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Water Authority, MWD to submit post-trial briefs in rate suit

Less than two weeks remain before the Metropolitan Water District of Southern California and the San Diego County Water Authority submit post-trial briefs in the water-rate lawsuit that began in 2010.

Lawyers from both sides wrapped up their cases Dec. 23, after a five-day trial with potentially more than $2 billion worth of decisions for the court to make. San Francisco Superior Court Judge Curtis E.A. Karnow requested post-trial briefs by Jan. 17. A hearing is scheduled for Jan. 23; then Karnow will take the matter under submission.

The case stems from allegations by the Water Authority that MWD artificially inflated the cost of its water transportation services to the San Diego area by improperly including unrelated expenses.

The petitioners cited California statutes, the state Constitution and common law in arguing that public agencies such as MWD are required to base their rates on the actual costs of services provided.

MWD has said that previous decisions in state appellate court have found in favor of MWD's established wheeling rate, and its ability to recover systemwide costs.

The Water Authority claims other MWD member agencies benefited from alleged undercharges, which it claimed totaled $57 million in 2013. The claimed overcharges to the Water Authority, it said, would amount to $217 million annually by 2021, if left unchanged.

MWD declined to provide comment or speculation on the outcome of the case, simply saying that it's preparing its brief and awaiting the hearing.

"Right now, we prefer that this issue be tried in the courts, and not in the press," MWD spokesman Bob Muir said Monday.

Dennis Cushman, assistant general manager at the Water Authority, said the Water Authority still views its case as solid. The court's dismissal of some MWD attempts to block discovery in the pretrial phases, he said, was an indication that what the Water Authority saw as important and what the court saw as important often matched up.

"Metropolitan vigorously fought discovery all along the way," Cushman said. "They argued that nothing should be provided — that the only thing the judge should review is the documents that Metropolitan selected to put in its administrative record."

During the course of the litigation, and in the years leading up to its filing, MWD has adjusted its water rates for member agencies such as the Water Authority, through its standard process.

The Water Authority has followed by raising rates on its member agencies — including the city of San Diego, Helix Water District, Otay Water District and the cities of Carlsbad and Oceanside — citing the MWD increases as a major factor.

Cushman said that if the Water Authority receives a favorable decision, damages would first be used to cover the costs of the litigation, with the rest distributed among its member agencies. How those agencies choose to apply the funds in any repayment to ratepayers would be up to the agencies, Cushman said.

If the court's decision favors the Water Authority, it could be some time until damages are determined. Last year, the court agreed to bifurcate the Water Authority’s claims from its original filing, meaning the court’s upcoming decision would conclude only half a larger argument.

The trial’s second phase — dealing with a breach of contract claim and preferential rights to water — will have to be scheduled after Karnow’s decision on the first phase.

Cushman said the second phase could determine water-rate adjustments in San Diego County.

Neither Cushman nor Muir could predict when the second phase might begin.

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