Tesla results renew worries about its long-term viability

Tesla Motors Inc. reported another good-not-great quarter, renewing concerns about its ability to quickly churn out enough electric vehicles to sustain the company for the long term.

The company plans to ramp up the introduction of Tesla Model S cars to consumers worldwide, saying it was "on a journey" this year to expand the line and turn profitable, Chairman Elon Musk and Chief Financial Officer Deepak Ahuja wrote in a letter to shareholders Wednesday.

"Our intention is not to make customers wait six months for a car," Musk said in a call with analysts. "Our focus in Q1 is on production efficiency, improving gross margin and making sure customers are really happy when they receive the car. It's important for us to operate at that steady state for a bit before we try to drive that number higher."

This year, Tesla plans to deliver about 20,000 Model S units, with about 4,500 deliveries expected in the current quarter. The Palo Alto company projected that it would "generate slightly positive net income" in the quarter. That was welcome news to analysts, who have been looking for the company to become more financially stable.

"There have been other electric vehicle car companies that have had numerous problems. So if I compare it to that, they're leaps and bounds ahead," said Ben Kallo, senior research analyst at Robert W. Baird & Co. "Now they have to prove the details around the business model."

On-time delivery of those Model S cars — which sell for $61,000 to more than $100,000 — will be key to the survival of future Tesla products, which have been hampered by delays. The company initially planned to start building the Model X crossover SUV by the end of 2013, but now says production will start in 2014. The X will share its platform and many of its components with the Model S.

Down the line, Tesla hopes to build a more affordable car, which it will need to sell in quantities greater than the S and X to ensure long-term viability.

Regardless of when and how Tesla expands its offerings, the company faces long odds in making a dent in the sales of gas and diesel vehicles. Electric vehicles accounted for just 0.1% of U.S. sales in 2012, and that number is expected to rise to only 2% by 2020.

Many consumers remain wary of a vehicle with a perceived finite range. The cost of the batteries and related technologies in EVs also makes it difficult to price them competitively with comparable gas-powered vehicles.

Tesla found itself dealing with the issue of electric vehicle range in a recent public dispute with the New York Times.

After reporter John Broder detailed problems with the car's range on a trip from Washington, D.C., to Connecticut, Tesla's stock dropped. Musk went on the offensive, calling the article "fake" and railing against the piece in several television appearances. He then released data logs from Broder's test car, saying they backed up his claims.

The Times initially responded by saying the article was "completely factual," and Broder wrote a follow-up piece defending his initial assertions. The Times' public editor, Margaret Sullivan, eventually waded into the controversy with a blog post that offered measured criticism of Broder but defended his motives.

For the three months ended Dec. 31, Tesla reported revenue of $306 million, beating expectations. But it posted a larger-than-expected loss — $90 million, or 79 cents a share.

In the year-earlier quarter, Tesla reported revenue of $39.4 million and a loss of $81.5 million, or 78 cents a share.

Excluding one-time charges, the company posted a fourth-quarter loss of $75 million, or 65 cents; analysts had expected a loss of 53 cents a share.

Tesla said it delivered about 2,400 Model S vehicles during the fourth quarter and sold most of its remaining Roadsters. It ended the year with more than $221 million in cash.

Shares fell 7.3%, or $2.80, to $35.74 in after-hours trading. During regular trading before earnings were released, shares declined 1.9% to $38.54.

Wednesday's release was the first detailed look at Tesla's finances since September. At that time, production delays had forced the company to downgrade its projected 2012 revenue to no more than $440 million, compared with previous estimates of up to $600 million.

Tesla had built just 255 Model S cars at that point, though it hoped to build 10 times that by the end of 2012. The company confirmed in Wednesday's report that it had indeed built 2,750 cars in the fourth quarter.

The company said Wednesday it has more than 15,000 fully refundable deposits on hand.

Now it just needs to deliver the cars.

andrea.chang@latimes.com

david.undercoffler@latimes.com

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O.C. shooting suspect identified as college student with no record

Orange County sheriff's officials on Tuesday identified the suspect in series of fatal shootings and carjackings as Ali Syed, a 20-year-old community college student with no criminal record.

Authorities don't have a motive for the shootings, which began with the slaying of a woman at Syed's  south Orange County home, spread north in a series of random and deadly carjackings, and ended with his suicide in the city of Orange.

