SAWS wraps up talks on water pipeline

SAN ANTONIO — The San Antonio Water System has wrapped up public negotiations on a pipeline project that proponents say could — in 30 years — provide ratepayers the cheapest water around, and then started a countdown for a decision on the $3 billion deal.

SAWS and the private Vista Ridge Consortium will present a contract to the utility's board this month for construction of a pipeline running more than 140 miles to carry groundwater from Central Texas.

The project, which would expand the local supply by 20 percent and reduce reliance on the Edwards Aquifer, has been called a potential game-changer for the city's economic future.

On Wednesday, SAWS Chairman Berto Guerra disbanded a panel of utility trustees and staff members who have met since July 1 to hammer out the water deal, set for SAWS board consideration Sept. 22.

“You will then have 10 days to accept the agreement or not. We're going to make it real simple,” Guerra told leaders of the consortium at the seventh and final public negotiation meeting early Wednesday at SAWS headquarters.

Any contract between Vista Ridge and SAWS would require City Council approval, setting the stage for delivery of 50,000 acre-feet of water annually — enough to serve about 175,000 homes — as early as 2019.

Guerra, who led the discussions, has said the deal needs to go to the City Council before Thanksgiving to avoid losing momentum over the holidays.

To stay on his timeline for council consideration by late October, he has asked lawyers to finalize a contract next week.

At the end of the 30-year term, SAWS would assume ownership of the pipeline and have right of first refusal to acquire water rights in Burleson County.

SAWS officials have urged Abengoa, the international environmental and energy conglomerate leading the consortium, to find ways to reduce costs while building a durable pipeline system.

SAWS hopes to avoid a rate increase of up to 16 percent to fund the project by initially selling water to communities along the growth corridors of Interstate 35 and Texas 130.

Abengoa, which has agreed to only receive payment for water it actually delivers, has said it seeks a 12 percent maximum rate of return on its investment, including an initial outlay of $81 million toward the project's $844 million in hard costs for the system.

Guerra was sympathetic to some of Abengoa's concerns about contract clauses regarding dispute resolution. Lawyers for SAWS have opposed Abengoa's proposal to provide for arbitration in the agreement, preferring instead to settle any disputes that arise in a Bexar County courtroom.

But Gene Dawson, president of Pape-Dawson Engineers, the project's engineering and environmental consultant, said SAWS will be well protected by breach and termination provisions, and has “sovereign immunity” from lawsuits as a public entity.

“It seems a little unfair to me,” Dawson said.

Guerra said he understood Abengoa's concern “from a business perspective,” and supported wording providing for “preliminary arbitration” prior to any litigation.

But, he remained determined to talk Abengoa down to a cap on interest on bonds sold through a special purpose entity for the project of 50 basis points, or 0.5 percent, to help minimize impact on water rates.

Francesca McCann, CEO of Abengoa Water USA, said the firm is “still at 150” basis points, but is trying to bring that ceiling down.

“There are issues still to be decided upon, finalized, that tie into overall risk with the project. And depending on how many of those things fall into play, we'll work toward 50 basis points,” McCann said.

Guerra asked McCann to make an international call to Abengoa's global headquarters in Seville, Spain.

“Please call Spain and get authorization, because we don't have much time left,” he said.

The cost of the Central Texas water is projected at just over $2,200 per acre-foot in 2020, rising to more than $2,600 in 2050. Though it seems high today, Guerra has predicted that “in 30 years, it'll be the cheapest water around.”