News Release

Water Authority’s Rate Lawsuits Against MWD Go to Trial Dec. 17

Superior Court judge sets date for long-anticipated trial on MWD’s 2011-2014 rates
July 24, 2013

A San Francisco Superior Court judge has set Dec. 17 as the trial start date for the San Diego County Water Authority’s two lawsuits challenging rates set by the Los Angeles-based Metropolitan Water District of Southern California.

The Water Authority sued MWD in 2010 and again in 2012 for imposing illegal rates that are not based on the costs of providing the services for which they are collected. Numerous California statutes, the California Constitution and common law all require that public water agencies such as MWD set rates based on the actual costs of services rendered.

“MWD has been and is continuing to overcharge San Diego County residents by tens of millions of dollars each year as a result of its unlawful rates,” said Daniel Purcell, special counsel for the Water Authority with the law firm of Keker & Van Nest in San Francisco. “That’s what we’re going to prove at trial.  We asked the court to set a trial date before the end of the year, and we’re looking forward to trying the case in December."

The Water Authority’s two lawsuits against MWD present common factual and legal elements. In both cases, the Water Authority asserts that MWD assigns water supply costs to transportation rates in violation of state law, the state constitution and common law. The lawsuits also allege that MWD’s rates discriminate against the Water Authority by artificially inflating the price MWD charges for transporting the Water Authority’s independent Colorado River water supplies through MWD’s pipelines.

Under MWD’s current rates – which fail to meet statutory and constitutional requirements or follow basic industry standards – water ratepayers in San Diego County will be overcharged this year by $57 million. By 2021, the overcharges could grow to more than $217 million annually.

The Water Authority’s first legal challenge was filed in June 2010, after MWD set its 2011 and 2012 rates. The Water Authority filed a second complaint in June 2012, after MWD set rates for 2013 and 2014. The court agreed to coordinate the lawsuits.

This week’s order by Judge Curtis E.A. Karnow in San Francisco followed more than two years of delay by MWD, which has sought to block any discovery into its unlawful rate practices and avoid trial of the cases.  The court recognized the Water Authority’s desire to try the cases before MWD again sets its rates in April 2014.  Judge Karnow scheduled pre-trial hearings for Nov. 4 and Dec. 10 to help determine the scope of the trial, with trial itself beginning Dec. 17.  Judge Karnow indicated the trial could take five days to complete.  He also indicated he will try the Water Authority’s breach of contract claim after issuing his decision on the other causes of action in the litigation.

For the past several months, the Water Authority has been asking 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 reconciles its various rates with actual costs as part of the process of setting future rates.  On May 10, MWD admitted that it does not do a cost-of-service analysis in establishing its individual rates. MWD has also claimed that it is exempt from California law requiring public agencies to establish rates based on the actual costs of the services being provided.

For more information about the Water Authority’s lawsuits against unlawful rates and charges levied by MWD, go to www.sdcwa.org/mwdrate-challenge.

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