Utility Watchdog in San Diego

SD County Grand Jury Explains Why Rates are High

Posted June 8th, 2011

San Diego County Grand Jury says: CWA member agencies have not communicated clearly to their customers about the reasons for water rate increases.

The San Diego County Grand Jury has recently delved into, and delivered a report on, why San Diegans are paying so darn much for water. Why are costs going up if we’re conserving? How many hands does the water go through before it gets to us? Will the rates ever stabilize? How can we fix it?

For those who didn’t know, San Diego County Water Authority (CWA) currently buys water from Metropolitan Water District (MET) in LA and sells it to San Diego member agencies/retailers (like City of San Diego Water Department). According to the report CWA will spend nearly $3.8 billion at MET from 1989-2030. We are MET’s largest customer! Unfortunately, we are also the most underrepresented on their board of directors (only 4 of 37 members are from San Diego County).

Just so you get an idea of the effect MET has on your bill, consider this: 45.5% of the rate increase you experienced in January of this year was pass-through costs from MET. Meaning, MET increased charges for CWA so they had to pass-through the costs to you. Thanks MET!

CWA currently gets 53% of water from MET (down from 90% in 1990) and there are plans to reduce this by another 29% by 2020. CWA is working on getting their own independent water sources but will still need to use MET’s system to transport the CWA controlled water to CWA facilities. BUT! The report says the “disproportionate representation on MET’s board suggests that MET will continue to levy a hefty fee to convey CWA water, regardless of source, since CWA has little influence on that decision.”

So, if MET isn’t charging us high fees for the water itself, it will do it in the transportation of water. “Why stick around” you ask?

CWA is trying solve their dependency on MET in many ways: 1. Recycling, 2. Desalination, 3. Ground Water Exploration, 4. Capital Improvements

The first three on the list are technologies that are being investigated which (if successful) would be free from MET control and would provide a plateau in water rates. According to the report, we will be more likely to consider these technologies as costs of rates go up even though they were once deemed too expensive.

The fourth item is Capital Improvement Projects. These are the kinds of projects (reservoirs, storage infrastructure, etc.) that help CWA develop their independent water sources and rely less on MET. Of the January rate increase, 47% was for capital improvements. (For those doing the math, the unaccounted for portion of the rate increase was for operations and other such expenses.)

The lawsuit which CWA filed against MET on June 11, 2010 says the charges MET approved on April 13, 2010 will cause an OVERCHARGE to CWA by, drum roll please… 30 MILLION DOLLARS ANNUALLY! This is because certain costs have been misallocated such that other MET member’s costs will be low while CWA unfairly pays for it.

The take-home message of the report was that rates will go up and customers should really know why. Many of the recommendations the County Grand Jury gave to CWA were regarding ratepayer education.

The report found that wholesale water rates have gone up by 11.3% to local retailers but that this has not been passed on to ratepayers. Local water retailers have been using up there reserves to absorb the costs and they aren’t going to be able to hold for long. The report flatly states: “This is UNSUSTAINABLE. Retailers don’t have enough cash reserves to absorb these costs for long. Customers in the county will eventually get the bill for these continuing costs.”

So let's summarize…

There is an organization that we have little say in which we buy water from and are suing for taking advantage of us.

Continuing on with them as things are means there will be an increase in rates.

There is a chance to be independent from them if we develop our own resources.

The expenses of these projects means there will be an increase in rates.

There are wholesale water costs which are being absorbed by retailers not customers.

When they can’t cover them anymore there will be an increase in rates.

In order to STOP this seemingly unavoidable increase MET must change their relationship with us. The study states: MET’s loss of water sales, along with the state’s 20% conservation target, means a significant loss of revenue to MET. They should be setting reasonable rates that are fair for all, not a disadvantage to San Diegans while benefitting those in LA, OC, and Riverside. Fair would also mean basing representation on amount of water purchased.

With a better relationship with MET, CWA would not be forced to increase costs due to MET fees. That would only leave an increase in rates as the ACTUAL COST of water goes up and future investment in water independence through capital improvements.

If MET would just watch out for CWA then ratepayers would be happy and MET wouldn’t lose our business.

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