Poseidon, agencies waiting on San Diego agreement

Negotiations to buy water from a planned desalination plant in Huntington Beach have stopped while Poseidon Resources waits to resolve a similar situation in San Diego County.

The Orange County meetings have been on hold since December while the city of Carlsbad irons out an agreement with the San Diego County Water Authority to buy Poseidon’s water. Nearly two dozen Orange County agencies have been in talks with the Connecticut-based company for several years.

Poseidon has not taken part in the talks between Carlsbad and the San Diego County Water Authority, which recently agreed to become the sole purchaser of Poseidon’s water in San Diego County. Carlsbad is among the agencies that would buy the water from the authority.

Poseidon Vice President Scott Maloni said his company and the Orange County agencies want to see if the Carlsbad agreement produces any elements they might want to use.

Bob Yamada, a water resources manager for the San Diego authority, said the sides were still in discussions. Maloni said he expected the situation to be resolved by summer.

“Assuming that schedule sticks, we can go back and start talking to potential [Orange County] customers about what we decided on in Carlsbad, what new stuff we might do,” Maloni said.

The San Diego authority intervened when Poseidon realized it needed financial help for its first few years of operation, according to Ken Weinberg, the authority’s water resources director.

Originally, Poseidon planned to sell water to nine agencies in the San Diego area for as much as the water cost to produce. However, the agencies couldn’t afford that price, so Poseidon created a new plan to sell water for no more than the agencies paid the authority for wholesale water, but that meant the company would take a loss.

Poseidon believed increases to water rates over time would recoup the losses from the first few years, Maloni said. That plan, though, depended on subsidies from the authority and the Metropolitan Water District of Southern California. But the amount of money needed exceeded the subsidies, and a legal dispute between the authority and metropolitan district put obtaining the subsidies at risk, Maloni said.

The authority, then, agreed to be the sole purchaser and resell the water. For that plan to work, the agencies that had purchasing agreements with Poseidon would have to cancel them, Weinberg said. So far, eight of the nine agencies have done so, and the authority is in talks with Carlsbad to nullify its agreement.

Kevin Hunt, the general manager of the Municipal Water District of Orange County, said he didn’t foresee a situation where the metropolitan district or another agency would step in as Poseidon’s sole purchaser in Orange County. Because his group isn’t mired in a legal battle with the metropolitan district, working out subsidies shouldn’t be a problem, he said.

Poseidon hopes to have the Huntington Beach plant finished in 2014. The plant would connect to an underground pipeline running through Huntington and Costa Mesa.

The company has all the permits it needs to begin operations in Carlsbad, Maloni said. The company still needs a Coastal Development Permit from the California Coastal Commission to proceed in Huntington.