Connect with CP&DR

facebook twitter

Follow us on Facebook and Twitter

Subscribe to our Free Weekly Enewsletter

Water: Ruling for Met Water District Strikes at ‘Water Wheeling' Plans

The Metropolitan Water District won a round of a lawsuit over the price it charges for conveying private transfers of water. A three-judge panel of the Second District Court of Appeal, Division Five, ruled that Metropolitan can include its capital investment and other system-wide costs when figuring the fee it charges for handling water transfers. The appellate court overturned the decision of San Francisco Superior Court Judge Laurence Kay, who had ruled Metropolitan improperly included costs unrelated to the actual water transfer. The appellate panel sent the case back to Kay for further proceedings. The ruling is potentially a blow against the private water market that many public officials, farmers, speculators and developers hope to nurture. In 1986, the Legislature adopted "water wheeling" statutes (Water Code §§1810-1814) that prohibit public water agencies from withholding use of their canals and pipelines when unused capacity is available and fair compensation is paid. The idea is to encourage transfers of water from land with excess water rights, such as certain farms, to growing urban areas. In January 1997, Metropolitan established a wheeling rate of $141 per acre foot for its member agencies, regardless of the water's source, how far the water would travel or the facilities used. Representatives of all 27 member agencies — except the San Diego County Water Authority — voted for the rate. The San Diego agency is counting on buying water on the open market to help meet future needs. To get court validation for its wheeling rate, Metropolitan filed a lawsuit against seven parties, including the San Diego County Water Authority, Imperial Irrigation District, private water developer Cadiz Inc., and a few Native American tribes. But Judge Kay ruled that Metropolitan could not set a fixed wheeling rate in advance of a particular transaction and without regard to the specific proposal. He also held that Metropolitan could not include system-wide costs, such as expenses for constructing reservoirs and administrative buildings. On appeal, San Diego County Water Authority and other defendants argued that wheeling rates should be determined on a "point-to-point" basis that accounts only for the facilities used. But Metropolitan contended that because a private water transfer could displace a sale to a member agency, Metropolitan's other agencies would get stuck with a higher proportionate share of system-wide costs, thus subsidizing the water transfer. In a detailed opinion, the court found "neither the plain language of the wheeling statutes nor the legislative history supports a conclusion as a matter of law that system-wide costs cannot under any circumstances be included in a wheeling rate calculation. … The Legislature did not utilize language which is consistent with defendants' theory that only ‘point-to-point' costs my be recovered." "In short," wrote Presiding Justice Paul Turner, "the Legislature did not intend that the impact of the wheeling statutes should be to cause a water conveyance system owner to lose money or to subsidize wheeling transfers." The panel sent the case back to the lower court to determine whether Metropolitan's wheeling rate meets the definitions of "fair compensation" and reasonableness within §1813. However, the case could become moot depending on the outcome of pending legislation. Senate Bill 1973 (Perata) would give the Public Utilities Commission authority to determine what factors can be included in wheeling rates. The Case: Metropolitan Water District of Southern California v. Imperial Irrigation District, No. B119968, 00 C.D.O.S. 4206, 2000 Daily Journal D.A.R. 5615, filed May 30, 2000. The Lawyers: For Metropolitan: N. Gregory Taylor, MWD, (213) 217-6115. For Imperial: David Osias, Allen, Matkins, Leck, Gamble & Mallory, (619) 233-1155. For San Diego County Water Authority: Daniel Hentschke, SDCWA, (619) 682-4113.
Search this site
From our Authors: