A feud between Metropolitan Water District of Southern California and one of its largest customers could end up costing Inland residents more than $500 million in the next six decades, local agency officials said.
The dispute is over how much Metropolitan is charging the San Diego County Water Authority to move supplies from the Colorado River to the city of San Diego. The city buys the water from Imperial Valley farmers and Metropolitan delivers it through its canals, pipelines and pumping stations.
Metropolitan says the price of moving the water is fair. But San Diego officials say that in addition to the transportation — or “wheeling” — fee, Metropolitan is charging them for the cost of its water supply, which, under California law, the city shouldn’t have to pay for.
The fight has turned particularly nasty in a state notorious for water wars and in a region where growth outpaces supply. The two sides have been battling the issue in various lawsuits for 15 years, and in the latest round San Diego has alleged a conspiracy among other Metropolitan member agencies.
If the court sides with San Diego, the disputed charges would be spread out among Metropolitan’s 25 other member agencies, which contract with the wholesaler to buy supplies from the State Water Project and the Colorado River. That includes three districts serving more than 2½ million people in Riverside and San Bernardino counties: Western Municipal Water District in Riverside, Eastern Municipal Water District in Perris and Inland Empire Utilities Agency in Chino.
Local water executives say the cost would be passed along on water bills, though they have yet to calculate the increases for individual customers. The hikes would follow nine consecutive annual increases by Metropolitan that resulted in higher rates for customers in the districts the agency supplies.
“They want to reduce that wheeling charge … so we pay more and they pay less,” said John Rossi, Western’s general manager. “This is a zero sum game for Metropolitan. It affects the agencies underneath Met.”
In all, Metropolitan member agencies could pay almost $3 billion, including the $502 million it would cost Inland districts, by 2078, they say. That is the end date of an agreement between the San Diego agency and the Imperial Irrigation District to buy Colorado River water saved through farm conservation and fallowing cropland. It is the nation’s largest farm-to-city water transfer.
San Diego says the rate includes charges for Metropolitan’s water supply and therefore violates a California law that prohibits water agencies from charging more than the actual cost of operating and maintaining the facilities used for transfers. It has cost San Diego customers $40 million this year, agency officials said.
Metropolitan says San Diego is trying to avoid paying its share for maintaining the transportation system at the expense of other users.
The alleged overcharges have been set aside in an escrow account, which by 2014 will total about $200 million without interest. If San Diego wins the lawsuit, it gets the money back; if it loses, Metropolitan keeps the money, said Dennis Cushman, assistant general manager for the water authority.
Need For Reliability
The agreement between San Diego and the Imperial farms is called the Colorado River Quantification Settlement Agreement. The initial term is 45 years, with an option to extend it to 75 years. By then, the city will be receiving 200,000 acre-feet of water per year. One acre-foot of water is enough to supply two families of four in California for a year.
In another agreement, San Diego gets 80,000 acre-feet of Colorado River water per year for helping line the All-American and Coachella canals. That amount of water also is transferred to the city using the Colorado River Aqueduct, which was constructed and is operated by Metropolitan.
The 2003 deals were part of the water authority’s effort to gain independence from Metropolitan and increase reliability, Cushman said. At the time, San Diego relied almost entirely on Metropolitan for its water.
Since then, the district has conserved, developed sources of recycled water and groundwater and increased storm-water capture, reducing Metropolitan deliveries to 44 percent of its total supply.
By 2020, with the addition of ocean desalination, San Diego will get only 30 percent of its water from Metropolitan, Cushman said. The San Diego County Water Authority supplies 24 districts and cities.
San Diego officials say Metropolitan inflated its transportation rates to make up the money lost from water sales as San Diego developed other sources, and that lost revenue should be shared among all member agencies.
“Everyone else is benefiting by the artificially subsidized costs that they’re paying,” Cushman said.
The wheeling rates were approved in 2003 by Metropolitan’s board of directors, which includes representatives from San Diego. The fee covers the expense of maintaining the pumps, tunnels and aqueducts needed to move the water, Metropolitan officials said. Pumping alone on the Colorado River will cost more than $33 million this year.
Water agencies that buy from Metropolitan pay the same transportation rate whether they are at the beginning of the delivery system or the end.
The going rate is $396 per acre-foot of water. San Diego says it should pay $159.
San Diego and Metropolitan have battled over this issue before. In 2000, a state appeals court ruled in favor of Metropolitan, saying the agency could include capital investment and systemwide costs in calculating its wheeling rate.
Metropolitan’s general manager, Jeffrey Kightlinger, said the fees were established after extensive public input. And most of the member agencies believe any agency that uses the Metropolitan system should pay for a share of conservation programs, he said.
“Metropolitan’s rates are set through an open and transparent process that ensures equity and fairness to all our member agencies and the 19 million residents they serve,” Kightlinger said. “If successful, this lawsuit would shift the cost of delivering San Diego’s (Imperial) water to customers throughout Southern California, including the Inland Empire, at a cost of tens of millions of dollars annually.”
So far, San Diego has paid more than three times more for the Imperial water than it would have for Metropolitan water, said Paul Jones II, general manager at Eastern Municipal Water District. Jones said he thinks the water authority underestimated the cost of the agreement with Imperial Irrigation District and is now trying to recoup from an expensive miscalculation.
“This is just an expensive transfer and San Diego’s goal is to lower the cost of the transfer to make it more affordable by changing Met’s rate structure,” he said. “Over time those costs would be reflected in the cost for our imported water we purchase from Met and ultimately would have to be passed through to our customers.”
Eastern’s customers span a 555-square-mile area from Moreno Valley south along the Interstate 215 corridor to Temecula and east to Hemet and San Jacinto. Western serves retail and wholesale customers in Jurupa, Corona, Norco and Riverside south to Temecula.
Cushman, of the water authority, said rates from the Imperial transfer are expected to become less expensive than Metropolitan’s anticipated rates over time.
Disputed Water Charges
Metropolitan Water District is charging San Diego County Water Authority $396 per acre-foot of water to transport water purchased from Imperial County farmers. That includes $217 per acre-foot for system access, $136 per acre-foot for pumping costs and $43 per acre-foot for conservation and water recycling efforts.
The San Diego County agency contends the pumping charge includes costs for Northern California water that should not be included, because the Imperial County water comes from the Colorado River. The agency says it should pay $116 per acre-foot for system access, $43 per acre-foot for power and not be responsible for conservation and water recycling programs.
BY JANET ZIMMERMAN
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