San Diego County Water Authority Water Rate Challenge Against Metropolitan Water District of Southern California

By James Peasley

Water Authority Board approved filing suit against the MWD challenging the methodology for determining water rates. The allegation is that their methodology unfairly places a disproportionate cost burden on the Water Authority. San Diego County ratepayers may be overcharged as much as $230 million annually by 2021. The Water Authority Board of Directors is approaching this issue properly.

It is alleged that the MWD improperly overcharges the Water Authority impacting its member agencies in violation of California law. Specifically, it is alleged that MWD charges too much for using its facilities to transport water and uses those revenues to subsidize the water supply costs of other MWD member agencies located in Southern Calfiornia.

MWD is the Water Authority's largest water supplier. The Water Authority estimates it will purchase approximately 50 percent of its water supply needs from MWD this year. The dispute is founded upon how MWD allocates water supply costs among its rate categories. Instead of treating water purchases as a cost of water, MWD allocates a significant portion of this cost to charges it imposes for the transportation of water through MWD facilities. The consequences are that MWD's water supply rate is artificially low, while the water transportation rate is artificially high. The Water Authority is the single largest user of MWD transportation services. The allegation is that this methodology unfairly places a disproportionate cost burden on the Water Authority. If MWD continues to set annual rates using the alleged flawed formula, the Water Authority estimates that San Diego County ratepayers may be overcharged as much as $230 million annually by 2021. This cost is significant directly impacts water bills.

The Water Authority Board of Directors authorized seeking a stay of the lawsuit so the two wholesale water supply agencies can try to resolve the dispute through negotiations. If negotiations fail, the stay would enable the Water Authority to protect its rights to contest MWD's rates in court.

If the Water Authority prevails, their 24 member agencies retail water rate increases could be significant reduced. The Water Authority Board of Directors is approaching this issue properly and the San Diego region should support their efforts and look forward to a successful outcome benefitting the San Diego County water rate payers.