Judge Orders MWD to Begin Producing Documents in First Round of Discovery in Water Authority Rate Challenge

Short Title
Judge Orders MWD to Produce Documents in Rate Challenge Case

San Francisco Superior Court Judge Richard A. Kramer today ordered the Metropolitan Water District of Southern California immediately to begin producing documents relating to MWD’s 2011 and 2012 water rates. The San Diego County Water Authority has sought documents it believes will show that MWD’s 2011 and 2012 rates do not meet the requirements of California law, and do not reflect the actual, reasonable or proportional cost of providing services to the Water Authority.

Today’s court hearing was a continuation of an August 3 hearing, in which Judge Kramer again rejected MWD’s arguments that the Water Authority was entitled to no discovery in the case. For the past eight months, MWD has vigorously tried to avoid any discovery in the case, filing numerous legal challenges to the court’s January 6, 2012 ruling that granted discovery, including a writ petition with California’s 1st Appellate District Court of Appeal. MWD’s writ was summarily denied by the Court of Appeal in April.

“We are pleased that the court reaffirmed once again that reasonable discovery is appropriate and necessary for a full review of the facts in this case, including a review of MWD’s water rates and rate-setting process,” said Daniel Purcell, special counsel for the Water Authority with the law firm of Keker and Van Nest, San Francisco. “We look forward to finally receiving documents from MWD and the other parties in the lawsuit that will show that MWD’s water rates are arbitrary, discriminatory, and fail to meet the requirements of California law. Discovery is a good first step in the direction of moving the case forward toward a resolution. ”

After a nearly three-hour hearing, Judge Kramer had ruled on all of the document requests to MWD, but had not completed ruling on separate requests to a group of MWD Member Agencies and two third-party consultants. He continued the remainder of today's hearing to Sept. 11 at 1:30 pm, at which time he is expected to rule on remaining discovery requests to the Member Agencies and consultants.

In addition to claims that MWD’s water rates are unlawful, the Water Authority has asserted claims against MWD for breach of contract and to declare unconstitutional MWD’s so-called “Rate Structure Integrity” provision. That provision was invoked by MWD to deny San Diego County residents any benefits from the approximately $18 million they are forced to pay MWD annually under its “Water Stewardship Rate.” The Water Stewardship Rate is also part of the rate challenge. The Imperial Irrigation District is also a party to the case, seeking discovery in connection with its claim that MWD’s wheeling rates violate California law.

The Water Authority’s initial legal challenge to MWD’s 2011 and 2012 rates was filed in June 2010. A second complaint was filed on June 8, 2012 to challenge rates adopted by MWD for 2013 and 2014. The second lawsuit was necessary, in part, because MWD’s actions have delayed timely resolution of the first lawsuit. The second case is in the process of being transferred to San Francisco, where the first case is pending.

The cases raise similar issues. The Water Authority alleges that MWD improperly overcharges the Water Authority for the transportation of the Water Authority’s independent Colorado River water supplies and uses that money to artificially lower the cost of MWD’s imported water supplies and other services it provides to its member agencies. This violates California’s Constitution, other state law and standard water utility practice.

The stakes in the case are high. The Water Authority estimates San Diego County ratepayers will be overcharged by approximately $40 million in 2012. By 2021, the overcharges would grow to more than $217 million annually.

To view a copy of the complaints challenging MWD’s rates, click here: 2011-2012 Amended Complaint  2013-2014 Complaint

For more information, visit http://www.sdcwa.org/mwdrate-challenge.