Local water officials say policy holds desalination hostage

By: GIG CONAUGHTON - Staff Writer | Saturday, December 18, 2004 10:24 PM PST ∞

San Diego County water officials say their dream of turning seawater into a critical supply of drinking water is being undermined by Southern California's main water supplier, which is threatening to cut off financial help over a long-standing rate dispute.

But the Metropolitan Water District says it's just protecting its financial stability ---- which, if jeopardized, would threaten the drinking-water supplies of all of Southern California.

Metropolitan board members, in a squeaky-close vote last week, approved a new policy that would ban water agencies from taking Metropolitan subsidies ---- including one San Diego County wants to cut the cost of a proposed desalination plant ---- unless the agencies promise never to challenge Metropolitan's rate system in court or the Legislature.

Meanwhile, leaders of the San Diego County Water Authority, the agency that supplies nearly all the water county residents use each year, say that any threat to local desalination plans endangers the county's future water supply.

Drought, environmental concerns and political disputes are putting caps on how much water Southern California can get from its traditional sources, the Colorado River and Northern California. Because of that, the Water Authority's board has said its main focus in coming years should be finding ways to tap the sea for drinking water.

But Water Authority officials have also said seawater desalination would be too expensive without the Metropolitan subsidy ---- money that would reduce the cost of every acre-foot of water a desalination plant produced by $250. An acre-foot is roughly enough water to sustain the household needs of eight people for a year. Water Authority officials expect the subsidy would reduce the cost of water the plant produced from $800 to $650 per acre-foot at a plant proposed to be built by a private company in Carlsbad.

Killing desalination plans?

After the Metropolitan vote last week, Water Authority board member Keith Lewinger said the new policy means Water Authority board members must decide quickly if they want to pursue desalination if they can't have Metropolitan's subsidy.

Bud Pocklington, one of the Water Authority's three delegates to the Metropolitan board, said that desalination was too important not to pursue.

"Desal has to go forward whether we get support or not," he said. "It's too critical for us to stop it."

But Lewinger wasn't as sure.

"Can we afford to pay an extra $250 per acre-foot for (what will amount) to one-sixth of our water supply?" he asked. "I don't know the answer to that."

Pursuing desalination without the subsidy could raise water rates. Not pursuing desalination could leave San Diego County with less water than it needs, officials say.

Last week's vote, meanwhile, left Water Authority leaders saying the subsidy policy was unconstitutional and hoping to derail it before it takes effect in April.

They also restated their belief that the policy change was a blatant ploy to hold the county's desalination hopes hostage over a continuing dispute related to renting Metropolitan pipelines for the Water Authority's historic Imperial Valley water transfer ---- an issue the Water Authority has taken to court before.

"I think this was aimed directly at San Diego (County)," Bud Pocklington, one of the Water Authority's three representatives to the Metropolitan board, said. "I think we're the only ones who have sued them over the last 10 years."

Metropolitan leaders, meanwhile, denied that the policy change was "all about" San Diego County. They said the move was simply about the financial stability of Southern California's main water supplier.

"We're telling you, you can't have your cake and eat it too," spokesman Adan Ortega said.

The conflict

The Water Authority desperately wants a Metropolitan subsidy for desalination, because desalinated water costs much more than the imported water that San Diego County has historically relied upon.

But just as desperately, the Water Authority wants to retain its legal right to challenge Metropolitan's rates.

That's because of the Water Authority's historic deal in 2003 to buy up to 65 billion of gallons of water a year from Imperial Valley farmers.

The Water Authority needs to rent Metropolitan pipelines to ship that water to San Diego County.

And the Water Authority has maintained for years that Metropolitan overcharges for that rental agreement.

The Water Authority has already unsuccessfully challenged the rates in court, but the agency has expressed interest in challenging them again.

In last-minute negotiations to complete the Imperial Valley transfer, the Water Authority agreed to pay Metropolitan's full rental rate of $253 per acre-foot of water rather than the $97 per acre-foot deal it wanted.

With the transfer deal set to run as long as 75 years, a successful challenge to Metropolitan's rate structure could save the Water Authority, and local ratepayers, nearly $2 billion.

Short-sighted

But Metropolitan's leaders say challenging the massive agency's rate structure would threaten its financial stability ---- which could destabilize Southern California's water supply.

Metropolitan was created by the state Legislature in 1928 to build and operate the Colorado River Aqueduct and bring water to desertlike Southern California. It supplies drinking water to more than 18 million Southern Californians by selling Colorado River and Northern California water to 26 cities and water districts in six counties. Its board is comprised of representatives from all those member agencies.

The revenues Metropolitan collects by selling Colorado River and Northern California water to agencies is the money the agency uses to maintain its 770 miles of pipelines, dams, water treatment plants, pumping stations and reservoirs. It's also the money the agency uses to seek out new sources of water to keep Southern Californians wet.

Metropolitan officials say challenging the rate structure throws Metropolitan's entire system ---- a system that supplies Southern California's water ---- into jeopardy.

Ortega said the subsidy policy change is simply meant to protect Metropolitan's revenue stream from peril.

Outrage

When Metropolitan Chief Executive Officer Ron Gastelum proposed the subsidy policy change this summer, Water Authority board members expressed outrage. They said it was wrong for any agency to force its members to give up their legal rights in return for financial incentives or subsidies.

At the time, Ortega and Metropolitan said Gastelum's proposal was simply meant to spur policy discussion, and "was not a line in the sand."

After last week's vote, Water Authority managers were called several times for response, but did not return calls.

But Pocklington, Lewinger and other board members again questioned whether the new policy was legal.

"I haven't had a formal opinion from our counsel. But it's questionable," Lewinger said. "It goes to the issue of whether you can contract away your constitutional rights to object. I don't think you can."

Ortega said Metropolitan's lawyers have determined the policy is legal.

He said the policy does not stop Metropolitan member agencies from going to court or the Legislature to challenge Metropolitan's rate structure.

It just says, if they do, Metropolitan will move to take back any subsidies they're getting for desalination projects, recycled water projects or other programs.

"They can do it," Ortega said of counties who wish to challenge the rates.

"What they can't do is have their cake and eat it too," he added. "They have the right to challenge but there is the general recognition that when you challenge the financial structure there could be consequences."

What's next

For now, both Lewinger and Pocklington said the Water Authority must find a way to convince more Metropolitan member agencies that the subsidy policy is unfair ---- and to vote against it in April.

Last week's vote was close. Fifteen water agencies supported the policy change. Ten agencies, including the Water Authority, voted against the plan. One agency's directors split on the question.

"Nothing is really happening for 90 days," Lewinger said. "We need to convince some of those agencies or directors who voted for the subsidy policy that it's not really in their best interest to forever tie their hands as a member agency of Met to not litigate or question the Metropolitan rate structure."

Contact staff writer Gig Conaughton at (760) 739-6696 or gconaughton@nctimes.com.