The city is positioned to secure the water it will need into the next century, but it doesn't want to pay for it until it begins using it.
The city is already committed to $444,440 a year in storage costs over the next 30 years for the 23 million-gallon a day allocation it secured from Lake Ouachita earlier this year. It can't use the water until a treatment plant and distribution system are in place, but the storage agreement it signed with the U.S. Army Corps of Engineers in May required it to began amortizing its share of $12.4 million in storage costs immediately.
The payment is based on the replacement cost of water that will not be available for power generation at Blakely Mountain Dam after the city begins withdrawing water.
The foregone benefits are credited to Southwestern Power Administration's share of storage costs. It's the division of the Corps that markets hydroelectric power to utilities in a six-state region, creating revenue remitted to the federal treasury for the repayment of the public's investment in the federal hydropower program.
City staff and the city's water-system consultant, Crist Engineers Inc., told the Hot Springs Board of Directors last month that they are working to avoid a similar arrangement with the 20 mgd DeGray Lake allocation the city purchased the rights to from Central Arkansas Water in 2013.
Deputy City Manager Bill Burrough told the board he is cautiously optimistic the Corps will allow the city to defer storage payments until it begins withdrawing water. Crist Engineers President Stewart Noland told the board demand models show the water could be needed as early as 2037, presuming a 15 mgd plant treating the Lake Ouachita allocation is on line by then and the 4 mgd Lakeside Plant has been taken offline.
The DeGray Lake Joint Use Agreement the city entered into with Central Arkansas Water, or CAW, in October 2013 requires the city to "make application for purchase" of storage for its allocation by Nov. 1. City Attorney Brian Albright said that means a storage agreement with the Corps has to be in place by then, but Burrough told the board CAW is amenable to extending the agreement.
The agreement also requires the city to pay for an 80-foot-wide easement for its and CAW's raw waterlines.
"It does expire in November," he said. "They're open to adjusting those dates and have no intention of clawing back any of that allocation."
The agreement commits the city to a $1,078,723 payment after a storage agreement is executed. In the interim, the city's been paying CAW $25,742 a year to preserve its rights to 20 mgd of the 120 mgd allocation available to CAW.
Burrough told the board CAW, which serves the Little Rock metropolitan area, is opposed to paying storage for water it won't need until later this century, so the proposal the Corps is considering would allow CAW to defer storage costs while retaining its share of the rights to the 120 mgd allocation it purchased from the Ouachita River Water District in 1988.
Burrough said a report written by Corps staff on the city's deferral proposal is working its way up the Corps' chain of command.
"I've not heard back on whether that's an option," he told the board. "I feel pretty confident that may be something the Corps is interested in, because they're trying to find something amicable for all parties. I don't really see that direction from a project manager to send a white paper to headquarters without somebody buying off on that somewhere in the process."
Above vs. below
City officials said the Corps and SWPA continue to maintain that water withdrawn above DeGray Lake Dam is subject to foregone benefits for lost hydropower production. The city has questioned that assertion in light of the lake's congressional authorization for water supply.
Unlike Lake Ouachita, DeGray Lake has a joint-use pool between 367 and 408 feet above mean sea level that's dedicated to power generation and supply. Congress added the latter purpose because power generation alone couldn't justify the cost of impounding the Caddo River.
The water the city has rights to stems from the 152 mgd, or 166,400 acre feet, of storage the Ouachita River Water District acquired right of first refusal to. It optioned 120 mgd of the allocation to CAW in 1988. A 1962 resolution of assurances signed by ORWD committed it to take its allocation from the re-regulating reservoir below the dam.
It provides water that can be pumped back into the lake during a drought and used again for power generation. It also helps regulate the flow of the Caddo River.
No foregone benefits are required for water withdrawn from below the dam, a SWPA spokeswoman said, but the city considers the lake proper as more favorable in view of the re-regulating reservoir being lowered every few years to allow for repairs to the dam.
The water level would be below a future intake site during those times, making the allocation unavailable. Burrough told the board the Corps has indicated a proposal to pump water back up to the lake and pay pumping costs instead of foregone benefits would require a lengthy study.
The study to reallocate water from the power pool at Lake Ouachita took more than four years to complete.
"They've told us if we touch the project, if we do anything that touches that dam, that we should know we have at least a five-year study," Burrough said.
Elizabeth Nielsen, public utilities specialist with SWPA's Division of Power Marketing and Transmission Strategy, said supply is meant to be allocated from below the dam, but the Kimzey Water District's 6 mgd allocation is accessed from an intake above the dam near the Arlie Moore Recreation Area. Kimzey pays foregone benefits as part of storage agreements it signed with the Corps in 1992, 1998 and 2001.
"When the Corps deviates from (withdrawing water for supply from the re-regulating reservoir), such as with the Kimzey agreement and with the proposed Hot Springs agreement, by allowing water supply withdrawal directly from the lake, the joint-use storage for hydropower and water supply is 'converted' to single-use storage for water supply only," Nielsen said.
"Since the water supply is withdrawn directly from DeGray Lake, it's not available for hydropower generation, thus decreasing the hydropower benefits identified in the original design and reducing hydropower's ability to repay the federal investment."
Several city directors questioned why foregone benefits are required when power generation and supply share the same pool.
"That's because Southwest Power is involved," Albright responded. "For some reason, the Corps has deferred a lot of this to Southwest Power as though they want their blessing on it. We really don't understand what they have to do with our agreement, but they've been given a little bit of oversight."
Local on 08/05/2017