News Release

Water Authority Expands its Lawsuit Against MWD

Five New Causes of Action Added
October 27, 2011

Today San Francisco Superior Court Judge Richard A. Kramer granted a motion by the San Diego County Water Authority to amend the lawsuit it filed last year challenging the Metropolitan Water District of Southern California’s 2011 and 2012 water rates. Over MWD’s objections, Judge Kramer granted the Water Authority’s motion to add five additional causes of action to its case challenging MWD’s systematic discrimination against the Water Authority and its ratepayers. 

“We are pleased that the court agreed with the Water Authority’s position that the most economical and efficient legal path is allowing one court to address and resolve all our claims against MWD. By streamlining and consolidating the claims into one case and before one judge, we believe this case can be resolved sooner,” Water Authority Board Chair Michael T. Hogan said.  

“This case is not only about challenging MWD’s rate-setting methodology as illegal and unconstitutional, but it is also about ending MWD’s retaliatory business and governance practices that unfairly target and discriminate against the Water Authority and its ratepayers,” Hogan said. 

The additional causes of action allege that MWD breached its fiduciary duty by discriminating against the Water Authority and in favor of other MWD member agencies, in violation of MWD’s and its Board’s duties to fairly represent the interests of all its member agencies. MWD also breached its contract obligations to charge rates that are fair, reasonable and consistent with California law. Further, MWD acted in bad faith and in violation of its contract with the Water Authority when, during an agreed upon five-year legal standstill, it adopted a punitive contract clause that imposed severe penalties on any MWD member agency that sued over MWD’s rates. MWD further acted in bad faith by invoking this clause after the standstill ended and the Water Authority exercised its constitutional right to seek relief from the courts.  

Two claims ask the court to mandate MWD to properly calculate the Water Authority’s preferential right to buy water and to reinstate the contracts for local supply and water conservation programs that MWD terminated as retribution for the Water Authority’s challenges to MWD’s unlawful rates.  

In June, MWD canceled agreements including a $1.3 million agreement to increase the amount of water recycled from the Ramona Municipal Water District’s San Vicente plant, a $1.1 million agreement to fund low water use landscape retrofits and training for homeowners, and about $800,000 annually to support local programs that increase water use efficiency. The MWD board also instructed its staff to refuse to consider any pending or future local supply development projects in San Diego County. 

"Our ratepayers are forced to contribute $16 million annually toward these local water supply and water conservation programs - more than any other MWD member agency.  MWD’s punitive actions require us to continue to pay for programs that we are denied access to.  This retaliation left us no other choice but to seek the court's intervention on behalf of our ratepayers," Hogan said.

The Water Authority originally filed the lawsuit last year after MWD adopted its 2011 and 2012 rates.   The rates violate state law and standard utility practice because they overstate the cost of transporting water and then use that money to subsidize the cost of MWD’s water supply. By 2021, these illegal overcharges could cost San Diego County ratepayers $230 million annually.  

The judge set a further case management conference for January 4, 2012, at 1:30 p.m.

To read more about the lawsuit, please visit, www.sdcwa.org/top-issue-mwd-rate-challenge

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