County water agency may suffer multibillion-dollar legal blow

June 22, 2017 5 PM PT

A legal ruling that San Diego County water officials said would save customers here up to $7 billion has been overturned.

A California appellate court on Wednesday partially reversed a 2015 trial court ruling that awarded the San Diego County Water Authority $234 million in alleged overcharges, interest and legal fees to be paid by longtime legal foes at the Los Angeles-based regional agency known as MWD, or the Metropolitan Water District of Southern California.

At issue is how much the county water agency pays to import Colorado River water over a MWD-owned aqueduct. Two years ago, San Francisco County Superior Court Judge Curtis E.A. Karnow found that MWD charged too much for that service and ordered the water importing giant to pay San Diego back and charge lower rates going forward. San Diego officials projected it would save billions over time.

Wednesday’s decision from a three-judge appellate panel largely disagreed, reinstating MWD’s right to tack water pumping and infrastructure maintenance fees onto San Diego’s water importing bill and directing Judge Karnow to reconsider the amount of damages he ordered MWD to pay.

San Diego County water officials had hoped to pass along those payments — and the cost savings associated with lower water transportation rates — to its 24 member water agencies, a move that could have translated to lower rates for individual water consumers.

Wednesday’s decision threw those plans into limbo. It also put San Diego water customers, who already pay some of the highest rates in the country, on the hook for the 10-figure difference between what San Diego officials want to pay for Colorado River water over the coming decades and what the appellate court says MWD can charge for it.

The ruling is expected to be appealed to the California Supreme Court, despite both sides claiming victory in statements issued Thursday.

Only hours after the decision came down, one of the county agency’s board committees unanimously recommended approval of more than $7 million to extend four existing attorneys’ contracts.

The board also approved a $1.58 billion two-year budget that included 3.7 percent water rate increases to begin in 2018. Dennis Cushman, the agency’s assistant general manager, said those increases had nothing to do with the expected windfall erased by the appellate court ruling. He said any future losses sustained in upcoming legal fights would not necessarily mean rate increases for consumers.

“Because we haven’t achieved total victory, we can’t lower rates,” Cushman said by telephone. “We have to proceed on a cautious basis.”

He went on to tout victories the ruling scored for county water rights and contested conservation program fees. Cushman said language in the ruling established MWD had breached its contract with the water authority. He said the decision also afforded the agency an additional 100,000 acre feet of water rights annually.

Still, he said, there is a lot of litigating left to do.

Jeffrey Kightlinger, MWD’s general manager, said he doubts the state’s highest court will take the case. In the meantime, he added, the district does not plan to offer the county agency a break on its contested water transportation rates.

Kightlinger figures none of Southern California’s taxpayers win when two of the region’s biggest water agencies spend years slugging it out in court.

“We’re tired of it and we wish it would stop,” Kightlinger said of the litigation in a telephone interview. “At the end of the day, I don’t think the public is well-served by it.

“I do think this is a poor use the public’s time, money and energy.”

Longtime MWD board member Larry Dick agreed. The Orange County water board representative likened the long-running legal spat to a ferocious fight between parents, with smaller water boards, and ratepayers, caught like children in the middle.

“We probably could make any number of adjustments to the rates,” he added in a phone interview. “But the Met is agnostic about this stuff. We do what the courts tell us to do.”

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