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MWD Approves Higher Than Necessary Rate Increases for 2013-2014
MWD Board shoots down ratepayer-sensitive Water Authority plan that would have capped average MWD rate increases at 3 percent a year for next two years
April 10, 2012
Disregarding public concern over rapidly rising water rates, the Metropolitan Water District of Southern California's board of directors today approved raising its “average” water rates by 5 percent in 2013 and another 5 percent in 2014. No one pays “average” rates at MWD. The rates MWD’s board approved today increase its Tier 1 Treated water rate by 6.7 percent in 2013 and another 5.1 percent in 2014.
MWD’s board voted down an alternative proposed by the San Diego County Water Authority that was more sensitive to water ratepayers. The Water Authority’s proposal called for reducing spending and capping average rate increases at no more than 3 percent per year for the next two years.
"By its vote today, MWD's board continues to spend more than is necessary to provide a safe and reliable water supply,” Water Authority Board Vice Chairman Thomas V. Wornham said. “In doing so, MWD rejected a more sensible option to reduce its operating costs and discretionary spending, as most other water agencies and cities in Southern California have. We are deeply disappointed that MWD’s board and staff did not give meaningful consideration to our proposal, which would have funded all of MWD’s core needs and provided some much-needed relief to 19 million water ratepayers in MWD’s service area.”
Wornham was part of a contingent of San Diego County water officials, city leaders and ratepayers who traveled to Los Angeles to testify at MWD’s board meeting.
MWD board approved the rate increases for 2013 and 2014 to support a $1.78 billion budget for fiscal year 2012-2013 and $1.89 billion spending plan for 2013-2014. MWD has pointed to rate increases as necessary to fund repair and replacement of aging infrastructure, including maintenance and repair of MWD’s Colorado River Aqueduct. In reality, the budget recommended by MWD staff increases funding for travel expenses, staffing levels and consulting services. MWD’s rates are mostly being driven by reduced water sales, which are down more than 30 percent since 2006.
The Water Authority’s alternative proposal, submitted to MWD’s board on March 21 after previous attempts to have MWD’s board and staff explore additional budget cuts to lower rate increases failed, would have made the 3 percent rate increase cap possible though $116.5 million in reduced spending. The proposed spending reductions would have left funding for necessary repairs and maintenance of aging infrastructure intact, but would have reduced overall operations and maintenance spending by 10 percent. It also would have suspended conservation funding for two years, to give a break to weary water ratepayers who have heeded MWD’s call to conserve water – but are still paying more. Significant reductions in MWD’s water sales also show a diminished need at this time to fund its expensive rebate programs.
During the public comment period of MWD’s Board meeting today, the Water Authority also presented evidence that questions the legality of MWD's proposed rates and charges. The documents demonstrate that MWD’s rate structure favors some member agencies over others, and does not adequately recover the costs to provide some services, while overcharging for other services. Under its rate structure, ratepayers in San Diego will be overcharged by $40 million this year, an amount set to grow with MWD’s approved rate increases for 2013 and 2014.
Under California law, public agencies must prove that rates charged bear a fair and reasonable relationship to the cost of providing those services and the customer’s burden on the system.
For example, the Los Angeles Department of Water and Power buys different amounts of water every year, depending on how much of its own water it receives from the Sierra Nevada via its own Los Angeles Aqueduct. MWD's rates do not reflect the costs MWD incurs to provide standby supplies and capacity to accommodate these annual demand fluctuations. As a result, LADWP receives a $35 million to $40 million annual benefit while MWD’s other member agencies, including the Water Authority, pick up a disproportionate share of those costs through MWD’s rates.
For more information on the Water Authority’s concerns visit www.MWDFacts.com.
MWD’s decision today perpetuates its rate structure that the Water Authority contends is illegal and is challenging in court. The Water Authority filed suit over MWD’s 2011 and 2012 wholesale water rates in 2010. The Water Authority alleges that MWD improperly overcharges for the transportation of water and uses that money to subsidize the cost of MWD water. By 2021, if left unchallenged, the overcharges could grow to more than $217 million annually. To learn more about the rate challenge, visit www.sdcwa.org/mwdrate-challenge.