Syed was described as an unemployed man who was taking a class at Saddleback College. He had no criminal record and was living with his parents on Red Leaf Lane in Ladera Ranch, Amormino said.

PHOTOS: Shootings at multiple locations in O.C.

Deputies were called to their home about 4:45 a.m. after his parents reported a shooting, Amormino said. Responding deputies found a woman dead inside who had been shot multiple times.

The relationship between the woman and Syed was not yet known, Amormino said, although she was not related to the suspect. The woman has not yet been identified.

Family members, including children, were at the home at the time of the shooting, Amormino said, but no other injuries were reported.

MAP: Orange County shootings

Syed fled the area and headed toward Tustin, where Amormino said "multiple incidents" occurred.

The first, authorities said, occurred near Red Hill Avenue and the 5 Freeway, where authorities received a report of a man with a gun about 5:10 a.m. The suspect attempted a carjacking, Tustin police Lt. Paul Garaven said, opened fire and wounded a bystander.

About five minutes later, the suspect stopped the BMW near the 55 Freeway in Santa Ana, officials said.

TIMELINE: Deadliest U.S. mass shootings

Around that time, authorities also received reports about a man shooting at moving vehicles on the 55 Freeway. Officials believe the man fired either while driving or after he stopped and got out of his vehicle. At least three victims have reported minor injuries or damage to their cars, and investigators asked that others who believe they may have been fired upon to contact police.

Shortly after, another shooting and carjacking was reported on Edinger Avenue near the Micro Center computer store in Tustin, Garaven said. One person was killed and another was taken to a hospital.

Co-workers identified the men as plumbers who were working at the under-construction Fairfield Inn on Edinger Avenue.

Officers spotted the suspect in a stolen vehicle, followed him into the city of Orange and initiated a traffic stop near the intersection of East Katella Avenue and North Wanda Road, Garaven said.

The suspect then shot and killed himself, authorities said. A shotgun was recovered, but officials said other weapons might have been involved earlier. 

In Orange, financial planner Kenneth Caplin said he had a clear view of the gruesome drama that unfolded Tuesday on the street outside his office.

Although the street had been blocked, Caplin parked farther away and persuaded an officer to let him walk to his office. He arrived shortly before 7 a.m., about an hour after the shooting.

From a conference room window, Caplin saw the police investigators at work, a white work truck up on a curb, and the suspect lying dead on the ground, with blood streaked across the pavement.

"It's scary.... This just happened right here," Caplin said hours later, as a team in biohazard suits scrubbed away at the street in an afternoon drizzle. "It's ludicrous."

Caplin, 71, said he is a pistol instructor for the NRA. What happened Tuesday only affirmed for him the need to stay armed.

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Police say NY TV anchor threatened wife with death

A New York City TV anchorman issued a death threat against his wife as he was being arrested on charges of attacking her at their Connecticut home, according to a court document released Tuesday.

New York City police, meanwhile, disclosed that they were called 11 times to the couple's home when they lived in Manhattan. One call resulted in an arrest, but the case was sealed, they said.

In the Connecticut case, a Darien police officer wrote that Rob Morrison, who works for WCBS-TV, "threatened that if he was released from police custody, he would kill his wife."

The document was offered in Superior Court in Stamford, in support of an order of protection against Morrison. Judge Kenneth Povadator ordered Morrison to stay 100 yards away from Ashley Morrison except when they're both at work.

She works for "CBS Moneywatch."

Rob Morrison, 44, was charged Sunday with strangulation, threatening and disorderly conduct. Officers had been called by his mother-in-law to the couple's home in Darien. They said Morrison had been belligerent toward his wife throughout the night and had wrapped his hands around her neck, leaving red marks.

Morrison's lawyer, Robert Skovgaard, did not enter a plea at the arraignment. He said afterward a plea would come "at the appropriate time."

Skovgaard said Monday that the allegations had been exaggerated and on Tuesday he referred to his previous statement.

Outside the courthouse, Morrison said: "I did not choke my wife. I've never raised my hands to my wife."

The NYPD said it was called 11 times between 2004 and 2009 to the couple's home on West 90th Street. In the 10 cases that did not result in an arrest, the calls involved verbal disputes and harassment, with no allegations of physical violence, the police said.

