The document summarizes discussions at a Board of Directors meeting regarding Metropolitan Water District's (MWD) water rate structure. Key points include:
- MWD's rate structure improperly allocates over 80% of its State Water Project supply costs to transportation rates.
- This discourages conservation and development of local water supplies.
- The Water Authority has exhausted all administrative remedies to address the rate structure issues within MWD without success.
- Analyses by the Water Authority and some other MWD member agencies show the current rate structure results in significant cost impacts.
- The Board authorized the General Counsel and Special Counsel to file suit challenging MWD's allocation of costs and continued negotiations pursuant to their agreement.
2. Supply costs shifted to transportation rate
◦ Financial impacts to Water Authority
◦ Disincentive for
Conservation
Cost-effective local water supply development
Beneficial use of transportation facilities
Closed session
l d
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3. MWD’s rate structure misallocates significant
water supply costs to transportation
◦ ~80% of MWD’s State Water Project supply costs
misallocated through the System Access Rate and
System Power Rate onto transportation
◦ Local water supply development funding
(recycling, d
( li desalination and conservation)
li ti d ti )
misallocated through the Water Stewardship Rate
onto transportation
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4. Water Authority worked within all available
forums at MWD to resolve rate dispute
f t t l t di t
◦ Cost of Service Review process (2009)
◦ Member Agencies Managers (2009-2010)
g g
◦ Budget & Finance Committee (2009-2010)
◦ Three Board of Directors’ Budget Workshops
(J
(January, February & March 2010)
y, y )
Fully engaged at staff and board level
Presented analysis, letters and testimony to
support f i resolution
t fair l ti
4
5. March public hearing
◦ Bartle Wells Associates study, oral and written
B l W ll A i d l d i
testimony at Business & Finance Committee and
Board
April public h
l bl hearing
◦ Bartle Wells Associates letter, letter from Water
Authority Special Counsel
y p
No substantive response from MWD
No substantive response from other MWD
member agencies
◦ Other member agencies lack motivation to correct
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6. MWD agrees that the Water Authority has
exhausted its administrative remedies:
◦ “We agree that SDCWA’s participation in the four-month
process that led to adoption of water rates on April
13, 2010
13 2010, which included participation of SDCWA board
members in board and committee
meetings, participation of staff in meetings for member
agency representatives, and submission of comments to
g y p ,
the Business and Finance Committee and the
board, exhausted SDCWA’s administrative remedies with
respect to the consideration and adoption of those
rates.” -- Sydney Bennion, MWD’s Assistant General Counsel, to Water
t ” d ’ l l
Authority General Counsel Dan Hentschke on behalf of MWD General
Counsel Karen Tachiki
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7. MWD’s imported water supply costs appear
artificially low
By making imported water supplies appear
less expensive than they really are
◦ Local agencies have no incentive to develop new
local supplies
pp
◦ Water users have less incentive to conserve water
◦ Local projects that really are cost-effective are
discouraged
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8. MWD’s transportation rate is artificially high
◦ Discourages use of MWD’s transportation facilities
Artificially increases cost of water transfers
Discourages cost-effective local water supply programs and
projects which require use of MWD facilities
◦ All MWD member agencies would benefit financially from
increased use of facilities
Because Water Authority uses MWD
transportation services for QSA supplies
◦ Water Authority overpays for transportation
◦ All MWD member agencies underpay for water supplies
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13. Some MWD member agencies analyzed
impacts of current rate structure
i t f t t t t
◦ Water Authority’s estimates are more conservative
◦ Agencies’ analysis shows similar magnitude of cost
g y g
impacts if water supply costs are properly
accounted for
Numbers differ due to different time periods analyzed
and differences in other assumptions
Agencies object to change in rate structure
Other agencies favor status quo because they
benefit from the misallocation
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14. City of Anaheim $0.4
City of Beverly Hills $0.2
City of Burbank
y $0.2
$
Calleguas MWD $2.0
Central Basin MWD $0.9
City of Compton $0.0
Eastern MWD $1.7
Foothill MWD $0.2
City of Fullerton $0.2
City of Glendale $0.4
Inland Empire Utilities Agency
a d p e Ut t es ge cy $1.4
Las Virgenes MWD $0.4
City of Long Beach $0.6
City of Los Angeles $7.6
MWD of Orange County
MWD of Orange County $4.3
City of Pasadena $0.4
‐$26.6 San Diego County Water Authority
City of San Fernando $0.0
City of San Marino
City of San Marino $0 0
$0.0
City of Santa Ana $0.2
City of Santa Monica $0.2
Three Valleys MWD $1.2
City of Torrance
City of Torrance $0 3
$0.3
Upper San Gabriel MWD $0.1
West Basin MWD $2.2
Western MWD $1.4 14
15. Authorize General Counsel and Special Counsel to file
suit challenging Metropolitan s allocation of State Water
Metropolitan's
Project costs and Water Stewardship costs under its
current rate structure.
Confirm the chair s appointment of a negotiating team
chair’s
and authorize continued negotiations with Metropolitan
pursuant to the Exchange Agreement.
Direct the General Manager to:
◦ Return at the June 24th Board meeting with a recommendation
to initiate a rate structure analysis/cost of service study of the
Water Authority’s rate structure.
◦ Include in the recommended FY 2011 budget the anticipated
costs of these actions to be taken from the Authority’s
reserves.
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