Pricing Water Fairly in Southern California
As the primary provider of imported water for a six-county region, the Metropolitan Water District of Southern California and its Board of Directors must fairly allocate the costs of water through its rate structure. More than a decade ago, Metropolitan began a comprehensive three-year process with extensive public input to develop a new regional pricing system for its 26 member public agencies that provide water to 19 million residents. The new pricing system was put into effect in 2003. After seven years, the San Diego County Water Authority (SDCWA) sued Metropolitan, challenging the rate structure and the allocation of costs.
At Issue: San Diego’s Above-Market Water Purchase
A key issue is SDCWA’s agreement to purchase water from the Imperial Irrigation District (IID). SDCWA chose to pay more for IID water than it would for Metropolitan’s water, supposedly to achieve a degree of water independence and additional reliability. However, SDCWA has no pipeline network to transport this water from IID and so currently can only use Metropolitan’s facilities. Metropolitan subsequently agreed to accommodate SDCWA’s request to exchange the IID water for Metropolitan water, at a set price. While the IID water comes from the Colorado River Aqueduct, the water that Metropolitan delivers to SDCWA in its place has less salinity and is a blend of both Colorado River and Northern California water. SDCWA’s lawsuit now seeks to change the agreed price structure to receive that water. If successful, SDCWA’s lawsuit would shift the cost of delivering SDCWA's exchange water to consumers in Los Angeles, Orange, Ventura, Riverside and San Bernardino counties. This cost would be tens of millions of dollars. SDCWA claims the cost would be well over $1 billion. Consumers in those areas are not inclined to pay for SDCWA’s business decision to pay more to purchase and exchange IID water.
Transporting Water: The Primary Cost
The bulk of the water that Metropolitan delivers comes at relatively little cost for the water itself; the cost is in delivering the supplies. Metropolitan gets its water from the Colorado River – over 200 miles to the east – and from Northern California’s Feather River system – over 400 miles away. This water moves through a complex system of pipes, canals and aqueducts. The water is lifted hundreds of feet over mountains and hills by massive pumps. SDCWA’s lawsuit seeks to avoid paying its share of maintaining this transportation system – at the expense of the system’s other users.
Water’s Real Costs
Metropolitan sets rates through an open and transparent process that assures equity and fairness throughout its 5,200-square-mile service area. Metropolitan’s Board of Directors, who represent the region as a whole, rely on this rate system to evenly collect costs across the region. The water system funded through these rates provides Southern California with a reliable supply of high quality water that benefits all residents and businesses and serves the region’s $1 trillion economy.
Metropolitan’s rate structure separates or “unbundles” its rates and charges to provide transparency and clearly show what service member agencies receive, what that service costs and what they pay for it. As an example, the cost to transport water is paid through the System Access Rate, reflecting the cost of operating, maintaining and investing in the basic infrastructure. In addition, the System Power Rate collects the cost to pump water through the Colorado River Aqueduct and from Northern California. All Metropolitan deliveries include the Water Stewardship Rate, which funds Metropolitan’s conservation and recycled water programs. Metropolitan also has a Water Supply Rate, reflecting Metropolitan’s cost to acquire water.
In addition to challenging why it should share in the cost of maintaining Metropolitan’s water transportation system, SDCWA argues that it should not have to pay the Water Stewardship Rate as part of Metropolitan’s transportation (delivery) charges. Exempting SDCWA’s exchange water from these charges would simply mean that everyone else outside of San Diego County would have to pay more for conservation and recycling as well as for operating and maintaining a reliable delivery system.
At Risk: A Regional Approach to Water Reliability
Metropolitan has built and funded a water supply system that is the backbone of the region’s $1 trillion economy. This complex system has been built and maintained over more than 80 years through Metropolitan’s cooperative, regional, cost-share model. The SDCWA lawsuit seeks to undermine this proven and successful regional approach and replace it with cost-shifting strategies that benefit one community over another. Outside of San Diego, there is overwhelming support for Metropolitan’s current rate structure which reflects an equitable and regional approach.