It was not clear if violence was alleged in the case that was sealed. Skovgaard did not immediately return a call about the New York incidents.

Morrison was released Tuesday on the $100,000 bond he posted Sunday. He is due back in court in Stamford on March 26.

Morrison, who has been a combat correspondent and was a reporter and anchor for WNBC-TV, anchors WCBS-TV's news programs "This Morning" and "News at Noon." Ashley Morrison worked for Bloomberg Television before joining "CBS MoneyWatch."

The couple has a young son.

Skovgaard said that because of the order of protection, Morrison "will not be going home tonight."

___

Associated Press writer Colleen Long in New York contributed to this report.

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Well: No Consensus on Plantar Fasciitis

Phys Ed

Gretchen Reynolds on the science of fitness.

There are more charismatic-sounding sports injuries than plantar fasciitis, like tennis elbow, runner’s knee and turf toe. But there aren’t many that are more common. The condition, characterized by stabbing pain in the heel or arch, sidelines up to 10 percent of all runners, as well as countless soccer, baseball, football and basketball players, golfers, walkers and others from both the recreational and professional ranks. The Lakers star Kobe Bryant, the quarterback Eli Manning, the Olympic marathon runner Ryan Hall and the presidential candidate Mitt Romney all have been stricken.

But while plantar fasciitis is democratic in its epidemiology, its underlying cause remains surprisingly enigmatic. In fact, the mysteries of plantar fasciitis underscore how little is understood, medically, about overuse sports injuries in general and why, as a result, they remain so insidiously difficult to treat.

Experts do agree that plantar fasciitis is, essentially, an irritation of the plantar fascia, a long, skinny rope of tissue that runs along the bottom of the foot, attaching the heel bone to the toes and forming your foot’s arch. When that tissue becomes irritated, you develop pain deep within the heel. The pain is usually most pronounced first thing in the morning, since the fascia tightens while you sleep.

But scientific agreement about the condition and its causes ends about there.

For many years, “most of us who treat plantar fasciitis believed that it involved chronic inflammation” of the fascia, said Dr. Terrence M. Philbin, a board-certified orthopedic surgeon at the Orthopedic Foot and Ankle Center in Westerville, Ohio, who specializes in plantar fasciitis.

It was thought that by running or otherwise repetitively pounding their heels against the ground, people strained the plantar fascia, and the body responded with a complex cascade of inflammatory biochemical processes that resulted in extra blood and fluids flowing to the injury site, as well as enhanced pain sensitivity.

But instead of lasting only a few days and then fading, as acute inflammation usually does, the process can become chronic and create its own problems, causing tissue damage and continuing pain.

This progression is also what experts believed was happening when people developed chronic Achilles tendon pain, tennis elbow or other lingering, overuse injuries.

But when scientists actually biopsied fascia tissue from people with chronic plantar fasciitis, “they did not find much if any inflammation,” Dr. Philbin said. There were virtually none of the cellular markers that characterize that condition.

“Plantar fasciitis does not involve inflammatory cells,” said Dr. Karim Khan, a professor of family practice medicine at the University of British Columbia and editor of The British Journal of Sports Medicine, who has written extensively about overuse sports injuries.

Instead, plantar fasciitis more likely is caused by degeneration or weakening of the tissue. This process probably begins with small tears that occur during activity and that, in normal circumstances, the body simply repairs, strengthening the tissue as it does. That is the point of exercise training.

But sometimes, for unknown reasons, this ongoing tissue damage overwhelms the body’s capacity to respond. The small tears don’t heal. They accumulate. The tissue begins subtly to degenerate, even to shred. It hurts.

By and large, most sports medicine experts now believe that this is how we develop other overuse injuries, like tennis elbow or Achilles tendinopathy, which used to be called tendinitis. The suffix “itis” means inflammation. But since the injury isn’t thought to involve chronic inflammation, its name has changed.

This has not yet happened with plantar fasciitis, and may not, given what a mouthful fasciopathy would be.

The evolving medical opinions about plantar fasciitis matter, beyond nomenclature, though, because treatments depend on causes. At the moment, many physicians rely on injections of cortisone, a steroid that is both a pain reliever and anti-inflammatory, to treat plantar fasciitis. And cortisone shots do reduce the soreness. In a study published last year in BMJ, patients who received cortisone injections reported less heel pain after four months than those whose shots had contained a placebo saline solution.

