Federal agency backs DeGray Lake payment deferral

A federal agency marketing hydroelectric power endorsed a revised draft agreement that would allow the city to defer storage payments until it’s ready to use its DeGray Lake allocation.

A letter dated Oct. 19 from Southwestern Power Administration to the Vicksburg, Miss., district of the U.S. Army Corps of Engineers supported the city’s effort to defer payments until the 20 million-gallon-a-day allocation comes on line.

The updated draft of the city’s water supply study presented earlier this year showed DeGray Lake could be needed as early as 2037, presuming the 15-mgd treatment plant the city plans on building to treat its Lake Ouachita allocation is on line by then.

The revised draft agreement between the city and Corps postpones payment until the city is ready to use

the storage. The start date can’t begin until Oct. 1, 2037, and the city has to notify the Corps of its intent to access the storage

10 years in advance.

The agreement reserves the city’s rights to the water until then while also making it available for hydropower production in the interim.

“We understand that the modified agreements represent a ‘nonstandard’ approach to water storage contracting by the Corps; however, we believe the approach provides the best possible solution for both the water supply and hydropower interests at DeGray Lake,” Marshall Boyken, senior vice president of Southwestern Power Administration, wrote in the letter.

The storage agreement providing the city’s 23 million-gallon-average-day allocation from Lake Ouachita required it to begin amortizing its share of a

$12.4 million obligation as soon as the agreement was signed in May, committing the city to

$444,440 in annual storage costs over the next 30 years.

That storage was reallocated from the lake’s hydropower pool after a lengthy process that began in 2004. The DeGray Lake allocation the city acquired right of first refusal to from Central Arkansas Water, or CAW, in October 2013 would be drawn from the joint-use pool between 367 and 408 feet above mean sea level that’s dedicated to power generation and supply.

Congress added the latter purpose when it became apparent that power generation alone couldn’t justify the cost of impounding the Caddo River. Blakely Mountain Dam, which impounds Lake Ouachita, was built under the Flood Control Act of 1944 for the purpose of flood control and hydroelectric power.

The city’s Lake Ouachita storage agreement requires it to compensate hydropower producers for water diverted from power generation. It began paying foregone benefits in May, even though the city is years away from being able to use the water.

The foregone benefits are credited to Southwestern Power Administration’s share of storage costs. A division of the U.S. Department of Energy, SWPA markets hydroelectric power to utilities in a six-state region, creating revenue remitted to the federal treasury for the repayment of the public’s investment in the federal hydropower program.

The city had argued that DeGray Lake’s joint-use pool didn’t entitle hydropower producers to foregone benefits. It’s since relented on that insistence, agreeing to make the payments once the water supply comes on line.

Deputy City Manager Bill Burrough said Thursday that the revised draft agreement would allow the city to put its intake above DeGray Dam. The city had considered taking water from the re-regulating reservoir below the dam. It provides water that can be pumped back into the lake during a drought and used again for power generation. It also helps regulate the flow of the Caddo River.

Foregone benefits wouldn’t be required to take water from below the dam, but water wouldn’t be available when the reservoir is lowered every few years for dam repairs.

Burrough credited Col. Michael C. Derosier, commander of the Vicksburg District, and Katy Breaux, senior projects manager for the Corps, for helping broker the compromise between the city and SWPA.

“We appreciate them and the Corps staff for helping to facilitate these meetings that led to an amicable solution for all parties involved,” he said. “We also appreciate all the time CAW and SWPA have invested.”

A storage agreement for DeGray Lake would increase the city’s water supply to 63 mgd. The allocation from upper Lake Hamilton is currently the city’s main raw water source, providing, per the withdrawal agreement with Entergy Arkansas Inc., an allocation not to exceed a 90-day rolling average of 20 mgd.

According to the most recent state survey of the water system, the city had to treat 15 million gallons to satisfy an average day of demand from its more than 35,000 accounts last year.

“If we are successful with this agreement, we’ll have solved our water supply needs for the next 75 to 100 years,” Burrough said. “We’ll be the envy of other communities throughout the U.S. as water supply becomes less available.”

The DeGray Lake Joint Use Agreement with CAW commits the city to a $1,078,723 payment after a storage agreement is executed. In the interim, the city has been paying $25,742 a year to preserve its rights to 20 mgd of the 120-mgd allocation available to CAW.

The agreement also requires the city to pay for an 80-footwide easement for its and CAW’s raw waterlines.

CAW, the water provider for Little Rock and much of its metropolitan area, acquired 120 mgd from the Ouachita River Water District in 1988. Its revised draft storage agreement with the Corps would also defer payments until CAW begins using the storage, which can happen no sooner than Oct. 1, 2067.