Perseverance pays off in rate case ruling

Mark Muir, Board Chair San Diego County Water Authority

When the San Diego County Water Authority filed its initial rate case lawsuit in 2010 against the Los Angeles-based Metropolitan Water District of Southern California, we knew it would be a marathon.

Seven years later, we passed another important marker in the long-running litigation when a June 21 ruling by the state Court of Appeal sided with the Water Authority and the San Diego region on several significant issues.

The decision includes a few key takeaways:

• The Water Authority has a right to significantly more water from MWD than MWD had credited. A correct calculation of the Water Authority’s preferential rights confirms the agency’s right to tens of thousands of acre-feet more water annually for the San Diego region – a water supply about twice the amount produced annually by the $1 billion Carlsbad Desalination Project.
• MWD collected tens of millions of dollars in illegal charges from San Diego ratepayers for “water stewardship.” MWD used this money to fund local supply and conservation projects for some MWD member agencies.
• MWD’s “Rate Structure Integrity” contract clause is unconstitutional and the Water Authority has legal standing to challenge it. The RSI clause was designed to punish the Water Authority for its decision to challenge MWD’s rates in court and prevent the Water Authority’s member agencies from receiving funding for local water supply project development.
• MWD breached its contract with the Water Authority, which required MWD to set legal rates.

Unfortunately, the Court of Appeal also ruled against the Water Authority on an issue with statewide implications – whether MWD must base its rates on the costs it actually incurs in providing its various services. Legal, cost-based rates are a fundamental element of the San Diego region’s ongoing efforts to provide a safe and reliable water supply that supports 3.3 million residents and a $222 billion regional economy.

The Water Authority argued successfully at the trial court that state law and the state Constitution require MWD to charge for services only what it costs to provide them. MWD convinced the Court of Appeal to reverse the lower court ruling on this key finding. We are concerned about the chilling effect this ruling could have on water transfers and their benefits for the environment.

With so much at stake, the Water Authority will seek review of the appellate court ruling by the California Supreme Court. From the start, this case was expected to land at the state’s high court.

While the June 21 decision secured several important victories for San Diego County, we remain determined to see this case through to a successful conclusion – and we will continue to rely on support from the region’s ratepayers, business leaders and elected officials every step of the way.

More information about the case, including court documents, is at www.sdcwa.org/mwdrate-challengelink.