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Orchard Mesa Irrigation District Agenda Item 14b November 16-17, 2016 Board Meeting (Updated November 17, 2016) Page 2 of 5 Background The District is a small irrigation district serving 9,500 acres and provides irrigation water to farms, vineyards, orchards, and subdivisions in the Grand Valley of Mesa County. Its service area is on the south side of the Colorado River starting just east of the Town of Palisade down to the confluence of the Colorado and Gunnison Rivers near downtown Grand Junction. Major crops grown in the District include alfalfa, orchards, vineyards, corn and grain, pasture, grass lawns, and truck gardens. The District became a division of the Bureau of Reclamation's (Reclamation) Grand Valley Project in 1921. Its water is diverted at the Grand Valley Project Diversion Dam (Roller Dam), flows through the Canyon Canal, and is diverted into the District's Power Canal. The GVPP was built in the early 1930s and was operated by Public Service Company of Colorado (Xcel Energy) in conjunction with the Cameo coal power plant until 2010. When the Cameo coal power plant was decommissioned, Xcel Energy decided to cease operations at the GVPP as well. As the continued operation of the GVPP is important for river flows in a stretch of the Colorado River known as the "15- Mile Reach," Reclamation encouraged the District and Association to operate and maintain the GVPP. At the end of 2010, a Lease of Power Privilege (LOPP) was entered into between Reclamation and the District and Association. Under this LOPP, the District and Association equally split GVPP operational and maintenance cost. Starting in 2011, the Association and District entered into a 10-year Power Purchase Agreement (PPA) with Xcel Energy, with revenues being equally split as well. The District operates the GVPP and invoices the Association for half its cost. Reclamation remains the owner of the GVPP and its hydropower water right. Very little work has occurred on the GVPP since its construction in the 1930s with the exception of minimal maintenance. The turbines, generator, and electrical panels are more or less as they were originally constructed, and rely on 1930s technology. It is believed this may be the last remaining hydroelectric power plant that manually syncs to the power grid. Due to the worn and now outdated condition of the plant, most of the major plant components require replacement or upgrades if the plant is to operate for more than a few remaining years. Loan Feasibility Study The District and Association together prepared the Loan Feasibility Study titled, "Grand Valley Hydroelectric Power Plant Rehabilitation Project Loan Feasibility Study," dated October 1, 2016. This study relied on a 2015 Feasibility Study prepared by Sorenson Engineering, Inc. titled "Grand Valley Power Plant Feasibility Study." The feasibility study was prepared in accordance with CWCB guidelines and includes an analysis of alternatives, preliminary engineering design, and construction cost estimates. Borrower - Orchard Mesa Irrigation District The District was organized in 1904 under the Colorado Irrigation District Law of 1903, and later changed to be organized under the Irrigation District Law of 1921. The District was formed for the purpose of diverting, carrying, and delivering irrigation water within the District's boundaries. The District provides irrigation water to approximately 9,800 parcels in Mesa County. Revenues are primarily derived from assessments charged to its water users, with additional revenues coming from the sale of electricity generated by the GVPP. The District is not a public governmental entity exercising taxing authority and is therefore not subject to TABOR restrictions. The District has a 5-member Board of Directors which carries out the normal business function of the District including levying assessments. As a 1921 Act irrigation district, the Mesa County treasurer collects assessments for Orchard Mesa with property taxes, and the treasurer can enforce penalties and