CWA seeks to soften water rate hike

The Metropolitan Water District of Southern California has brought forth its revenue requirements for Fiscal Year 2008 which would equate to a 6.9 percent increase in water rates for Calendar Year 2008, and the San Diego County Water Authority seeks to negotiate with MWD for a less severe increase.

“We don’t want to sink Met. We don’t want them to not have all the money they need,” said Jim Bond, who represents the San Dieguito Water District on the County Water Authority board and is also one of four CWA delegates to the MWD board. “But we don’t want them to take money they don’t need.”

Bond joined the MWD board as a replacement for Bud Lewis and immediately was selected as chair of MWD’s Business and Finance Committee. “This is something that was graciously placed before me to eat,” Bond said.

While the CWA adopts a budget before determining revenue needs, MWD’s process first adopts revenue requirements. “We think that is a fundamentally flawed budgeting process,” said CWA assistant general manager Dennis Cushman.

“It’s an interesting process. We think we can turn it around,” Bond said. “That, I guess, will be my charge in my committee.”

MWD’s typical rate cycle schedule adopts revenue requirements in January, holds a public hearing in February, considers recommended rates and charges in March, holds a public hearing on the standby charge in April, considers a standby charge in May, and considers a budget in June.

The County Water Authority purchases much of its water from MWD, so MWD increases are usually passed on by the CWA to the member agencies which acquire water from the CWA. Those member agencies then decide whether to absorb those rate increases or pass them on to the users.

Mark Muir, an Olivenhain Municipal Water District board member who represents that district on the CWA board, notes that member agency board members often tell angry constituents that the rate increases are the result of provider increases being passed on to agencies, but he reminded his CWA colleagues that the member agency representatives to the CWA board often support such increases. “We’re doing it to ourselves because we’re allowing our votes to support that,” he said.

The MWD board met January 8-9 in Los Angeles, although the Business and Finance Committee deferred the adoption of the revenue requirements proposed by MWD staff. MWD’s proposed revenue requirements of $1.098 billion include an increased power cost of $43 million, from $208 million to $251 million, and increased capital financing costs of $36 million, from $356 million to $392 million. The increases would provide an untreated Tier 1 rate increase of $23 per acre foot, or from $331 to $354 per acre foot, while increasing the treatment surcharge by $12 per acre foot and thus the treated Tier 1 rate from $478 to $513 per acre foot and the agricultural treated rate from $364 to $399 per acre foot.

MWD’s revenue assumptions include a 5.0 percent fixed debt rate and 3.3 percent variable debt rate, sales of 2.23 million acre feet, and a 3.0 percent increase in department operations and maintenance costs. Uncertainties about MWD’s revenue needs include a lawsuit settlement regarding temporary workers, litigation over State Water Project credits, unfunded health benefits for retired MWD employees, power costs, a Delta levee failure, and potential Bay-Delta solutions.

The Business and Finance Committee deferral will result in MWD staff reviewing alternative rate increase impacts. MWD has a Water Rate Stabilization Fund, and even with the 6.9 percent rate increase MWD would be expected to withdraw $41.4 million from that fund.

In MWD’s 2004 long-range finance plan the increase was expected to be between 3 and 5 percent. In 2006 MWD staff recommended an increase of $20 per acre foot, which the board deferred over three years. The CWA’s desire is to cap the current increase at 5.8 percent, covering 5.0 percent for the new costs plus the 0.8 percent comprising the deferred amount. That 5.8 percent increase would equate to $30 per acre foot, and CWA board members hope that their MWD delegation will work with other MWD board members to obtain that $30 cap.

San Diego’s MWD delegation will also ask MWD staff to develop cost-cutting proposals. Every $2 million in expenditures equates to $1 per acre foot, so the CWA request for a 5.8 percent increase cap would reduce $10 million, or 1 percent, from the MWD budget.