How did Water Authority's unicorn become an endangered species?

"Life's not easy for unicorns, you know. We're a dying breed." - Meg Cabot

Shortly after the California Coastal Commission’s stunning rejection of Poseidon Water’s $1.4 billion ocean desalination plant proposal for Huntington Beach, Poseidon’s long—time VP of development, Scott Maloni, quipped on Facebook about the “unjust decision,” which put an end to big ocean desal in California for the foreseeable future.

“The silver lining,” he wrote, “San Diego has a water unicorn. The Carlsbad Desalination Plant is a one-of-a-kind treasure that will never be replicated again in the state of California.”

Today, that unicorn is breaking the San Diego County Water Authority’s bank and fomenting rate-increase protests, including detachments, roll-offs and calls for “creative destruction” from among its member agencies and individual directors.

How did the Water Authority’s unicorn turn into an albatross around its neck? Some history of Poseidon, the Water Authority, and the development of the ocean desalination industry will help answer that question.

Starting in the early 2000s, Poseidon promoted its two giant ocean desalination plant proposals (for Huntington Beach in Orange County and Carlsbad in San Diego County) as a “cost-effective solution to provide residents with a safe and reliable water supply by using existing structures—at no cost to taxpayers.”

Strategically, Poseidon spent millions of dollars over several decades on propaganda and political campaigns to make sure that local politicians and public citizens bought that narrative and ONLY that narrative.

For years, that strategy worked.

In 2005, the Orange County Register, strongly aligned with Poseidon at the time, pushed the free market/need narrative:

Improving technology, however, means that desalinated water gradually will become cheaper, and at the same time, reduced allocations of Colorado River water and higher energy rates will drive up imported water cost. Prices are expected to intersect in about a decade, said Kevin P. Hunt, general manager at the Municipal Water District of Orange County MWDOC).

MWDOC sponsored the Poseidon HB project for almost a decade before passing it off to the Orange County Water District (OCWD) after it failed to find willing buyers for the expensive desal water, which was estimated at 2-3 times the cost of water imported from the Metropolitan Water District of Southern California.

(Today, there’s no mention on OCWD’s website of ocean desalination or the agency’s past obsession with building Poseidon’s HB project, except in archived meeting-agenda packets.)

At a public hearing of the Huntington Beach City Council in 2006, representative Don Hansen praised Poseidon’s supposed free market values to a crowded chamber before he voted along with council members, Keith Bohr, Gil Coerper and Cathy Green to approve the project on behalf of the city.

“My belief is that the market is going to drive the majority of these [regulatory] decisions. I truly believe that,” Hansen said.

If the Poseidon desalination plant is not profitable, he added, it “will never see the light of day. And it’s purely born on private investment dollars, the risk that they [Poseidon] are going to take.”

In a candidates’ debate in 2008, Hansen warned that “We’re going to need the water” and reassured again that “It’s not us building the plant. It’s all private investment.”

Carlsbad desal pipeline under construction C. 2013. Photo SCWW

Poseidon’s Senior Vice President, Peter MacLaggan, tried to speed up approval of its Carlsbad project (nearly identical to the HB plant) by the Coastal Commission by creating a sense of desperation.

In a quote to the North County Times in 2007, referring to the drought at that time, he said:

There is a sense of urgency at play here. The water supply situation in Southern California has deteriorated significantly in the 10 months since we submitted this application.

Three years later he falsely claimed to the now defunct D.C. Bureau that the Carlsbad plant would guarantee reliable water to San Diego customers “for the same or less than they would pay for imported water.” And asked, “Why is that not a good investment for the public?”

But Poseidon was seeking huge taxpayer/ratepayer subsidies for both projects to make them cost effective—from Poseidon’s perspective—and attractive to banks and a multitude of other potential investors worldwide.

This was happening at a time when financing for large desalination plants in the Middle East and Australia was drying up and experts were pointing out that wastewater recycling is cheaper.

Critics of the proposed Carlsbad project pointed out that the Water Authority had much cheaper water-supply options than ocean desalination, but that Poseidon would, however, “make a killing” financially.

“The reason they’re going to make a killing,” UC Berkeley expert David Zetland told the New York Times in 2009, “is because they’re going to try and build 10 or 20 plants along the coast of California.”

The need for ocean desalination would quickly disappear if water districts incentivized conservation by raising water rates, he claimed.

“If San Diego raised the price of water this month, they would not need a desal plant next month,” he told the Times, pointing out that Southern Californians were using 120 gallons of water daily vs. 35 gallons in Australia where big ocean desalination was in developing stages.

Peter Gleick, a scientist with the non-partisan Pacific Institute, a water management think tank, pointed out that superior alternatives were available; including conservation, which would save ratepayers money.

But he was confused by the Water Authority’s decision to pursue ocean desalination.

“They’re not idiots,” he told the Times in the same story.

“They’re familiar with economics,” he said. But “they feel more comfortable buying from a centralized plant than dealing with 10,000 customers who have an inefficient washing machine. I don’t understand why they’re doing it.”

If Gleick had spent years observing the actions of local and regional water agencies, particularly the Water Authority, he would have understood, as Zetland succinctly put it, politicians avoid hard choices.

And that’s because “The economics of water have never been as important as the politics.”

You can see proof of that in past reporting by me and Debbie Cook about OCWD’s fanatical efforts to saddle ratepayers with high-cost desalination water (2013 - 2022) compared to its hypersensitivity to raising rates just enough to pay for basic infrastructure.

Then, there’s also the Water Authority’s decades-long feud with Metropolitan. More on that later.

Next in Unicorn 2: Public vs private ownership of water