Preferential Rights

"Preferential rights" is an antiquated formula used by Metropolitan Water District of Southern California to calculate the amount of water to which each member agency is legally entitled. Under Section 135, each MWD member agency has a preferential right to a percentage of MWD’s available water supplies based on a formula established in the MWD Act.

A member agency's "preferential right" was intended to be based on its payments toward MWD's capital and operating costs. When MWD was established in 1926 and up to the early 1960s, the bulk of these costs were paid through member agencies' property taxes. More than 70 years later, however, the bulk of MWD's capital and operating costs are paid from revenues derived from water sales to member agencies.

Currently, the Water Authority pays about 25 percent of MWD's total revenue, but has preferential rights to only 17.22 percent of MWD's water supply (to be updated this month).  This disparity is due to Section 135 limiting the calculation of preferential rights to those revenues that are unrelated to the “purchase of water.”