But whether those benefits will last is unknown, especially if plantar fasciitis is, indeed, degenerative. In studies with people suffering from tennis elbow, another injury that is now considered degenerative, cortisone shots actually slowed tissue healing.

We need similar studies in people with plantar fasciitis, Dr. Khan said. “They have not been done.”

Thankfully, most people who develop plantar fasciitis will recover within a few months without injections or other invasive treatments, Dr. Philbin said, if they simply back off their running mileage somewhat or otherwise rest the foot and stretch the affected tissues. Stretching the plantar fascia, as well as the Achilles tendon, which also attaches to the heel bone, and the hamstring muscles seems to result in less strain on the fascia during activity, meaning less ongoing trauma and, eventually, time for the body to catch up with repairs.

To ensure that you are stretching correctly, Dr. Philbin suggests consulting a physical therapist, after, of course, visiting a sports medicine doctor for a diagnosis. Not all heel or arch pain is plantar fasciitis. And comfort yourself if you do have the condition with the knowledge that Kobe Bryant, Eli Manning and Ryan Hall have all returned to competition and Mr. Romney still runs.

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Health insurance rate-setting map would raise costs, official says

A proposal to split California into six zones for setting health insurance rates would drive premiums up as much as 23% for some policyholders next year as part of the federal healthcare overhaul, the state insurance commissioner is warning.

These rating boundaries for the individual insurance market are among several items that state lawmakers are debating during a healthcare special session in Sacramento aimed at implementing the federal Affordable Care Act. In January, most Americans will be required to have health coverage or pay a penalty.

Under the proposal for six regions, the lnsurance Department estimates that premiums for similar coverage would increase as much as 22% in Los Angeles and 23% in the Bay Area.

Insurance Commissioner Dave Jones said he's pushing for an 18-region plan that would cap increases at 8%. That and other alternatives are expected to be discussed at state hearings Wednesday.

Overall, many healthcare experts and consumer advocates have expressed concern about the affordability of premiums next year. Rates are expected to rise because the federal law requires improved benefits, and there will be new limits on how much insurers can vary rates based on age.

Now, state leaders are trying to determine what role geography will play in insurance rates. Health insurers currently set their own rating regions, but the federal law allows states to establish their own map.

"There is a lot of interest in doing this quickly," Jones said. "It's important to get it right as well so we can minimize any rate shock."

A spokeswoman for state Sen. Ed Hernandez (D-West Covina), chairman of the Senate Health Committee, said the proposed legislation seeks to keep California in compliance with federal rules that recommend seven rating regions or fewer.

Two industry trade groups, the California Assn. of Health Plans and the Assn. of California Life & Health Insurance Cos., also oppose the six-region plan. Insurers favor a 19-region map that was adopted by state lawmakers last year for the small-employer health insurance market.

Jones has come out against the 19-region plan as well, saying rates could rise as much as 25% under that system.

chad.terhune@latimes.com

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Tucson arrests unleash anger over Arizona immigration law

TUCSON — It's routine for immigration officials in Arizona to detain people suspected of being in the country illegally.

Monday, however, the detention of two men — an immigrant rights activist and a father of six in Tucson — sparked protests, frustrated local authorities and illustrated the difficulties of complying with SB 1070, the state's controversial immigration enforcement law.

"This is unjust," Alma Hernandez yelled in Spanish to a crowd of about 300 that gathered in front of the Tucson Police Department to protest the detentions. Hernandez, a spokeswoman with the civil rights organization Corazón de Tucson, riled up the crowd by introducing immigrant rights activist Raul Alcaraz Ochoa, who had just been released from immigration detention.

"We need to fight for all those who are detained," Alcaraz Ochoa said.

Immigration officials arrested him Sunday after he positioned himself underneath a U.S. Customs and Border Patrol vehicle in an attempt to stop officials from taking away another man, Rene Meza.

The incident began Sunday afternoon after someone called Tucson police expressing concern for the safety of children in a silver Mercury Cougar, Lt. Fabian Pacheco said.

Officers discovered five children in the vehicle, along with Meza and his girlfriend, Perla Lopez. Four of the children were younger than 5 and were not in proper safety restraints as required by law, Pacheco said.

Meza had a Mexican voter registration card but no valid U.S. driver's license, Pacheco said. Police arrested Meza and called immigration officials after federal records revealed he had prior contact with them.

