Final Delta Conveyance EIR Released Without Cost Estimate or Benefit-Cost Analysis: A Quick Look At Old DWR Analysis of Single-Tunnel Alternatives Shows This Proposal Is Likely A Bad Deal For SWP Agencies. (and even worse for a State that cares about the environment and non-SWP regions)

 The Final EIR for Delta Conveyance was released today.  I just read the press release summary.  Here is my quick take.

The press release case for the tunnel argues that the project will result in about 500,000 AF in additional water supply for State Water Project agencies once operational.  They continue to ignore updated cost estimates, and economic/financial analysis of the project.

However, in 2018, DWR did analyze the effects of a single-tunnel proposal that would result in 660,000 additional AF, over 30% more water than the current proposal, that was estimated to cost $11 billion in 2017 dollars.  While no cost estimate for the current proposal has been released, it is well-known that costs of the current proposal are much, much higher - even after accounting for inflation.

In 2018, DWR's consultant found that a single-tunnel proposal barely penciled out for SWP agencies (benefit-cost ratio was about 1.2), and the benefit-cost ratio would have been negative if the project yield were the same as the current EIR (a greater than 30% decline in water supply benefits).  Thus, it appears the current proposal would not pencil for SWP agencies out even if the costs had not increased at all, but it is well-known that the cost has escalated substantially.    

Is it any wonder that DWR still has no cost estimate or benefit-cost analysis for a project with well-known financial troubles.

A few additional things to consider when comparing to 2018 single-tunnel analysis:

• That analysis only considered benefits and costs to SWP contractors.  It was not a comprehensive benefit-cost analysis that incorporates environmental harm or impacts on non-SWP supplied regions of the state like the Delta.  The project is bad for SWP agency ratepayers, but it is even worse for the state as a whole.
• Economic and finance will drive operations.  Thus, the missing economic analysis is a critical oversight, and the EIR lacks credibility without it.
• State population growth forecasts have plummeted since the earlier analysis, meaning that future demand will be much lower, and the costs will be spread over fewer households which means larger rate increases.  
• Projects like this can be good for SWP agency leaders and staff, and provide political value to the Governor, even when they are bad for their ratepayers and citizens.  It is one reason why objective benefit-cost analysis is so critical.  

At some point next year, I may have time to update a comprehensive benefit-cost analysis of this proposal.  However, there is plenty of reason to doubt the economic and financial viability of this project based on what we know now.