GrokSurf's San Diego

It’s like dominoes.

The Metropolitan Water District of Southern California (MWD) is raising rates for wholesale water. The San Diego County Water Authority (CWA) which purchases most of its water from MWD will pass-through the increase to the 24 water agencies it serves in San Diego County. Local agencies, in turn, are announcing their own pass-through rate increases and the San Diego Water Department is pursuing a rate hike as well. The new rates would be effective Jan 1, 2011.

The rate hike situation was discussed at Monday’s (Aug 9) meeting of the Independent Rates Oversight Committee (IROC).

Marsi Steirer, Interim Assistant Director of the Public Utilities Department, shared copies of a Notice of Public Hearing that will be mailed to water customers informing them of a November 15 hearing to consider the proposed water rate changes. The notice has a well-organized presentation of details about rates and charges, and includes a form that can be used to file a protest against the increase.

Committee members then discussed the related draft IROC Report on Water Rates Study. The report states that MWD is improperly passing expenses to San Diego by including costs other than the price they pay for water. Factors said to contribute to the disputed costs include:

• MWD’s compensation structure
• MWD’s scheduling of the CIP program and ‘pay-as-you-go’ financing
• MWD’s misallocation of water supply costs to their transportation rate

The report recommends that the City seek a state legislative mandate for an audit of MWD’s rate and cost structure, and that the Mayor and Council support CWA’s lawsuit against MWD’s improper cost allocations (so far I’ve only seen the report in hard copy; I’m checking to see if IROC plans to put it on their web page; else I’ll ask for a copy to post). [11/19: here’s the report]

Andrew Hollingworth was both outspoken and soft-spoken about MWD. He said we’ll never be able to control the retail price of water until MWD’s wholesale price structure receives critical examination.

He also expressed concern about ratepayers paying more and more even though they’re using less. He predicted that without an audit, we face the prospect of never-ending price increases from MWD that will lead to a ratepayer revolt. An audit, he said, is the only way to move a body as big as MWD to change. There’s no desire to harm MWD, he said, he just wants to “apply some heat without causing damage.”

Don Billings said “MWD seems to exist in a bubble” inside which “compensation rates are rich.” The bubble needs piercing, he said, but he doesn’t foresee much coming from an audit, if one could even be done.

Chairman Jim Peugh cautioned that it might be unrealistic to expect the legislature to authorize more spending in order to audit MWD; Marsi Steirer drew attention to the 4 San Diego members on the MWD board, saying they have been closely following MWD’s pricing and their influence should not be discounted.

The discussion ended with two motions, one to approve the pass-through increase and send it on to the Natural Resources & Culture Committee. If everything proceeds according to schedule, the City Council would take up the matter at their September 21 meeting and the November public hearing would be on. All but Hollingworth voted in favor of this motion.

The other motion, to press forward with a request for the state legislature to mandate an MWD audit did not pass. With meeting time running out and too many details and questions not addressed, only Todd Webster and Andy Hollingworth were ready to vote yes. The committee agreed, however, to return to the issue at an upcoming meeting.

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In other meeting news, the committee received a desalination update from Bob Yamada, Water Resources Manager at CWA. The talk, interspersed with members’ questions and comments, was mostly a recap of previously publicized information about the possible CWA Water Purchase Agreement with Poseidon Resources for desalinated seawater from the Carlsbad Desalination Plant.

Gail Welch observed that electricity for the plant promises to be a major expense that will keep rising. She also noted that SDG&E is not yet in compliance with California’s mandate for 20% of electricity from renewable resources (which may become 33%). Mr. Yamada said that situation hasn’t been fully analyzed yet but CWA is working on it.

Other details that came out during questions and comments:

• Desalinated water from the Carlsbad plant will be piped to the Twin Oaks Treatment Plant north of San Marcos, which will require Pipeline 3 of the San Diego Aqueduct to flow in the opposite direction. The desalinated water will then be blended with treated water from Twin Oaks, and then shipped back south into the CWA system through Pipeline 4. Due to the distance from the desalination plant to Twin Oaks, the desalinated water may require additional treatment en route.
• The MWD subsidy for the desalinated water is still an open question because of CWA’s lawsuit against MWD. Unable to predict what will happen, although MWD is likely to make a decision about it soon.
• The output of the desalination plant will probably vary somewhat depending on the season and demand, but the average per day will be 50 mgd.
• All CWA member agencies will share the supply and delivery cost of the desalinated water. However, agencies that don’t buy treated water won’t be charged for the treatment portion of the desal cost.
• When the Encina power station goes offline, lots of re-permitting (e.g., water intake) will be required and costs will rise, but the term sheet appears to not address that.
• CWA is planning to hold desalination plant workshops beginning Sept-Oct. IROC would like to be on the list for one of those.