News Release

Court Ruling Allows New Claims to Remain in Water Authority’s Case Against MWD

January 4, 2012

Following today’s ruling by San Francisco Judge Richard A. Kramer, three of the San Diego County Water Authority’s additional causes of action will be heard as part of a lawsuit it filed in June 2010 challenging the Metropolitan Water District of Southern California’s 2011 and 2012 water rates.  While Judge Kramer sustained MWD’s demurrer without leave to amend on two other claims added by the Water Authority in October 2011 on technical grounds, the Water Authority’s core allegations of MWD’s arbitrary and illegal rate setting practices and punitive denial of service to Water Authority customers remain in the case.

Judge Kramer left open the possibility that the Water Authority could bring additional claims based on MWD’s systemic discriminatory business practices.  Judge Kramer also denied MWD’s attempt to bring an anti-SLAPP motion against the Water Authority, ruling that the Water Authority’s new claims were not an attempt to impair MWD’s free speech, but were simply challenges to MWD’s actions.

The Water Authority’s new claims that will remain in the case include causes of action related to MWD’s breach of its contract to follow applicable law in charging the Water Authority and its ratepayers for transportation of water, MWD’s unlawful under calculation of the Water Authority’s Preferential Right to purchase water and MWD’s imposition of a retaliatory contract provision designed to prevent the Water Authority from challenging MWD’s unlawful rates. 

MWD did not challenge the cause of action related to the retaliatory contract provision, called the RSI clause.  MWD inserted this clause into its contracts for water conservation program funding and local water supply projects to force its member agencies to accept its water rates and give up their constitutional rights to challenge them in court.  When the Water Authority did exercise its constitutional rights to challenge MWD’s rates, MWD terminated conservation and local water supply development funding, depriving San Diego County ratepayers their fair share of such funding.  Judge Kramer said at the hearing that he intends to rule on the question of the constitutionality of MWD’s retaliatory RSI contract provision.

Judge Kramer continued the hearing on how the case will be managed, including pending requests for discovery, to Friday, January 6 at 2 p.m. To read the legal documents filed in the case, click here: www.sdcwa.org/mwdrate-challenge

Background:

In June 2010, the Water Authority filed a lawsuit challenging MWD’s 2011 and 2012 wholesale water rates.  The Water Authority alleges that MWD improperly overcharges for the transportation of water and uses that money to subsidize the cost of MWD water.  This violates California’s Constitution, other state law and standard water utility practice. Because the Water Authority pays MWD to transport the Water Authority’s water transfer supplies it obtains from the Imperial Valley, MWD’s rate structure overcharges San Diego County ratepayers. In 2011 alone, the overcharges were about $31 million, and the estimate for 2012 is $43.2 million.  By 2021, if left unchallenged, the overcharges could grow to more than $230 million dollars annually.

To learn more about the lawsuit, visit: www.sdcwa.org/mwdrate-challenge

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