Water Authority Gains Ground in High-Stakes Lawsuit Against Metropolitan

Short Title
Water Authority Gains Ground in High-Stakes MWD Lawsuit
Judge grants Water Authority motion to allege MWD violated Proposition 26

A Superior Court judge on Tuesday granted the San Diego County Water Authority’s motion to amend a lawsuit against the Los Angeles-based Metropolitan Water District of Southern California.

Water Authority Rate Challenge

For more information about the Water Authority’s lawsuit against unfair rates and charges levied by MWD, go to www.sdcwa.org/mwdrate-challenge

San Francisco Superior Court Judge Curtis E.A. Karnow ruled that theWater Authority is entitled to allege violations of Proposition 26 in its challenge of MWD’s 2011 and 2012 rates.  The Water Authority has already alleged MWD violated Prop. 26 in a related lawsuit contesting MWD’s 2013 and 2014 rates.

As part of its ongoing strategy to delay and prevent a resolution to the litigation, MWD objected to the Water Authority’s petition to amend its complaint.  MWD has filed numerous pre-trial challenges with the court over the past two-and-a-half years, most of which have been struck down.

“California law gives broad discretion for amending complaints prior to trial, so long as there is no prejudice to the defendant,” said Warren Braunig, special counsel for the Water Authority with the law firm of Keker & Van Nest in San Francisco.  “Despite this, MWD once again felt the need to drag everyone into court over a process that should have been a formality.”

Voters passed Prop. 26 in 2010 to stop hidden taxes.  Prop. 26 prohibits government agencies such as MWD from imposing rates and charges that exceed the cost of the services for which those rates are charged.  It also requires that the rates charged to individuals be proportional to the benefits received from the government activity.  Prop. 26 also places the burden on the government agency of proving that its rates meet these criteria.

The Water Authority has filed two lawsuits against MWD that present common factual and legal claims.  The first challenge was filed in June 2010, after MWD set its 2011 and 2012 rates.  The Water Authority filed a second complaint in June 2012 after MWD set rates for 2013 and 2014 that were based on the same flawed cost-of-service methodology as the first action.  The second lawsuit was necessary because MWD’s foot-dragging in the first lawsuit has delayed its resolution.  The court agreed to coordinate the cases for case management purposes.

Each case asserts that MWD’s rates assign water supply costs to transportation rates in violation of state law and the state constitution.  Both cases also allege that the water rates set by MWD discriminate against the Water Authority by artificially inflating the price charged for “wheeling” (or transporting) water through MWD’s pipes if it is purchased from a water supplier other than MWD.

The Water Authority purchases water from the Imperial Irrigation District and receives other independent water supplies from relining the All-American and Coachella canals.  The Water Authority is the only MWD member agency that uses the pipelines MWD controls to transport a large volume of third-party water each year. 

The stakes in the two court cases are high for San Diego County water ratepayers.  Under MWD’s current rate scheme, local water ratepayers will be overcharged for transportation services this year by $57 million.  By 2021, the overcharges could grow to more than $217 million annually.

During Tuesday's hearing, Judge Karnow signaled that he hoped to set a case management schedule under which one or both cases could go to trial by November.  He said he would issue a case management order by the end of this week providing more detail on scheduling and other matters in the case.

Judge Karnow recently took over the case after changes in judges' assignments in San Francisco Superior Court.  The case was previously assigned to Judge Richard Kramer.

To read the Water Authority’s proposed amended complaint, click here: www.sdcwa.org/sites/default/files/files/water-management/ratechallenge/2013_01_15-sdcwa-3rd-amended-complaint.pdf.