State Supreme Court declines final issue in MWD and San Diego County Water Authority case

By on October 2, 2017

The California State Supreme Court denied to review an appellate court ruling earlier this week brought forward by the San Diego County Water Authority (SDCWA) regarding a case over rates set by the Los Angeles-based Metropolitan Water District (MWD) of Southern California. The case ruling earlier this year by the lower court has potential statewide significance.

The litigation relates to the 2003 Colorado River Quantification Settlement Agreement and the Water Authority’s historic water conservation-and-transfer agreement with the Imperial Irrigation District, the largest ag-to-urban water transfer in U.S. history. The agreement provided the SDCWA with independent supplies from the Colorado River; however, the water transfer required the use of MWD’s aqueduct and pipelines to move the water to San Diego.

At issue were the fees MWD was charging SDCWA for the conveyance of Colorado River water into the San Diego County area. Though the water authority has sought to reduce its reliance on MWD supplies it still needs Metropolitan’s aqueduct. SDCWA has reduced its dependency on MWD water from 95 percent in the early 1990s to today’s roughly 40 percent; additional plans are in place to further reduce this reliance on MWD’s water.

Still, both water entities are claiming victories in the current legal decisions. The state Supreme Court’s decision to let an earlier appellate court decision stand means Metropolitan can add State Water Project supply costs to the price it charges to transport the Water Authority’s independent supplies of Colorado River water through MWD’s aqueduct. The trial court ruled MWD could not, but the Court of Appeal reversed that decision earlier this year.

Jeffrey Kightlinger, general manager of the Metropolitan Water District of Southern California, stated that, “We are pleased that the Supreme Court took the appropriate step by denying to review this case, reaffirming a major legal victory for Metropolitan and its member public agencies, that directly or through their own sub-agencies provide water to nearly 19 million residents throughout Southern California.

“As directed by the appellate court, certain matters in the case will now be remanded to the trial court for redetermination. This may provide further financial relief for Metropolitan and its member agencies.”

But the Water Authority is claiming victory over MWD for three other litigated matters:

  • MWD must pay the Water Authority approximately $51 million for so-called “Water Stewardship” charges MWD added to the transportation rates it charged the Water Authority from 2011-2014; the trial court will determine the final amount of damages, including pre- and post-judgment interest, on remand. The decision prevents MWD from imposing more than $20 million in illegal charges annually going forward. Through 2047, those unlawful charges would have amounted to approximately $1.1 billion.
  • MWD unlawfully under-calculated the Water Authority’s statutory water right to MWD’s water supply; properly calculated, the Water Authority will be entitled to approximately 100,000 acre-feet of additional MWD water annually – about twice the production of the $1 billion Claude “Bud” Lewis Carlsbad Seawater Desalination Plant.
  • A contract clause MWD used to disqualify local water supply projects in San Diego County from receiving funding from MWD was unconstitutional. Funding under MWD’s Local Resources Program is from rates charged by MWD. No agency has paid a greater share of MWD’s local projects’ funding. Yet, MWD used the illegal contract clause to prohibit the Water Authority and its member agencies from receiving funds for projects in San Diego County.

“While we hoped that the state Supreme Court would strike down all of MWD’s monopolistic rates, our lawsuits have produced noteworthy victories for San Diego County residents – rights to significantly more MWD water, a determination that MWD breached its contract with the Water Authority, and a ruling that MWD illegally collected tens of millions of dollars in overcharges from our region,” said Mark Muir, chair of the Water Authority’s Board of Directors. “In addition, MWD will be prevented from collecting an estimated $1.1 billion in illegal charges over several decades.

Also to be yet determined by a trial court is which side – or neither side – pays for the legal fees each water entity has incurred. Though this and some other minor issues still await determination by the courts, MWD’s Kightlinger summed up his agency’s viewpoint on the overall matter saying:

“After prevailing on the major legal and financial issues in this litigation, we believe it’s time to move on to more productive activities on behalf of our member agencies and the Southern California region. … We remain committed to working toward real solutions for our future water needs and invite the Water Authority to join as a cooperative partner.”