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MWD Rate Challenges
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A Superior Court judge on May 14 sided with the San Diego County Water Authority by denying the majority of a motion to compel discovery filed by the Los Angeles-based Metropolitan Water District of Southern California in a case contesting that agency’s water rates and charges.
Judge Curtis E.A. Karnow ruled that most of MWD’s discovery requests of the Water Authority were too broad and not related to the pending litigation, which alleges that MWD’s rates fail to comply with constitutional and statutory cost-of-service standards. The pre-trial ruling means MWD is entitled to discovery only on issues that are relevant to the pending litigation.
At the same time as MWD was seeking thousands of pages of documents unrelated to the case, its lawyers were fighting in court to block the Water Authority from obtaining any documents that are directly related to MWD’s rates and cost-of-service standards.
Numerous California statutes, the California Constitution, and the common law all require that public water agencies – including MWD – set rates based upon the actual cost of providing services. The Water Authority sued MWD in 2010 and again in 2012 for imposing unlawful rates that are not based on the costs of providing the services for which they are collected.
Water Authority lawyers have asked MWD to produce evidence showing the costs that are included in each of MWD’s rates and charges, the estimated sales volume on which those rates are based and whether MWD later reconciles its various rates with actual costs to set future rates. Every one or two years, MWD adopts several rates, including a water supply rate, a power rate, a “water stewardship” rate and a system access rate. In recent court documents, MWD claimed that it is exempt from the requirements of state statutes and the state constitution to tie its rates to the actual costs of the services it provides.
At an April 23 hearing, Karnow told MWD to produce information by May 10 about how it allocates its costs to rates or admit it does not have any evidence to support its current allocation of its costs to its rates. On May 10, MWD confirmed that it does not perform any allocation of its costs to its individual rates.
To read the most recent court order, click here:
Judge’s Order granting in part and denying in part MWD’s motion to compel discovery - May 13, 2013
To read the judge's order, click here:
Judge's Order granting Water Authority's Motion to Compel - April 23, 2013
To learn more about the 2011 and 2012 case, click here.
To learn more about the 2013 and 2014 case and to view court documents related to this case, click here.
Background
MWD’s Misallocation of Costs
MWD, our largest supplier, improperly overcharges for the transportation of water and uses that money to subsidize the cost of MWD water. This violates California’s Constitution, other state law, and standard water utility practice.
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Water conserved by the All-American Canal lining project is an important part of the Water Authority's Colorado River water supplies.
MWD purchases more than half of its water from the State Water Project under a contract with the Department of Water Resources. Instead of treating these purchases as a cost of water, MWD allocates nearly 80 percent of the cost to charges it imposes for the transportation of water through MWD facilities. This discriminates against the Water Authority, which is the single largest user of MWD transportation services. The Water Authority uses MWD facilities to transport Colorado River water it purchases under a water conservation agreement with the Imperial Irrigation District, and also from lining sections of the All-American and Coachella Canals.
Range of MWD Overcharges in 2021
The financial impact of MWD's overcharges could vary greatly depending on potential costs to fix the Bay-Delta and incentives to develop local water supplies
The financial impact of MWD's overcharges could vary greatly depending on potential costs to fix the Bay-Delta and incentives to develop local water supplies
Financial Impacts to San Diego County Ratepayers
MWD’s approved rate structure will cause significant financial harm to the San Diego region. San Diego County will lose up to $40 million in 2012 through MWD’s overcharges; those overcharges may grow to as much as $217 million annually as the Water Authority’s independent Colorado River supplies reach the maximum annual amount in 2021.
Negative Impact to Conservation and Statewide Water Supply Reliability Efforts
MWD’s rate structure disguises the true price of imported water and impedes cost-efficient water conservation and long-term regional and statewide water supply reliability efforts. By charging an artificially low rate for its water supplies, MWD discourages water conservation and local agency investments in cost-effective water supply projects. These local investments could improve Southern California’s water supply reliability and reduce the region’s exposure to droughts or regulatory restrictions on imported water.
impact of MWD Overcharges to Water Authority Ratepayers*
*Based on annual water sales of 600,000 acre-feet and $40 billion cost to fix the Bay-Delta
*Based on annual water sales of 600,000 acre-feet and $40 billion cost to fix the Bay-Delta
