MWD Rate Challenge

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Second phase of landmark rate trial concludes

The second phase of the San Diego County Water Authority’s landmark rate case against the Metropolitan Water District of Southern California was heard by a San Francisco Superior Court judge in April, but no ruling was issued before the end of the fiscal year.

A year earlier, the Water Authority prevailed in the first phase of the case, with Judge Curtis E. A. Karnow ruling that rates charged by MWD in 2011-2014 were illegal and violated several provisions of California law and the state constitution.

The Phase 2 ruling will determine the amount of damages the Water Authority should be awarded as a result of MWD’s breach of its contractual obligation to set legal rates. The Water Authority has calculated that MWD has overcharged San Diego County ratepayers tens of millions of dollars each year since 2011, and the Water Authority is seeking more than $180 million in damages. The Board of Directors has determined that the Water Authority will deduct litigation expenses from whatever damages it receives and return the remaining money to its 24 member agencies in proportion to their payment of MWD’s illegal overcharges over the four years in dispute.

Phase 2 also will decide whether MWD miscalculates the Water Authority’s preferential right to MWD water. Each MWD member agency has a preferential right – or legal entitlement – to a percentage of MWD’s available water supplies based on a provision in the MWD Act. The preferential rights issue is significant because MWD has understated the San Diego region’s right to purchase water by tens of thousands of acre-feet a year, more than the annual production capacity of the $1 billion Carlsbad Desalination Project.

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Water Authority maintains leadership role in Bay-Delta

As proposals for fixing the Sacramento-San Joaquin Bay-Delta ebbed and flowed in Sacramento, the Water Authority maintained its longstanding commitment to promote viable and cost-effective solutions.

The Water Authority has been among the most active water agencies in the state in seeking viable Bay-Delta solutions because financing any major project is particularly significant for San Diego County ratepayers. The Metropolitan Water District has said its share of the cost is about a quarter of the Bay-Delta fix project cost, although no cost allocation has been agreed upon. As MWD’s largest customer, the Water Authority would be expected to pay for a large share of those costs.

Guided by the Board of Directors, a multi-disciplinary staff team reviewed the proposed Bay Delta Conservation Plan in fiscal year 2014 and submitted a formal comment letter as part of the environmental review process. In July, the Water Authority submitted another formal comment letter on the BDCP Implementation Agreement. Central among the Water Authority’s concerns is the lack of legally binding financing commitments in the plan.

The following April, Gov. Jerry Brown announced that the state would take a different approach to address the Delta, decoupling the water conveyance and ecosystem restoration objectives into two distinct efforts. The Water Authority staff continued to monitor the situation in light of policy principles set by the Board.