New proposed permanent charges on treated water by the big seller of the commodity to Southern California could have a significant impact on Escondido according to local water chief Greg Thomas of the Rincon Del Diablo Municipal Water District, which serves part of the city.
He and his board are calling for a more open and transparent” process for developing new charges that may be imposed on local agencies.
San Diego County residents who have responded to Governor Jerry Brown’s mandates for cutting water use could find their water bills going up dramatically as a result as the supplier, the Metropolitan Water District (MWD, “The Met”), thrashes around for a way to make up the money it is losing.
The Met is also losing money because San Diego County has brought on line its own treatment plant and begun operating a desalination plant in Carlsbad.
San Diego County Water Authority (SDCWA), which purchases water from the Met and then sells it to member agencies such as Rincon Del Diablo MWD and the city of Escondido recently sounded the alarm on the proposed charge, which would recover 38% of MWD’s total treatment costs.
Right now MWD recovers all of its treatment costs, capital debt service, operations and maintenance through its treated commodity rate.
However because the public has responded to the drought by significantly cutting water use, and finding alternative supplies such as the desalination plant in Carlsbad, MWD is not fully recovering its treatment expenses.
MWD staff has proposed a range of options for a new fixed treatment charge, based upon either a 10-year of 20-year historical use of MWD treated water, both ending in 2007. According to Thomas, the MWD staff has not been transparent in this process, a point he brought up this week in a letter to the MWD board.
This treatment charge would be assigned to an MWD member agency in perpetuity, with no ability for the charges to be adjusted based upon relative use of the treated water system in future years.
SDCWA has estimated that the new fixed charge would increase the SDCWA’s overall treatment costs from 62% up to 93%.
The impact of the new proposed charge is much higher as a percentage because the San Diego agency has cut treated water purchases since 2007 due to bringing on its own Twin Oaks Treatment Plant and the opening of the Claude “Bud” Lewis Carlsbad Desalination Plant in December.
SDCWA’s initial response to the proposed charge is that it will simply pass it through to its member agencies, such as Rincon and Escondido.
The MWD board met on April 11. Local water officials planned to testify at that meeting, and to emphasize, in the words of one local water district general manager, “that a 62% to 93% increase (or more) in the SDCWA melded treatment rate could be a fatal blow to San Diego agriculture and the large agricultural agencies.”
“We don’t agree with what they are doing,” Thomas told The Times-Advocate on Friday. With the approval of his board Thomas sent a letter to the Met board.
The letter states, “This letter is written in opposition to MWD’s recommended package of rates, charges and taxes for the next two years that is being considered at the April Board meetings. Rincon del Diablo, as a member agency of the San Diego County Water Agency, thus a recipient of MWD water, believes that the proposed increase and methodology for increasing rates and charges is flawed and should be rejected by the Board of Directors for these reasons:
“The development of these rates, charges and taxes have not been developed in a completely open and transparent process, and have been developed with little to no time for adequate analysis and review.”
The letter continues, “From the limited information provided by this process, retail agencies such as ours, which are reliant on our wholesalers for all our treated water, are faced with a significant increase in treated water rates. The proposed 10-year period for fixed treatment charge or another period, whichever is greater, does not meet the basis of properly developing water rates based on cost principles.”
Noting that the Met has already lost a superior court case over its rate structure (that judgment is being appealed by MWD), Thomas adds, “but MWD is still using the same flawed methodology to misallocate costs among its rates and charges. As any water agency, we have long supported the concept of increasing fixed revenue sources to cover fixed costs. However, this new fixed charge was proposed AFTER the public hearing was held, and only 13 days before the board is scheduled to vote on rates.
“This type of rushed, ad hoc rate- making process does not provide the necessary transparency for the public to be informed about the new and impeding charge that would have significant impact to their pocketbook. For these reasons, on behalf of Rincon del Diablo Municipal Water District, its Board of Directors and its ratepayers, I request that the MWD Board direct its staff to go back to the ‘drawing board,’ and produce lawful rates that are based on costs, as required by law.”
Thomas said he didn’t agree with having some sort of ten-year period for a charge, “but it should be a rolling average.”
He told the Times-Advocate, “In some form we are going to get hammered. Our ratepayers are going to suffer. They are going to see this charge as a direct impact on them since the water authority will just pass the new charge along to us.”