1. Edwards Aquifer Recovery Implementation Program – Impact to San Antonio October 3, 2011 Green Industry Alliance

2. October 3, 2011 Page 2 EARIP Impact to San Antonio EARIP Background EARIP –“Balances the recovery of listed species with water use and development through a multi-stakeholder process” Ongoing process since 2007 –Parameters and timelines solidified in Senate Bill (SB) 3 (2007) –Stakeholders specifically identified in legislation (26 Member Steering Committee)

3. October 3, 2011 Page 3 EARIP Impact to San Antonio EARIP Background Consensus-based approach that uses available science to develop a program document that: –Protects identified endangered species Contributes to long-term species recovery –Balances regional interests Human water use, environmental sustainability –Provides Incidental Take protection for interested stakeholders Protection for covered activities through a permit issued by the U.S. Fish and Wildlife Service (FWS) with an approved plan

4. October 3, 2011 Page 4 EARIP Impact to San Antonio Habitat Management Phase I Components –Improve habitat surrounding both spring complexes –Environmental restoration and protection areas with research component – protection in the wild –Refugia - protection in captivity –Bio-Monitoring –Low impact development considerations around critical habitat (water quality) –Implement specific species protection measures (i.e. Recreation Management) Flow Management Phase I Components –VISPO Dry Year Option –Regional conservation –SAWS ASR commitment –Stage V additional 4% water use curtailments If necessary, Phase II Components –Expanded use of the ASR through SAWS Water Resources Integration Pipeline –Additional pumping reductions to be determined Phase I – Bottom Up Activities Activities Approved by the EARIP Steering Committee to Accomplish its Goals

5. October 3, 2011 Page 5 EARIP Impact to San Antonio Phase I – Bottom Up Activities SAWS ASR recovery commitment –126,000 acre-feet of recovered water is delivered to SAWS customers to replace pumping on the Edwards Aquifer during a future drought similar to the 1950s Drought of Record (DOR) Determination –Ten-year rolling Edwards Aquifer recharge average As identified in the annual EAA Hydrogeologic Data Report –Regional Advisory Group Coordination of 50,000 acre-feet of regional leases SAWS ASR

6. October 3, 2011 Page 6 EARIP Impact to San Antonio Phase I – Bottom Up Activities Last layer of the activities to provide spring flow protection Triggered when J-17 is at 625’ msl or below –July 1990 (most recent occurrence) Permits will be reduced to a total cutback of 44% Stage V reduces firm yield of the aquifer to 320,000 acre-feet Stage V Restrictions

7. October 3, 2011 Page 7 EARIP Impact to San Antonio SAWS ASR Commitment

8. October 3, 2011 Page 8 EARIP Impact to San Antonio Introduction and Overview The capabilities of the ASR are greater than originally anticipated and continue to develop All water in the ASR continues to serve SAWS ratepayers The EARIP plan and SAWS intended use of the ASR in drought stages are generally consistent

9. October 3, 2011 Page 9 EARIP Impact to San Antonio EARIP Leased Water and ASR EARIP will lease 50,000 acre-feet of water annually The leased water will be available for SAWS to store in the ASR –16,000 acre-feet will be available annually –34,000 acre-feet will be available based on DOR triggers

10. October 3, 2011 Page 10 EARIP Impact to San Antonio Using ASR through Drought

11. October 3, 2011 Page 11 EARIP Impact to San Antonio Protecting Comal Spring Flows Model Simulation shows 39 months of zero spring flow at Comal Springs cfs

12. October 3, 2011 Page 12 EARIP Impact to San Antonio Phase I Program and Reduced SAWS Pumping cfs

13. October 3, 2011 Page 13 EARIP Impact to San Antonio ASR Phase II Models are predictive tools only and are built with conservative assumptions If additional protections are needed, SAWS is committed for Phase II To meet Phase II commitments using the ASR, SAWS will need to construct the integration pipeline As a fall back position, Phase II could impose additional cutbacks

14. October 3, 2011 Page 14 EARIP Impact to San Antonio SAWS Challenges with ASR in EARIP SAWS must manage the ASR for long-term storage and produce from the ASR once DOR is identified SAWS will need to evaluate produced water quality under extended drought and maximum production operation SAWS Edwards annual water rights will be reduced proportionally to the annual volume of ASR water produced in a DOR

15. October 3, 2011 Page 15 EARIP Impact to San Antonio Benefits with ASR in EARIP Potentially less expensive than other EARIP projects considered SAWS makes all operational decisions on use of the ASR prior to DOR All ASR water is used by SAWS ratepayers

16. October 3, 2011 Page 16 EARIP Impact to San Antonio Implications to SAWS Water Resources

17. October 3, 2011 Page 17 EARIP Impact to San Antonio WMP – Current Status DOR Occurring Late in Scenario Alt. Scenario (136 GPCD) Normal (116 GPCD) 7/26/11

