South Coast Water District selects financial path for 3 MGD Doheny Desalination stake

South Coast Water District selects financial path for 3 MGD Doheny Desalination stakeThe California utility board has reached consensus on a rate strategy that temporarily lowers debt service coverage targets to fund the desalination project while keeping combined bill increases near 8%.

The Board directed staff to proceed with 'Scenario 2B', supporting a 3 MGD share of the Doheny Desalination Project.

The selected plan anticipates combined water and sewer rate adjustments of approximately 8.4% to 9.3% annually, keeping increases under a 10% threshold.

To achieve this, the District will allow its debt service coverage ratio to dip below the 2.0x policy target in fiscal year 2030.

Analysis showed the monthly bill impact of the desalination project is only approximately $2 higher than a 'No Desal' scenario relying entirely on imported water.

The South Coast Water District (SCWD) Board of Directors has directed staff to move forward with a financial plan that secures the District's participation in the Doheny Ocean Desalination Project at a capacity of 3 million gallons per day (MGD). During a rate study workshop on January 8, 2026, the Board reached a consensus to adopt 'Scenario 2B,' a financial model designed to balance significant infrastructure investment with ratepayer affordability. Presented by Sanjay Gowar of RDN, the selected scenario projects combined water and sewer bill increases of approximately 8.4% in the initial year, peaking at 9.3% in later years. This approach aligns with Board direction to keep combined adjustments below 10%. To make the 3 MGD capacity affordable without steeper rate hikes, the plan allows the District’s debt service coverage ratio to temporarily drop below its 2.0x policy standard in fiscal year 2030. This dip accommodates the debt service schedule for a funding package that includes an invited $60 million WIFIA loan, approximately $10 million in state desalination grants, and Metropolitan Water District subsidies. General Manager Rick Shintaku noted that the variance between the different financial scenarios presented was minimal, at approximately 1.1% at maximum. The presentation highlighted that the cost difference for the average customer between building the desalination plant (Scenario 2B) and a 'No Desal' scenario (Scenario 4)—which relies 100% on imported water from the Metropolitan Water District—is negligible. The average monthly bill under the 'No Desal' option was projected at $268, compared to roughly $270 under the selected desalination plan. Director of Finance Erica Castillo confirmed that Scenario 2B was the staff recommendation, noting it provides a conservative approach regarding WIFIA loan timing. This caution reflects the broader history of California desalination, where projects like Carlsbad have demonstrated high capital intensity and final costs often land at the upper end of planning estimates. However, with Doheny’s current capital estimate of $107.1 million tracking consistently with modern sector benchmarks for capacity, the Board favored the 3 MGD share over a 2 MGD option. They reasoned that securing the higher capacity was preferable given the minimal price difference and the potential to lower rates in future years if costs are contained.