News Release

Court Reaffirms Prior Order Granting Discovery in Water Authority’s Rate Case Against Metropolitan Water District of Southern California

February 17, 2012

San Francisco Superior Court Judge Richard A. Kramer today reaffirmed his January 6 order granting discovery in the San Diego County Water Authority's lawsuit challenging 2011 and 2012 water rates adopted by the Metropolitan Water District of Southern California. In reaffirming his prior ruling, Judge Kramer rebuffed attempts by MWD to assert limits on discovery before the process has even commenced.

"MWD lost on the discovery issue on January 6," said Dennis Cushman, assistant general manager of the Water Authority. "Over the past six weeks, MWD dithered and delayed moving forward with the discovery process. Instead, in its most recent court papers, MWD attempted to re-litigate motions it lost in early January."

In a pretrial court hearing January 6, Judge Kramer granted a motion by the Imperial Irrigation District and the Water Authority to permit discovery -- subpoenas, depositions, interrogatories and document production -- in the case. MWD had opposed those motions, arguing the court could only consider a far more narrow set of documents MWD itself produced.

Judge Kramer also denied without prejudice a motion by MWD to bifurcate -- i.e. try separately -- the first three of six causes of action in the case and defer trial on the three remaining causes of action.  The judge said he will consider how the case should be tried after the parties complete discovery.

“Trying all of the Water Authority’s causes of action in the same trial will provide a more complete picture to the court about how MWD's governance is broken, allowing the self-dealing system in place there to illegally set rates and take other actions that harm not only San Diego County ratepayers, but all of Southern California,” said Michael T. Hogan, chair of the Water Authority's board of directors.

During Friday’s court session, Judge Kramer ordered the parties to work with a special master to develop and implement a plan for discovery. A further case management conference was set for April 13, 2012.

MWD’s rate structure illegally overcharges San Diego County ratepayers tens of millions of dollars annually for the transportation of water and forces it to subsidize the water costs of MWD's other member agencies.

"We believe discovery in this case will shine a light on the secretive and improper decision-making process in place at MWD, the largest public water agency in the nation,” Hogan said. “These practices unfairly and illegally discriminate against the Water Authority and its ratepayers to enrich MWD’s other 25 member agencies. And, they compromise MWD’s integrity and its responsibilities as a public agency, which is to conduct its business in the board room, not the back room.”

In addition to three causes of action challenging the 2011 and 2012 rates, the Water Authority’s lawsuit claims MWD breached its 2003 contract with the Water Authority in which it pledged to follow applicable law in charging the Water Authority and its ratepayers for transportation of water. Another claims MWD has unlawfully under-calculated the Water Authority’s Preferential Rights to purchase water. The Water Authority is also challenging MWD’s imposition of a retaliatory contract provision designed to prevent the Water Authority from challenging MWD’s unlawful rates in a court of law.

The Imperial Irrigation District and the San Diego-based Utility Consumer Action Network (UCAN) have joined the case as interested parties on the Water Authority’s side.  Eight MWD member agencies joined the case on MWD's side.

The stakes in the litigation are estimated at between $1.3 billion and $2.1 billion over a 45-year period. As part of the 2003 contract that the Water Authority alleges MWD has breached, MWD is required to place all disputed payments made by the Water Authority into an escrow account, which MWD cannot spend during the pendency of the litigation. If the Water Authority wins the case, MWD will be required to return those funds to the Water Authority. By the end of 2012, the escrow account will grow to approximately $78 million.  By the end of 2013, the balance will grow to approximately $135 million.

“We are fighting to protect our region’s ratepayers and our $186 billion economy,” Hogan said. “If we are successful, MWD will be forced to return tens of millions of illegally collected revenues to the Water Authority.”

To learn more about the lawsuit and to read the legal documents filed in the case, click here: www.sdcwa.org/mwdrate-challenge.

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