The San Diego County Water Authority on Monday petitioned California’s
highest court to review an issue of statewide significance – whether the
Metropolitan Water District of Southern California may charge its
transportation-only customers costs associated with a service those
customers do not purchase. Specifically, the petition asks the Supreme
Court to review whether MWD may include in the transportation rates it
charges the Water Authority to wheel its conserved Colorado River water,
MWD’s unrelated State Water Project supply costs.
Central to the case are two pillars of public policy in California: the
efficient allocation and conservation of the state’s water supplies, and
the state’s broad commitment to ensure that the price of government
services reflects no more than the costs the government incurs in
providing them. The petition also urges Supreme Court review because the
Court of Appeal decision breaks with a line of prior state appellate
court opinions that have appropriately recognized that -- particularly
when it comes to water service -- charges must be based on the
reasonable cost of the services provided to ensure basic fairness in the
prices Californians pay for this basic necessity of life.
MWD owns the only water conveyance facilities available to transport
water to most of Southern California. After several weeks of testimony
during a bifurcated trial on the merits, San Francisco Superior Court
Judge Curtis E.A. Karnow ruled in favor of the Water Authority on almost
all its claims, including a ruling that MWD had overcharged the Water
Authority for use of its Colorado River Aqueduct by almost $200
million during the four years at issue in the 2010 and 2012 cases
before the Court. The Water Authority and MWD both appealed parts of the
Superior Court's decisions. The 1st District Court of Appeal ruled in
favor of the Water Authority on nine out of 10 significant issues,
including that MWD: breached its contract with the Water Authority,
which required MWD to set legal rates; undercounted the Water
Authority’s right to MWD water by nearly 100,000 acre-feet a year; and
collected tens of millions of dollars in illegal "water stewardship"
charges from San Diego ratepayers.
But the Court of Appeal ruled against the Water Authority on one
important issue that has broad implications for California ratepayers
and taxpayers, finding that certain State "project water supply charges,"
itemized by the Department of Water Resources as transportation-related
for purposes of billing its own customers, and comprising about 75%
of total State Water Project costs, could be treated by MWD as
though they were its transportation costs and charged to its
transportation-only customers. This single issue, involving the court's
analysis of State Water Project costs, is the basis of the Water
Authority’s petition to the state Supreme Court.
Review of the petition by the California Supreme Court is of vital
importance to the Water Authority, serving San Diego County's 3.3
million residents, its thriving $222 billion economy and one of the
largest concentrations of military facilities in the United States,
including the First Marine Division at Camp Pendleton and much of the
Navy's Pacific Fleet.
“If not reviewed and reversed, the negative impacts of the Court of
Appeal decision will extend far outside San Diego County, to the rest of
California, as the decision undermines core California state policies
favoring the efficient use and transportation of existing water
supplies, reduced reliance on water from the environmentally sensitive
Bay-Delta ecosystem, and reasonable government rate-setting,” said Neal
Katyal, special counsel for the Water Authority from the firm of Hogan
Lovells US, in Washington, D.C., who led the petition along with Keker,
Van Nest & Peters, of San Francisco.
“While components of this case appear complex, it essentially boils down
to whether MWD can force San Diego County to pay for a State Water
Project supply it didn't want to buy and hasn't received,” said
Mark Muir, Chair of the Water Authority’s Board of Directors. “We are
hopeful that the state’s highest court will recognize that the Water
Authority's Board of Directors did the right thing when it chose to
invest billions of dollars to conserve water in Imperial County, rather
than continue its heavy reliance on imported water supplies purchased
from MWD, a substantial portion of which MWD obtains from the Bay-Delta.
We also hope the Supreme Court will grant review in order to preserve
bedrock limits on the power of government to impose fees and charges on
The Water Authority is represented by Neal Katyal, Hogan Lovells US,
Washington, D.C., Keker, Van Nest & Peters, San Francisco, and
Brownstein Hyatt Farber Schreck, a national firm with offices in San
Diego. Additional information about the rate case, including the Supreme
Court petition for review and the appellate court ruling, is at www.sdcwa.org/mwdrate-challenge.
The state Supreme Court has until Sept. 29 to determine if it will
hear the case, though it can grant itself a 30-day extension
If the state Supreme Court decides to hear the case, it would likely
take 18 to 24 months to issue a final decision.
The San Diego County Water Authority sustains a $222 billion regional
economy and the quality of life for 3.3 million residents through a
multi-decade water supply diversification plan, major infrastructure
investments and forward-thinking policies that promote fiscal and
environmental responsibility. A public agency created in 1944, the Water
Authority delivers wholesale water supplies to 24 retail water
providers, including cities, special districts and a military base.
Mobile News App: www.sdcwa.org/mobile-news-app
@schwa & @mwdfacts
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