18. October 3, 2011 Page 18 EARIP Impact to San Antonio EARIP Commitment EARIP Assumptions –SAWS ASR Becomes a base loaded supply in future DOR based on modeled recovery regime ASR recovery will replace Edwards pumping totaling 126,000 acre-feet over a ten-year period –46,300 acre-feet in worst year of DOR Portion of regional leases to be used for ASR storage –SAWS initially contributing 8,000 acre-feet per year Water will be restored back to SAWS as the other water conservation efforts across the region begin to achieve results Estimated commitment to be ten years Assumptions

19. October 3, 2011 Page 19 EARIP Impact to San Antonio EARIP Commitment Edwards Aquifer Proposed Cutbacks Additional reductions in Phase II if necessary Assumptions StageTriggerReduction I660’ msl20% II650’ msl30% III640’ msl35% IV630’ msl40% V625’ msl44%

20. October 3, 2011 Page 20 EARIP Impact to San Antonio Implications of EARIP Bottom Up DOR Occurring Late in Scenario Normal (116 GPCD) Alt. Scenario (136 GPCD)

21. October 3, 2011 Page 21 EARIP Impact to San Antonio Funding Options and Costs

22. October 3, 2011 Page 22 EARIP Impact to San Antonio Funding July 19 th letter from EAA –“… the maximum projected total aquifer management fee rate would be $116 per acre-foot beginning in 2012” –Represents an increase of $77 per acre-foot for municipal and industrial users Implement and sustain programs in the HCP – $64 per acre-foot Maintain the long-term sustainability of the aquifer management rebate program – $12 per acre-foot Enhanced water quality regulations – $1 per acre-foot Likely increase in the EAA Aquifer Management Fee

23. October 3, 2011 Page 23 EARIP Impact to San Antonio Funding Ordinance #87042 – passed by City Council in 1997 –Instructs SAWS to pass the EAA Aquifer Management fee through to customers based on volume of water used The Aquifer Management fee appears as a line item on each SAWS bill Current rate – approximately 1.4 cents per 100 gallons –Average 2011 residential customer: $1.10 per month –Average 2011 commercial customer: $7.03 per month EAA Fee Pass-Through to Monthly Water Bill

24. October 3, 2011 Page 24 EARIP Impact to San Antonio EAA Fee Calculation 2011 Fee with EARIP Projection

25. October 3, 2011 Page 25 EARIP Impact to San Antonio The Edwards Aquifer Would Remain the Most Economical Source of Water

26. October 3, 2011 Page 26 EARIP Impact to San Antonio Funding Federal Contribution –FWS Possibility of $2 million per year Downstream Contribution –Goal of $1 million of funding GBRA - $400,000 Others - $250,000 (CPS Energy - $100,000) Outstanding - $350,000 Other Potential Sources of Funding

27. October 3, 2011 Page 27 EARIP Impact to San Antonio Costs to SAWS Given the legislative cap on agricultural Aquifer Management fees and the likely limited contributions from federal sources and downstream stakeholders, most of the funding for the EARIP will come from Municipal and Industrial EAA permit holders SAWS pays approximately 65% of the total Aquifer Management fees collected by EAA –Other Municipalities and Industries pay 34% –Agricultural irrigators pay 1% Largest EAA Municipal Permit Holder

28. October 3, 2011 Page 28 EARIP Impact to San Antonio Next Steps

29. October 3, 2011 Page 29 EARIP Impact to San Antonio Next Steps – Moving Forward Bottom Up activities are meaningful programs with merit Four years of regional cooperation and understanding –Unprecedented four-year effort with all stakeholders involved in negotiations HCP approval is promising –FWS very engaged in process

30. October 3, 2011 Page 30 EARIP Impact to San Antonio Without SB 3 Cap of 400,000 acre-feet Cap of 572,000 acre-feet CPM per EAA CPM codified Owned water 159,000 acre-feet Owned water 227,000 acre-feet Constrained water market Vigorous market ASR limited ASR at 95,000 acre-feet High litigation risks Low litigation risks Gaps filled with non-Edwards Gaps filled with Edwards and non-Edwards 172,000 acre-feet loss = $950 million With SB 3 Next Steps – Moving Forward

31. October 3, 2011 Page 31 EARIP Impact to San Antonio Next Steps – Moving Forward Impacts to SAWS Water Resources is manageable SAWS should be applicant to the HCP Funding commitment is high, but benefits are long-term and provide much needed protection to Edwards water rights as well as resolution to ongoing issues Staff will continue to work on key issues and develop recommendation for Board consideration

32. Edwards Aquifer Recovery Implementation Program – Impact to San Antonio October 3, 2011 Green Industry Alliance