The strategy historically implemented by the District Board of Directors is to set annual water rates at a level that recovers the expenses associated with available water supply for that year. In addition to revenue received from water sales, a portion of the money received from Assessments and the Friant Power Authority project are also used to offset annual water-related expenses.

Expenses associated with the District's water supply fluctuate from year-to-year based on the following factors.

• The amount of water available from Buchanan Dam and its cost
• The amount of Class 1 water available to the District and its cost
• The amount of Class 2 water available to the District and its cost
• The amount of additional water purchased from other districts and its cost
• State Water Resources Control Board fees

A brief description of each of these water-related expense centers is provided.

Water Available from Buchanan Dam

Prior to construction of Buchanan Dam the Chowchilla Water District obtained appropriative water rights issued by the State Water Resources Control Board to divert water from the Chowchilla River. These water rights are senior to the Bureau of Reclamation’s appropriative water rights issued for storage of water in Buchanan Dam.

Buchanan Dam was constructed in 1975 and is operated and maintained by the U.S. Army Corps of Engineers. The maximum capacity of the dam is 150,000 acre-feet and it has a maximum conservation capacity of 140,000 acre-feet. Annual natural flows from 1912 to 2008 at Buchanan Dam have ranged from a low of 1,901 acre-feet in 1977 to a high of 341,212 acre-feet in 1983. The average annual flow at the dam is 70,107 acre-feet. The District has been able to take delivery of about 43,000 acre-feet annually from the Chowchilla River since the dam was constructed. The remaining 27,000 acre-feet have been released as flood flows from the dam. Although Buchanan Dam is operated and maintained by the U.S. Army Corps of Engineers it has been incorporated into the Central Valley Project. Chowchilla Water District contracted with the U.S. Bureau of Reclamation for the 24,000 acre-feet of water supply developed by Buchanan Dam. The contracted supply from the Bureau of Reclamation is in addition to the average supply of 19,000 acre-feet diverted from the Chowchilla River by the District under its appropriative water right permit.

Class 1 and Class 2 Water Availability and Cost

The Friant Division of the CVP employs a unique "Class 1/Class 2" water contracting system. Class 1 water is commonly referred to as the "firm yield" of the project. The first 800,000 acre-feet that is made available from the project is Class 1 water. There are many years that the project does not even yield all of the Class 1 water. CWD has contracted for 55,000 acre-feet of Class 1 water.

Class 2 water is the next 1.4 million acre-feet that develop from the project. Class 2 water is available only after all of the Class 1 water has been made available. In an "average" water year, about 650,000 acre-feet of Class 2 water develops from the project. CWD has contracted for 160,000 acre-feet of Class 2 water.

As the firmer water supply, Class 1 water is more expensive than Class 2 water, typically about 35 percent more costly. The cost of Class 1 and Class 2 water is set each year by the U.S Bureau of Reclamation.

Because the annual amounts of Chowchilla River, Class 1 and Class 2 water that are available are variable, the cost of the water can also vary greatly. The more of the less expensive Chowchilla River water and Class 2 water that is available that can be blended with the more expensive Class 1 water, the less expensive the blended acre-foot water cost is to the District, and ultimately, for the grower. In 2009 the cost of water from Buchanan Dam was $26.70 per acre-foot, the cost of Class 1 water was $41.97 per acre-foot and the cost of Class 2 water was $29.23 per acre-foot.

State Water Resources Control Board Fees

In reaction to the state's budget crisis, in 2003 the California legislature withdrew all general fund monies that previously supported the activities of the State Water Resources Control Board. In place of those funds, the legislature passed a bill directing the SWRCB to levy new fees annually on all water rights holders in California to fund its operations. CWD paid a fee of $80,000 directly to the state in 2009.