Meza was charged with being in the country illegally after a previous deportation, Customs and Border Protection spokesman Victor Brabble said. Meza is scheduled to go before an immigration judge Tuesday.

Under SB 1070, Arizona law enforcement officials are compelled in most circumstances to check the status of someone they stop for lawful reasons if they suspect the person is in the country illegally.

Pacheco said the officers were simply enforcing the law.

"The department is stuck in the middle," Pacheco said. "Our discretion is gone."

Soon after Tucson police flagged immigration officials, Border Patrol officers drove up.

Alcaraz Ochoa, who was on his way to a community meeting, saw what was happening and approached the officials.

"They took the father, and the children were crying and asking for their father," Alcaraz Ochoa said.

Alcaraz Ochoa, a legal permanent resident and prominent immigrant rights activist best known for participating in a sit-in at Republican Sen. John McCain's office in 2010, said he began to question the officials. Dissatisfied with their answers, he crawled underneath the Border Patrol vehicle.

He said Border Patrol officials pepper-sprayed him, removed him from beneath the vehicle and handcuffed him.

Brabble said Border Patrol agents arrested Alcaraz Ochoa after he failed to respond to repeated warnings and refused to move from beneath the vehicle.

Meza may also face state charges of driving with a suspended license and of not having the children in proper restraints. Lopez, a U.S. citizen, was not detained.

Lopez's mother, Lydia Lopez, said the children weren't restrained properly because the family had just bought the vehicle from a private owner moments earlier and didn't have the safety seats with them. She said the punishment is too extreme.

"It's not justified," Lopez said in Spanish.

cindy.carcamo@latimes.com

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Fergie, Josh Duhamel expecting their 1st child

NEW YORK (AP) — Her hump, her hump, her lovely lady lump: Fergie is pregnant with her first child.

A representative for the Black Eyed Peas singer confirmed the news Monday. Fergie's actor husband Josh Duhamel tweeted about the news with joy, saying: "Fergie and Me and BABY makes three."

The 37-year-old Fergie and 40-year-old Duhamel married in 2009. She joined the Black Eyed Peas when the group released its third album, "Elephunk," in 2003. The foursome is known for its pop-inspired hip-hop tunes like "My Humps," ''I Gotta Feeling" and "Boom Boom Pow."

Fergie launched her solo debut, "The Duchess," to much success in 2006. It featured five Top 5 hits, including "Fergalicious" and "Big Girls Don't Cry."

Duhamel has appeared in the "Transformer" films and most recently in "Safe Haven."

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National Briefing | South: Abortion Curbs Clear Senate in Arkansas

The State Senate voted 25 to 7 on Monday to ban most abortions 20 weeks into a pregnancy. The measure goes back to the House to consider an amendment that added exceptions for rape and incest. The legislation is based on the belief that fetuses can feel pain 20 weeks into a pregnancy, and is similar to bans in several other states. Opponents say it would require mothers to deliver babies with fatal conditions. Gov. Mike Beebe has said he has constitutional concerns about the proposal but has not said whether he will veto it.

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Audit of Fed's gold finds it's safe, more pure than expected

NEW YORK — Turns out the Federal Reserve's gold is secure and a bit more pure than previously thought — or so the government says.

Auditors spent weeks last year in a vault five stories beneath Manhattan counting, weighing and drilling small holes into gold bars owned by the U.S. Treasury.

It was the first time the Treasury's inspector general had audited the department's gold held by the Federal Reserve Bank of New York, which has captured the imagination of Hollywood as well as government skeptics.

The audit's results are in: The New York Fed's operations and controls are up to snuff, and the U.S. gold on deposit is a bit finer than Treasury records had indicated.

Still, the audit probably will not lay to rest questions over whether the New York Fed has secretly lent the gold or otherwise encumbered it in a swap transaction with another government or bank.

"There's no way to prove there's not a secret agreement," said Ted Truman, a former assistant Treasury secretary and top Fed official.

The audit of the Fed gold came after 2012 presidential contender and former Rep. Ron Paul (R-Texas) questioned the central bank's gold holdings.

While he was in Congress, Paul questioned whether the Fed had lent or otherwise encumbered U.S. gold in financial arrangements. At a congressional hearing in 2011, the Treasury Department's inspector general, Eric Thorson, assured Paul that "not one troy ounce is encumbered."

