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Judge's final ruling in favor of Water Authority in lawsuit against MWD rates

A California Superior Court judge has found that water rates adopted by the Metropolitan Water District of Southern California for the years between 2011 and 2014 violate state and common law.

The final ruling, issued late Thursday, spelled victory for the San Diego County Water Authority, which in 2010 filed suit against MWD claiming the rate structure effectively forced San Diego County ratepayers to subsidize ratepayers in other parts of Southern California.

The Water Authority is the largest user of MWD’s transportation service, and the only MWD member agency that uses pipelines controlled by MWD to transport a large volume of third-party water supplies each year.

“Today’s decision seals our victory in this pivotal phase of the litigation,” Thomas Wornham, chair of the Water Authority’s Board of Directors, said in a release. “There’s still a long road ahead, but such a strong validation of our efforts only enhances our determination to continue this fight on behalf of San Diego County ratepayers."

At issue was the "wheeling rate" making up part of MWD's overall rate structure, and other rate add-ons used by MWD to set rates based on water transportation costs. Superior Court Judge Curtis E.A. Karnow deemed several aspects of MWD's rate-setting mechanism to be illegal.

"Indeed, the record confirms that these rates over-collect from wheelers, because at least a significant portion of these costs are attributable to supply, not transportation," he said.

Karnow determined in his 66-page ruling that the system access rate, system power rate, water stewardship rate and wheeling rate in MWD's 2013-14 rates violate Proposition 26, and that for each year's rates between 2011 and 2014, they violate the California Wheeling statute and common law.

"The Court invalidates each rate for both the 2011-2012 and 2013-2014 rate cycles," Karnow wrote.

California’s Wheeling statute is designed to make publicly owned pipelines available for use by others when there is space available in them, so long as fair compensation is paid. Prop. 26, approved by voters in November 2010, shifted the burden to public agencies to prove they are not charging more than the actual cost of the services they provide.

The Water Authority said overcharges were the result of MWD changing its rate-setting structure after the Water Authority made agreements years ago to import independent sources of water from the Colorado River using MWD-controlled pipelines.

“We’ve said all along that MWD is not above the law,” Maureen Stapleton, general manager of the Water Authority, said in a statement. “I hope that Met’s board of directors listens to a judge saying the same thing and conducts a real, independent cost-of-service study and sets rates that comply with the law.”

The overall issue isn't settled, though.

The Water Authority on Thursday voted to file a new lawsuit against MWD for rates set earlier this month, which — under the same rate structure that was found illegal by Karnow — set rates for the 2013-2015 rate cycle. Additionally, a second phase of the initial litigation was set in motion by the judge to determine the disposition of tens of millions of dollars in disputed payments the Water Authority has made since 2011.

Karnow set a case management conference for May 16 to schedule the second phase.

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