Special Edition - December 23, 2013

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Landmark Trial Concludes

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Landmark Trial Over MWD's Rates Concludes in Superior Court

Billions of dollars hang in the balance; decision expected in 2014

Lawyers for the San Diego County Water Authority today wrapped up their case against the Los Angeles-based Metropolitan Water District of Southern California, concluding a five-day trial with more than $2 billion at stake for county residents. Judge Curtis E. A. Karnow requested post-trial briefs from both parties by Jan. 17, with a hearing on those briefs scheduled for Jan. 23. Following the Jan. 23 hearing, Judge Karnow will take the matter under submission before issuing his decision.

Over the five-day trial in San Francisco Superior Court, the Water Authority's attorneys presented reams of evidence and witness testimony that proved MWD's rates artificially inflate the cost of its water transportation services by improperly including unrelated expenses. Numerous California statutes, the California Constitution and common law all require that public agencies such as MWD base their rates on the actual costs of the services provided.

"There aren't any seriously disputed facts in these cases; there is a serious dispute about whether Metropolitan can set rates any way it wants," said John W. Keker, special counsel for the Water Authority with the law firm of Keker & Van Nest in San Francisco. "Over the past five days of hearings, we have conclusively shown that MWD set rates to preserve its revenues, and that is flatly illegal. We believe the judge will direct MWD to reformulate its rates consistent with what the people of California have long demanded - that public agencies set their rates no higher than needed to cover the costs for each service."

MWD's rates -- challenged in two lawsuits that were coordinated for trial -- overcharge the Water Authority, which relies on MWD to transfer large volumes of independent water supplies from the Colorado River. Other MWD member agencies benefit from corresponding undercharges, which totaled $57 million this year and are projected to reach $217 million annually by 2021.

The Water Authority first sued MWD in June 2010, and then filed another lawsuit in June 2012 because the 2010 case had not been resolved and MWD had adopted rates for 2013 and 2014 based on its same flawed misallocation. In both lawsuits, the Water Authority asserts that MWD illegally assigns unrelated water supply costs -- including its costs of obtaining water from the state of California and its costs of subsidizing local water supply projects -- to MWD's water transportation rates.

To read more about the rate challenges, click here.

To read news coverage about the trial, click here.

The San Diego County Water Authority works through its 24 member agencies to provide a safe and reliable water supply to support the region's $188 billion economy and quality of life of 3.1 million residents.