April 30, 2025

Central Valley Project and State Water Project Allocation Increase

Nasdaq Veles California Water Index

(NQH2O) $408.68 +0.01 {+0.00%} as of April 30, 2025

Water Market Prices and Trading 4/21/2025 – 4/25/2025

Both the Central Valley Project (CVP) South of Delta (SOD) Ag and the State Water Project (SWP) allocation increased to 50% this week. All other CVP allocations remain the same, with North of Delta (NOD) and Friant Class 1 contractors receiving 100% and Friant Class 2 receiving 0%. Friant Class 1 is the first amount of Friant water up to 800,000 AF, while Class 2 is the second amount available after Class 1 up to 1.4 million AF. The updated allocations are good news for market participants waiting to initiate transfers in hopes of a final increase in allocations.

Based on the same CVP SOD allocation as 2024, expected transfer pricing may range up to $380/AF. The CVP SOD Ag allocation was 50% in 2024 and 2018. In those years, spot market values SOD were $380/AF and $241/AF respectively. Adjusting for inflation provides an average price range of $306/AF to $386/AF in 2025.

As shown in the figure below, prices are inversely correlated with allocations. Prices range widely during years with low allocations as a result of a large pool of buyers entering the market and variable supply and demand factors at play. Higher allocations result in a narrow range of relatively low prices as demand for transfers declines. Prices have generally increased in more recent years.

Current negotiations for 2025 transfers are within this expected range. Transfer agreements for delivery later in the season have an average price of $350/AF. Multi-year-variable transfers will execute at higher values near $390/AF. Over the past five years, variable agreements have been executed at slightly higher values than spot market transfers. The spread between upcoming spot market transfers and variable agreements aligns with this trend.

Negotiation activity is expected to increase in May now that allocations have increased. Market participants who cannot meet their demands under a 50% allocation are expected to enter negotiations in May for transfers later in the year.

Current Trading Trends – Surface Water

Volume Traded:

13,935 AF Traded YTD

16% of Average Historical Volume Traded YTD

Number of Transactions:

7 Transfers Completed YTD

Latest Transfer Prices South-of-Delta (SOD):

$185/AF

South-of-Delta (SOD) Market Outlook: Spot market prices in 2025 have ranged from $185/AF to $375/AF. These prices reflect the value of 2024 carryover supplies. Prices for transfers of 2025 are currently in discussion as participants are entering negotiations for transfers to occur in May.

North-of-Delta Market (NOD) Outlook: Water transfer activity is expected to be minimal as the NOD region has high capacity and allocations. A couple of transfers are in negotiation for later in the year.

NOD-SOD Transfers Limited: Market participants are initiating discussions about potential transfers for 2025, including crop idling, reservoir release, and groundwater substitution transfers. Water transfer activity may increase in the summer when the through-Delta transfer window opens. Prices and trading volumes will depend on Delta conditions, reservoirs storage and project water allocations.

California Surface Water Markets

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