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Ratesetting Process

Frequently Asked Questions

  1. Why were Water Ratesetting Policies needed?

    A.  Fixed rate contracts generated inadequate revenue to recover the Federal investment in the project. Water ratesetting policies were needed to assure repayment within the authorized project repayment period.

  2. What is the repayment status of the Central Valley Project?

    A.  As of September 30, 1999, approximately 7% of the irrigation share of capital costs has been repaid, and about 4% of the M&I share of capital costs has been repaid.

  3. Why is the M&I ratesetting policy considered "interim?"

    A.  By decision of the Assistant Secretary of the Interior, the M&I ratesetting policy was implemented as interim pending approval of the CVP Programmatic Environmental Impact Statement (PEIS). The PEIS has subsequently been approved and the MP Region is beginning the process to finalize the M&I ratesetting policy.

  4. Is ratesetting for CVP contractors different than other projects? Why?

    A.  Yes; the CVP Policy was designed specifically for the unique CVP which has many features distinct from other projects, primarily being an exceptionally large, complex and multipurpose project, providing multipurpose benefits over a very large geographical area. CVP is unique in that it is a series of smaller projects constructed in segments over a period of approximately 35 years, but for operational and financial purposes, it is treated as an integrated project pursuant to authorizing legislation. While CVP Ratesetting is not applicable to projects other than the CVP, many of the fundamental cost pooling and allocation concepts underlying the CVP ratesetting policy are also utilized in setting rates for non-CVP projects within the Mid-Pacific Region.

  5. What are in-basin facilities?

    A.   "In-basin" facilities are the main project features of the CVP geographically located within the Sacramento-San Joaquin Valleys. In-basin facilities include all CVP facilities except the San Felipe Unit facilities, which are located outside the Sacramento-San Joaquin valleys.

  6. What are out-of-basin facilities?

    A.  "Out-of-basin" facilities refers to the capital features of the CVP geographically located outside the central valley basin. The main out-of-basin facilities are two major canals are direct pumping facilities which currently serve two water contractors exclusively.

  7. What is the CVP repayment period?

    A.  As required by the Coordinated Operations Act of 1986 (COA), the authorized repayment period is 1981-2030 for in-basin facilities; 1987-2036 for out-of-basin facilities.

  8. What's the difference between the CVP Irrigation Ratesetting Policy and the CVP Interim M&I Ratesetting Policy

    A.  Key differences are as follows:

    CVP Irrigation Ratesetting Policy

    Interim CVP M&I Ratesetting Policy
    Final
    Interim
    Capital expense is non-interest-bearing
    Capital expense is interest bearing @ the project rate of interest (approximately 3.5% per annum)
    Deficits were non-interest-bearing until fiscal year 1985, and interest bearing beginning fiscal year 1986
    Deficits have been interest bearing since inception
    Does not require a minimum water rate
    Requires a minimum water rate of $15 per acre-foot for COS contracts
    Does not include interest in annual accountings of net results of operations
    Includes interest in annual accountings of net results of operations

    Revenue is applied in priority order to:
       ~ annual O&M costs
       ~ annual interest costs
       ~ interest bearing deficits
       ~ non-interest-bearing deficits

    Revenue is applied in priority order to:
       ~ annual O&M costs
       ~ annual interest costs
       ~ capital costs
       ~ interest bearing deficits


  9. How are capital additions to the project handled?

    A. They are recorded as capital assets (plant-in-service) in Reclamation's accounting system and included as part of the water rates to the extent such costs are allocated to the irrigation and/or M&I water functions.

  10. Will new capital additions have their own 50-year repayment period?

    A. To date, the only capital additions to the CVP that have had their own 50-year repayment period has been the San Felipe Unit facilities. So far no other additions have been significant enough to require establishing separate 50-year repayment periods.