The California Air Resources Board carbon cap-and-trade program does not include free allocations to the Department of Water Resources, which runs the massive State Water Project. Moving water from the San Francisco Bay Delta, up and over the Tehachapi Mountains and down to Southern California uses massive amounts of energy. In fact, the water sector is the largest consumer of power in the state--using about 20 percent. DWR, therefore, must buy carbon allowances associated with moving water a few hundred miles to public water contracts. The agency is to pass on those costs. Tim Haines, the State Water Contractors senior power manager, estimates the cost will run between $20-$30 million\/year. The exact amount will be determined by the cost of carbon, he noted. Southern California water agencies would bear much of the carbon cost associated with the energy consumed to move the water a few hundred miles. Haines pointed out that the carbon allocations associated with the energy used to move the water are to be given to energy utilities up and down the state. Several water utility representatives said the carbon costs would force rate hikes of about five percent. The largest water purveyor in California, the Metropolitan Water District of Southern California, estimates annual cost increases of about $5 million a year, said Debra Man, MWD\u2019s assistant general manager. About one fifth of MWD\u2019s associated allocation is to be reaped in northern California by Pacific Gas & Electric, she added. Air board member Ron Roberts agreed with the water contractors, expressing dismay at the \u201cdramatic disparity.\u201d In a resolution incorporated in the carbon market regulations adopted Thursday, the board agreed to look at the \u201cequitable distribution\u201d of the costs of the carbon associated with the energy used to transport surface water.