March 25, 2004


Water board rejects request for desalination help

SAN DIEGO ---- Two months after breaking off talks with Poseidon Resources, Inc. to build a "critical" plant that would turn seawater into drinking water, San Diego County Water Authority board members made it clear Thursday they don't intend to help the city of Carlsbad finish the deal.

Claude "Bud" Lewis, Carlsbad's mayor and its representative on the Water Authority body, asked board members to give his city a written endorsement entitling it to a special subsidy that would lower the cost of the water the plant would produce.

Lewis and officials from the company, Connecticut-based Poseidon Inc., said Thursday that the plant can't be built without the subsidy.

But Water Authority board members, without taking a formal vote, told Lewis they had no intention of recommending Carlsbad get the subsidy, which is being offered by Southern California's main water supplier, the Metropolitan Water District.

They said the Water Authority might still use the subsidy itself on possible future desalination projects, and said they thought Carlsbad's deal with Poseidon would be too expensive for local ratepayers.

But the rejection ---- the latest twist in the plant's continuing saga ---- also raised the question of whether the Water Authority was trying to force Poseidon back to the negotiating table.

Poseidon has been studying building the plant for six years, and has a long-term-lease chokehold on the Encina Power Plant site in Carlsbad, where the desalination plant would be situated.

Three years ago, the Water Authority started negotiating with Poseidon to build a plant that would turn 100 million gallons a day of seawater into drinking water. The plan was for Poseidon to use the water agency's access to low-interest financing to build the plant, then sell it to the Water Authority after five years.

The Water Authority supplies nearly all the water that county residents use annually. It has identified the proposed plant as a "critical" piece of the region's future water supply, and negotiated a deal with Poseidon for three years.

Partly because California's share of the Colorado River supply will shrink by 2015, the Water Authority says that seawater desalination must make up between 6 percent and 15 percent of the county's water supply by 2020.

But negotiations between the Water Authority and Poseidon turned ugly nine months ago.

A dispute over a confidentiality pact led the Poseidon to refuse to give the Water Authority information that the agency says it needs for an environmental study ---- until the water agency signed a final deal with Poseidon.

Water Authority officials said they wanted the right to allow competition on the project.

Board members broke off the Poseidon talks Jan. 30, saying that the company could now try to work out a deal with Carlsbad and Oceanside.

Carlsbad officials immediately asked the Water Authority about the Metropolitan subsidy ---- a $250 per acre-foot subsidy that would reduce the cost of the water the plant produced from $800 per acre-foot to $550 per acre-foot. That would be close enough to the $418 to $499 per acre-foot cost of imported water to make the plant doable.

The Water Authority's desalination committee told Lewis in a letter last month that it would not recommend giving Carlsbad access to the subsidy.

But Lewis said Thursday that he wanted the full board's response. He said the Water Authority was talking out of both sides of its mouth, saying it supported Carlsbad's attempt to complete the Poseidon deal, while refusing to give up the subsidy.

"I simply want to know if you're going to let us do it (the project) without putting these roadblocks in the way," Lewis said. "We can't have this where we're saying we think the project's good and then nailing us (Carlsbad) from the backside."

A number of board members said they couldn't support endorsing Carlsbad's bid for the subsidy until they knew more about how much the city's deal to build the plant with Poseidon would cost ratepayers. They said they suspected a deal with Carlsbad would cost $200 million more than the Water Authority's proposed project because Poseidon would build and keep the plant ---- selling the water ---- rather than selling the plant to the Water Authority after five years.

Others said the Water Authority could still build other desalination sites, and should keep the subsidy for those projects.

Others said they didn't like the idea of a private company, which has to please shareholders rather than ratepayers, getting involved in "their" water business.

"We're going to do nothing to facilitate private ownership of desalination along our coast," said board member Harold Ball of the Helix Water District.

Poseidon Vice President Peter MacLaggan said the company was disappointed, but would continue to work with Carlsbad.

He said it was possible that the company could go forward with the city on a project in the hopes that Water Authority board members would change their minds.

Contact staff writer Gig Conaughton at (760) 739-6696 or