Paul has called for a full, independent audit and assay of the country's gold reserves. But as part of its audit, the Treasury tested a sample — not all — of the government's 34,021 gold bars in the New York Fed's vault.

In three of the 367 tests, the gold was more pure than Treasury records indicated, according to the inspector general. As a result, the government notched up the value of its gold holdings by approximately 27 fine troy ounces — or about $43,500, based on gold's market price Monday.

The assaying process consumed 10 ounces of gold, and the remaining 69 ounces removed for sampling were returned to the Treasury, according to the inspector general's office.

The U.S. gold at the New York Fed has been placed under so-called Official Joint Seals, attesting to the results of the audit.

"At this point, we do plan to conduct this audit annually," the inspector general's office said in emailed responses to questions. "However, since the gold is now under Official Joint Seal, we would not anticipate weighing, counting and assaying unless the seal shows signs of tampering."

The audit also examined internal controls, security and operations at the New York Fed. "Our audit disclosed no material weaknesses and no instances of reportable noncompliance with laws and regulations," the Treasury's audit report said.

The New York Fed holds 99.98% of the U.S.-owned gold bars and coins in the custody of the Federal Reserve. The rest of the gold is on display at Fed banks in cities such as Richmond, Va.; Kansas City, Mo.; and San Francisco.

As of Sept. 30, when the market price of gold was $1,776 an ounce, the Fed banks held $23.9 billion in U.S. gold. (Gold has since declined in value, and on Monday the precious metal was hovering around $1,610 an ounce.) The vast majority — about 95% — of the country's gold reserves is held elsewhere, in Ft. Knox, Ky.; West Point, N.Y.; and Denver.

Truman, the former Treasury and Fed official, was not surprised by the audit's findings.

"I would be flabbergasted if they found some huge discrepancy or even a substantial discrepancy between what they said they had and what they found," Truman said.

Still, the audit won't end conspiracy theories that involve the government's gold held by the Fed, he said.

"I would surprised if anyone's convinced of anything," he said. "They'll conspire now about whether the audit was aboveboard."

andrew.tangel@latimes.com

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Seawater desalination plant might be just a drop in the bucket

CARLSBAD, Calif. — Dreamers have long looked to the Pacific Ocean as the ultimate answer to California's water needs: an inexhaustible, drought-proof reservoir in the state's backyard. In the last decade, proposals for about 20 desalting plants have been discussed up and down the coast.

But even with construction about to begin on the nation's largest seawater desalination facility, 35 miles north of San Diego, experts say it is doubtful that dream will ever be fully realized.

"While this Poseidon adventure may work out, I don't look for a lot of that," said Henry Vaux Jr., a UC Berkeley professor emeritus of resource economics who contributed to a 2008 National Research Council report on desalination.

The reasons boil down to money and energy. It takes a lot of both to turn ocean water into drinking water, driving the average price of desalinated supplies well above most other sources.

The purified water produced by the Poseidon Resources plant will cost the San Diego County Water Authority more than twice what it now pays the Metropolitan Water District of Southern California for supplies from Northern California and the Colorado River. Over the authority's 30-year contract with Poseidon, San Diego County ratepayers will pay between $3 billion and $4 billion for the desalted water, which is expected to provide no more than a tenth of their overall supply.

Seawater desalination is not new to California. There are number of small coastal plants, used mostly for research or industrial purposes, and a few, such as one on Catalina Island, that provide municipal supplies.

For reasons unique to the region, San Diego County will be the first to stick a big straw into the Pacific. It is at the end of the line for imported water, doesn't have much local groundwater and is perennially battling with Metropolitan, Southern California's wholesaler of imported supplies.

"I do believe it is worth it," said Tom Wornham, board chairman of the county water authority. "I would rather be apologizing to people in 10 years for the rate than the fact they would have no water."

Up the coast, other places have taken a pass on the Pacific. Los Angeles and Long Beach recently shelved seawater desalting plans after concluding that other water sources, such as conservation or recycling, are cheaper and easier to pursue.

Poseidon, a small, privately held company based in Stamford, Conn., started talking about developing a desalination plant in Carlsbad in late 1998. The road to construction has been so long and twisting that Global Water Intelligence, which covers the international water industry, last year listed the project among the "Top 10 Desalination Disasters" of all time.

