News Release

Metropolitan Water District Cancels Funding for Local Water Supply Projects in Retaliation for Lawsuit Challenging its Rates

Instructs staff to not enter into new agreements
June 14, 2011

San Diego ratepayers will pay nearly $23 million to the Metropolitan Water District of Southern California (MWD) this year to help fund local conservation and water supply development projects like seawater desalination, groundwater and recycled water – more money than any other water district in Southern California.

However, in an act of retaliation, the MWD board voted Tuesday to cancel funding to increase water recycling from a Ramona water facility and for programs to encourage local water use efficiency and retrofit homes with low-water use landscaping. MWD also said it will refuse to fund any pending or future local water supply projects in San Diego County.  

“Terminating these programs in San Diego County represents an unmistakable act of retaliation by MWD,” said Water Authority Board Chair Michael T. Hogan. “The impact of barring the Water Authority from participating in these programs, for which San Diego County ratepayers pay tens of millions of dollars annually to MWD, is highly punitive, disruptive and inequitable.”

According to data provided by MWD, only about 35 cents of every dollar paid by San Diego County ratepayers was returned to the region last year by MWD to fund local water supply projects and conservation programs, with the remainder funding projects elsewhere in Southern California.  MWD collects about $20 annually on the typical monthly residential water bill in San Diego County to fund the subsidy programs.

“No other MWD member agency contributes more money to MWD to fund these projects and programs,” Hogan said. “Conservation programs and local water supply projects in Los Angeles, Orange, Riverside, San Bernardino and Ventura counties are being funded at the expense of San Diego County ratepayers. Now, with MWD’s action Tuesday, even less money will be used for water supply projects in our own region.”

Current Water Authority programs terminated by MWD’s decision include a $1.3 million agreement to increase the amount of water recycled from the Ramona Municipal Water District’s San Vicente plant, a $1.12 million agreement to fund low-water use landscape retrofits and training for homeowners, and about $800,000 annually to support local programs that increase water use efficiency, such as turf removal incentives.

The MWD board also instructed its staff to refuse to consider any pending or future local supply development projects in San Diego County.  The pending agreements included the Carlsbad Seawater Desalination Project, which would have been eligible for up to $14 million in annual payments, and an agricultural water conservation audit program, which would have been eligible for up to $500,000 in annual funding.

MWD’s Board had considered terminating two additional agreements that provide funding for consumer and business rebates for water-efficient devices, but decided not to cancel those agreements. It is unclear from Tuesday’s action what MWD will do once these existing agreements expire in 2015.

“By refusing to enter into any new agreements, MWD’s action means our region will be denied any benefits under MWD subsidy programs funding local water supply development.  As the few remaining agreements run their course and expire, our ratepayers literally will receive not one dollar of value in exchange for the more than $20 million annually they are being forced to pay MWD year in and year out,” Hogan said.

Under MWD’s subsidy programs, conservation and local water supply development projects are funded through water rates and charges paid by its member agencies. About six years ago, MWD included a punitive contract clause - dubbed “Rate Structure Integrity” - in funding agreements in an attempt to shield MWD from legal or legislative scrutiny of its water rates and charges.  Under that clause, MWD’s board can cancel agreements if a member agency sues MWD or seeks legislative action challenging its water rates. 

In June 2010, the Water Authority filed a lawsuit challenging MWD’s 2011 and 2012 wholesale water rates.  The Water Authority believes that MWD improperly overcharges for the transportation of water and uses that money to artificially lower the cost of MWD water.  In 2011 alone, the overcharges to the Water Authority are estimated at $31 million.  By 2021, if left unchallenged, the overcharges could grow to more than $230 million dollars annually. The lawsuit is currently pending in Superior Court in San Francisco.

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

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