Water Authority Lawsuit Against MWD Water Rates

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Water Authority Board approves filing a lawsuit against Metropolitan Water District Challenging Illegal Water Rates

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Water Authority Lawsuit Against MWD Water Rates

  1. 1. Board of Directors June 10, 2010
  2. 2. Supply costs shifted to transportation rate ◦ Financial impacts to Water Authority ◦ Disincentive for Conservation Cost-effective local water supply development Beneficial use of transportation facilities Closed session l d 2
  3. 3. MWD’s rate structure misallocates significant water supply costs to transportation ◦ ~80% of MWD’s State Water Project supply costs misallocated through the System Access Rate and System Power Rate onto transportation ◦ Local water supply development funding (recycling, d ( li desalination and conservation) li ti d ti ) misallocated through the Water Stewardship Rate onto transportation 3
  4. 4. Water Authority worked within all available forums at MWD to resolve rate dispute f t t l t di t ◦ Cost of Service Review process (2009) ◦ Member Agencies Managers (2009-2010) g g ◦ Budget & Finance Committee (2009-2010) ◦ Three Board of Directors’ Budget Workshops (J (January, February & March 2010) y, y ) Fully engaged at staff and board level Presented analysis, letters and testimony to support f i resolution t fair l ti 4
  5. 5. March public hearing ◦ Bartle Wells Associates study, oral and written B l W ll A i d l d i testimony at Business & Finance Committee and Board April public h l bl hearing ◦ Bartle Wells Associates letter, letter from Water Authority Special Counsel y p No substantive response from MWD No substantive response from other MWD member agencies ◦ Other member agencies lack motivation to correct 5
  6. 6. MWD agrees that the Water Authority has exhausted its administrative remedies: ◦ “We agree that SDCWA’s participation in the four-month process that led to adoption of water rates on April 13, 2010 13 2010, which included participation of SDCWA board members in board and committee meetings, participation of staff in meetings for member agency representatives, and submission of comments to g y p , the Business and Finance Committee and the board, exhausted SDCWA’s administrative remedies with respect to the consideration and adoption of those rates.” -- Sydney Bennion, MWD’s Assistant General Counsel, to Water t ” d ’ l l Authority General Counsel Dan Hentschke on behalf of MWD General Counsel Karen Tachiki 6
  7. 7. MWD’s imported water supply costs appear artificially low By making imported water supplies appear less expensive than they really are ◦ Local agencies have no incentive to develop new local supplies pp ◦ Water users have less incentive to conserve water ◦ Local projects that really are cost-effective are discouraged 7
  8. 8. MWD’s transportation rate is artificially high ◦ Discourages use of MWD’s transportation facilities Artificially increases cost of water transfers Discourages cost-effective local water supply programs and projects which require use of MWD facilities ◦ All MWD member agencies would benefit financially from increased use of facilities Because Water Authority uses MWD transportation services for QSA supplies ◦ Water Authority overpays for transportation ◦ All MWD member agencies underpay for water supplies 8
  9. 9. Year $/AF 2003 $253 2004 $253 2005 $258 2006 $258 5-year 2007 $258 Time- Time-out 2008 $278 2009 $278 2010 $314 2011 $372 2012 $396 9
  10. 10. $2,105  $1,637  $1 311 $1,311  $1,033  $330  $330 $330  $330 Low High Next 10 Years 35 Year Term 45 Year Term 10
  11. 11. $250 $230 $225 $200 $175 $150 Delta Fix $125 $116 $100 Water Stewardship $75 State Water Project $50 $25 $0 Low High 11
  12. 12. $550 $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Total $50 $57 $66 $71 $76 $80 $84 $103 $124 $146 $384 $396 $408 $421 $434 $448 $462 $477 $493 $510 Water Stewardship ‐ High Water Stewardship ‐ $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $87 $91 $95 $99 $104 $109 $114 $119 $125 $130 $40B Delta Fix $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $103 $103 $103 $103 $102 $102 $101 $101 $101 $100 $10B Delta Fix $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $34 $34 $34 $34 $34 $34 $34 $34 $34 $33 Water Stewardship ‐ Low Water Stewardship  $9 $10 $12 $13 $14 $14 $15 $18 $22 $26 $29 $30 $32 $33 $35 $36 $38 $40 $42 $43 State Water Project $41 $47 $54 $58 $63 $66 $69 $85 $102 $120 $131 $137 $144 $151 $159 $167 $175 $184 $193 $203 QSA Wheeling  (1,000 AF)         160 170 180 180 180 180 180 210 240 270 280 280 280 280 280 280 280 280 280 280 12
  13. 13. Some MWD member agencies analyzed impacts of current rate structure i t f t t t t ◦ Water Authority’s estimates are more conservative ◦ Agencies’ analysis shows similar magnitude of cost g y g impacts if water supply costs are properly accounted for Numbers differ due to different time periods analyzed and differences in other assumptions Agencies object to change in rate structure Other agencies favor status quo because they benefit from the misallocation 13
  14. 14. City of Anaheim $0.4 City of Beverly Hills $0.2 City of Burbank y $0.2 $ Calleguas MWD $2.0 Central Basin MWD $0.9 City of Compton $0.0 Eastern MWD $1.7 Foothill MWD $0.2 City of Fullerton $0.2 City of Glendale $0.4 Inland Empire Utilities Agency a d p e Ut t es ge cy $1.4 Las Virgenes MWD $0.4 City of Long Beach $0.6 City of Los Angeles $7.6 MWD of Orange County MWD of Orange County $4.3 City of Pasadena $0.4 ‐$26.6 San Diego County Water Authority City of San Fernando $0.0 City of San Marino City of San Marino $0 0 $0.0 City of Santa Ana $0.2 City of Santa Monica $0.2 Three Valleys MWD $1.2 City of Torrance City of Torrance $0 3 $0.3 Upper San Gabriel MWD $0.1 West Basin MWD $2.2 Western MWD $1.4 14
  15. 15. Authorize General Counsel and Special Counsel to file suit challenging Metropolitan s allocation of State Water Metropolitan's Project costs and Water Stewardship costs under its current rate structure. Confirm the chair s appointment of a negotiating team chair’s and authorize continued negotiations with Metropolitan pursuant to the Exchange Agreement. Direct the General Manager to: ◦ Return at the June 24th Board meeting with a recommendation to initiate a rate structure analysis/cost of service study of the Water Authority’s rate structure. ◦ Include in the recommended FY 2011 budget the anticipated costs of these actions to be taken from the Authority’s reserves. 15

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