It took years for the company to get the necessary state and local permits. Environmentalists filed multiple legal challenges, the last of which was only recently resolved in Poseidon's favor. A deal with a number of local water agencies in San Diego County fell apart.

In the end, the Poseidon supplies — up to 56,000 acre-feet a year — will sell for roughly $2,000 an acre-foot, more than double the company's 2004 estimate. (One acre-foot is enough to supply two average homes for a year.) The price will rise with inflation; if energy costs go up, so will the price of water.

On the other side of the Pacific, Australia offers a sobering lesson in the perils of diving too deeply into desalination.

When years of withering drought emptied the country's reservoirs, Australia commissioned six big coastal desalting plants, including some of the world's largest. Then the rains returned. Just as some of the operations were coming on line, they were no longer needed.

Four of the six plants are being idled because cheaper water is available. Australian politicians are bemoaning the desalination binge, complaining that it saddled ratepayers with "hyper-expensive" white elephants they have to pay for regardless of whether the plants are used.

"That's certainly the risk — that we build them when they're not necessary or we build them, frankly, too soon," said Heather Cooley of the Pacific Institute, an Oakland think tank.

Santa Barbara had a similar experience in the early 1990s, when it built a desalination plant during a severe statewide drought that ended before the facility was finished. The $34-million plant, with a tenth of the capacity of the Carlsbad facility, was never used beyond the testing phase, though it could still be brought into service in an emergency.

The $954-million Carlsbad project is being financed with $781 million in tax-exempt construction bonds sold by Poseidon and the water authority. The balance is coming from investors who anticipate a return of about 13%. IDE Americas Inc., the subsidiary of an Israeli firm that runs some of the world's largest coastal desalination facilities in the Middle East, has been hired to design and operate the plant, slated for completion in 2016.

The fresh water will be produced through reverse osmosis, an energy-intensive process that separates salts and contaminants from seawater by forcing it through sand filters and tightly coiled, synthetic membranes peppered with billions of tiny holes a fraction of the width of a human hair. The water will then be pumped inland for distribution — the opposite direction that drinking supplies are usually moved — requiring construction of a 10-mile underground pipeline that the water authority will own and operate.

Poseidon chose the Carlsbad location, next to the Encina Power Station, so it could draw from the power plant's cooling water discharge — thus avoiding the environmental harm of operating its own ocean intake.

But new federal and state environmental regulations are pushing coastal power plants to phase out the use of huge volumes of ocean water for cooling, thwarting that strategy. Poseidon expects the Encina station to be replaced within the decade with a new generating facility employing a different cooling system.

That will mean the desalter will have to pump directly from the ocean, sucking 300 million gallons a day. Of that, 100 million gallons will go through the reverse osmosis process, with half converted to fresh water and half to a concentrated brine. The brine, twice as salty as the sea, will be diluted in a mixing pool with the other 200 million gallons of intake and discharged to the ocean.

Destruction of marine life is a major environmental concern of ocean desalination. Raw seawater is full of tiny organisms, including plankton that form a critical part of the food chain and the young stages of fish and invertebrates. When the water they live in is pumped into a plant, they die.

The Coastal Commission is requiring Poseidon to restore 55 acres of marine wetlands in south San Diego Bay to compensate for the plant's projected effects. The State Water Resources Control Board is also developing new seawater desalination regulations that could force Poseidon to change its intake and discharge systems.

"They took a big risk in building this before the rules are finalized," said Joe Geever of the Surfrider Foundation, which tenaciously fought the Carlsbad proposal in court and argues that water agencies should turn to the ocean only as a last resort — after more environmentally benign sources such as recycling and storm-water capture have been aggressively pursued.

Poseidon, which is trying to line up customers for a similar-size desal plant proposed in Huntington Beach, says it is peddling more than water. "What we're selling is ... a reliability premium that's locally controlled, drought-proof," said Carlos Riva, the company's chief executive.

But even Poseidon doesn't predict that the Pacific will become California's dominant water supply. The state has too many other sources.

"We have quite a bit of water to move around," said Peter MacLaggan, the Poseidon executive who is overseeing the Carlsbad project. "I don't think it's ever going to be a majority of supply or anywhere close to that."

bettina.boxall@latimes.com

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