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Grand Valley Water Users Association Agenda Item 14c November 16-17, 2016 Board Meeting (Updated November 17, 2016) Page 2 of 5 Background The Association is the managing entity of the Bureau of Reclamation (Reclamation) owned Grand Valley Project. The Grand Valley Project facilities include the Roller Dam, the 55-mite-long Government Highline Canal, 150 miles of project-operated laterals, 100 miles of drainage ditches, and the Grand Valley Power Plant (GVPP). The Association was established to deliver water for the purpose of irrigating farm land which carries water rights appurtenant to the land. 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 Association and District to operate and maintain the GVPP. At the end of 2010, a Lease of Power Privilege (LOPP) was entered into between Reclamation and the Association and District. Under this LOPP, the Association and District 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 Due to the worn and now outdated condition of the plant, most of the major plant components require replacement or upgrades if the plant is to operate for more than a few remaining years.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 Association and District 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 - Grand Valley Water Users Association The Association is a non-profit corporation formed in 1905 to manage the Bureau of Reclamation's Grand Valley Project. There are 1,754 shareholders in the Association's service area. Water is allocated to the land through "Subscription for Stock" agreements. These agreements were entered into by the Association and owners of irrigable lands in the early 1900s and were recorded with the Mesa County Clerk and Recorder's office. When land ownership changes, water rights remain with the land and cannot be sold separately. Assessments are billed annually based on allotments for individual parcels of land. Each parcel is assessed a fee per acre, plus an additional assessment of $100 per account to cover the additional costs incurred from work on the Roller Dam, laterals, and other entities. Revenues are primarily derived from these assessments, but the Association also receive funds from Reclamation per a salinity control cost sharing agreement, and from the sale of electricity generated by the GVPP. The Association is governed by an eleven-member board of directors. The board has the authority to make and levy all assessments, and has the power to enforce collection of assessments by ceasing