205 



The proposed changes will re-establish the baseline, the foundation, from which the CVP 

 water users can effect changes in water management in their districts and outside of theii 

 districts. One of the problems that was not very well understood at the time of passage of the 

 CVPIA was that to the extent there was uncertainty injected into the basic understanding of 

 what these water service contracts meant, then that uncertainty would necessarily translate 

 itself into an imwillingness to participate in longer term conunitments for such things as water 

 marketing programs, system improvements and other new approaches to water management. 

 A district is much more likely to be willing to enter into arrangements which will lead to 

 resolving many of California's water management problems, if it knows the totality of their 

 obligations, and if it can reasonably predict that there will be an adequate water supply to 

 meet the needs of its constituents in the future. Injecting uncertainty into the renewal of these 

 water service contracts virtually eliminated the potential for CVP contractors to enter into any 

 form of long-term water marketing program or meaningful discussion of providing either 

 water or money in resolution of California's water management crisis. 



Again, much of what is being proposed as part of the CVPRA will return the CVP and the 

 CVP contractors to a better understanding of what their baseline water supply and financial 

 obligations will be, putting CVP water users in a much better position from which to continue 

 meaningful discussions of resolving California's water problems, including the myriad of 

 problems associated with the Sacramento-San Joaqxiin River Delta and San Francisco Bay. 



Tiered Water Pricing 



Currendy, the CVPIA contains provisions which require water service contracts of longer than 

 three years (i.e., long-term renewal contracts) to provide for tiered water pricing. Under the 

 mandated pricing scheme, the first 80 percent of the "contract total" supply will be priced at 

 the "applicable contract" rate, the next 10 percent of the "contract total" will be priced 

 halfway between the "appUcable contract" rate and the "full cost" rate, and all remaining 

 water delivered will be priced at "full cost" rate. These prices are to be charged by the 

 Bureau of Reclamation to the district. 



Tiered pricing has been widely touted as an effective means of encouraging water 

 conservation. However, a "one size fits all" approach to any water conservation measure 

 ignores unique circumstances of different districts and imposes unnecessary burdens without 

 any counterbalancing benefits. This is particularly true for tiered water pricing. "On the 

 ground" experience clearly demonstrates that tiered pricing does not produce water 

 conservation in all instances. In some cases, it is even counterproductive and contrary to 

 sound water management, in that it can make overdrafted groundwater supplies less expensive 

 than the more expensive "tiers" of surface water. Providing water users with an incentive to 

 extract dwindling groundwater supplies in lieu of surface water is nonsensical. It has the 

 potential of further exacerbating the problems described above currently being encountered in 

 managing the increased cost of surface water supplies resulting from the CVPIA. The simple 

 fact is that dered water pricing does not result in significant water savings for farmers in the 



