A California Court of Appeal today ruled in favor of the Water Authority, the San Diego region, and its ratepayers on several significant elements of the Water Authority's lawsuits to secure legal rates at the Los Angeles-based Metropolitan Water District of Southern California.
- Both parties have 15 days to petition for a rehearing by the Court of Appeal.
- The Court of Appeal decision becomes final 30 days after it is issued; both parties have 10 days to appeal to the state Supreme Court.
- The state Supreme Court has 60 days to determine if it will hear the case.
- If the state Supreme Court decides to hear the case, it would likely take 18 to 24 months to issue a final decision.
One key ruling is that the Water Authority is entitled to significantly more water from MWD than MWD had credited under its preferential rights formula. A correct calculation of the Water Authority's preferential rights confirms its right to tens of thousands of acre-feet more water annually for the San Diego region - a water supply comparable to the amount produced annually by the $1 billion Carlsbad Desalination Project.
Another is that MWD illegally collected millions of dollars in illegal charges from San Diego ratepayers for "water stewardship." MWD used this money to fund local supply and conservation projects for some MWD member agencies.
In addition, the court found that MWD breached its contract with the Water Authority, which required MWD to set legal rates. The court also ruled that MWD's 'Rate Structure Integrity' contract clause is unconstitutional and that the Water Authority has legal standing to challenge it. The RSI clause was designed to punish the Water Authority for its decision to challenge MWD's rates in court and prevent the Water Authority's member agencies from receiving funding for local water supply project development.
The court ruled against the Water Authority on an important issue with statewide implications. The key question is whether MWD must base its rates on the costs it actually incurs in
providing its various service
The Water Authority argued successfully at the trial court that state law and the state Constitution require MWD to charge for services only what it costs to provide them. MWD convinced the Court of Appeal to reverse the lower court ruling on this key finding.
We are also concerned about the chilling effect this ruling could have on water transfers and their benefits for the environment.
With so much at stake, both the Water Authority and MWD are likely to seek review by the California Supreme Court of various aspects of the decision.
"When we filed the first rate case lawsuit in 2010, we knew that this would not be a sprint," said Mark Muir, chair of the Water Authority's Board of Directors. "It's a marathon that we are running on behalf of - and with the strong support of - our region's ratepayers, business leaders and elected officials.
While today's ruling secures several important victories for the Water Authority and its ratepayers, we are no less determined to see this case to a successful conclusion."