November 2004 – Central Arizona Project, CAP Rates: an example of government
decision making about water use
- Grady Gammage Jr.
Senior Fellow at ASU's Morrison Institute and Board
Member, Central Arizona Project
- Ted Cooke
Assistant General Manager, Central Arizona Project
- Sid Wilson
General Manager, Central Arizona Project
Central Arizona Project (CAP) delivers Colorado River water to central and
southern Arizona, including the metropolitan areas of Phoenix and Tucson.
The Central Arizona Water Conservation District (CAWCD) serves as a quasi-governmental
entity to manage the CAP and collect revenue to repay the federal cost of building the
canal. Excess revenue is banked to provide capital improvement funding. Rates are set based
on maintaining an appropriate level of reserve funds. This has led to low rates for its
customers (municipal and industrial, federal, agricultural, and recharge).
The retail cost of CAP water is approximately 0.03 cents per gallon, while
the residential customer pays 0.15 cents to 0.26 cents per gallon. For comparison,
Los Angeles charges 0.30 cents per gallon to its residential customers. The
delivery charges account for 40% of CAP revenue, while power charges from the CAP-owned
Navajo Generating Station in Northern Arizona account for another 23%. CAP also
receives property taxes, air quality credits, capital charges, water storage
taxes, and interest income. This diverse portfolio influences rate-making
decisions. Along with that are considerations given to provide incentives
for use and support for groundwater recharge. CAP’s priority of the Colorado
River is last among the allocations on the river; therefore, CAWCD ensures
that its entitlement is used to its fullest extent. Otherwise, competition
from the other Lower Basin States may become a threat to future supplies.
Presentation (2 MB pdf)
|
