Conservation Pushes MWD for 40% Hike

Less than a month after a 14% rate increase took effect, Metropolitan Water District officials quietly began taking steps Friday to impose an additional 40% rate increase on Southern California users to offset mounting costs for conservation and construction programs.

In a private meeting with managers of Southern California water agencies served by the giant wholesaler, the officials unveiled a series of proposals for a staggering array of rate increases that would go into effect beginning July 1, 1992.

Duane Georgeson, MWD’s assistant general manager for water supply, water quality and planning, said officials outlined several different scenarios for the increases, including a plan for seasonal charges--rates that would be higher in the summer, when demand is at its peak, and lower in the winter, when it subsides. Under any of the scenarios, further increases are likely beyond 1992, officials said.

For 1992, Georgeson said, the average increase in charges for treated water under the proposals would be about $100 an acre-foot, or nearly 40% more than the $261 the district charges. An acre-foot is about the amount of water that a typical Los Angeles family of five uses in 18 months.

He said anything more specific could not be disclosed until the proposals are formally presented to the district’s 51 board members either in late August or September. The new rates cannot go into effect until they are approved by the board--which is not expected to reach a decision until early next year.

If the increases are adopted, the effect they would have on the 15 million Southern California residents served by MWD would vary from water district to water district. In general, the more that local water districts depend on MWD for their supplies, the greater the pressure would be for them to raise their rates.

The rate increases would be particularly painful for local agencies like the San Diego County Water Authority, which gets about 90% of its supply from MWD, and Beverly Hills, which relies on the big wholesaler for all its water.

Mike Gage, president of the governing board of the Los Angeles Department of Water and Power, said Los Angeles would be less affected because MWD is only one of several sources it depends on for water.

“It’s (the rate proposal) a dramatic jump. It means that the water we purchase from MWD would clearly be a lot more expensive than it is today, “ he said. “It would also give us the added incentive to purchase as little as possible from them.”

Until last year, only about 16% of Los Angeles’ water came from MWD. In 1989-90 however, its purchases jumped to about 55% as legal decisions forced it to stop all water diversions from the Mono Lake Basin and to reduce imports from the Owens Valley region. This year, Gage said, conservation efforts in the city have been so successful that it has again reduced its dependence on MWD.

“That is a significant increase, but our ratepayers, because of their conservation efforts, won’t be stung by it, at least for the time being,” he said. “And we are aggressively pursuing conservation and water reclamation, mechanisms that we hope will help us not need as much water from MWD in the future.”

Until recently, MWD had nearly $1 billion in reserves--a fund that was built in the years when water consumption was high. Officials said this had cushioned ratepayers from any major increase. But by the end of this year, that fund will nearly have been depleted, Georgeson said.

Georgeson added that although rate studies have shown for some time that MWD would have to double its charges in the next decade, unexpected costs--and a drop in revenue caused by the drought conservation effort--have forced district officials to seek increases ahead of schedule.

As the drought stretched into a fifth year and the State Water Project reduced deliveries to MWD by 80%, he said, the district has had to double the subsidy it gives local districts for water reclamation projects and double the budget for conservation programs that encourage people to save water.

At the same time, he said, it has invested $52 million in the purchase of 300,000 acre-feet of water from an emergency state water bank--an expenditure that was “totally unanticipated and unbudgeted.”

Meanwhile, Georgeson said, MWD was required to finance the initial stages of several construction projects with current revenues rather than bond money. The district also was hit with higher than expected costs for improvements to the Imperial Irrigation District’s distribution system. MWD has agreed to pay for improvements in the irrigation district’s system that will conserve water. The Imperial district, in turn, has agreed to make about 106,000 acre-feet of its water available to MWD.

“There have just been a variety of events that have come along that push rates up,” Georgeson said.

While costs have been going up, he said, revenues have been going down as each water agency attempts to cope with the drought by reducing consumption and resorting to other sources of water.

Unlike many local water companies, MWD is not regulated by the Public Utilities Commission. The proposed rate increase can be derailed only by a vote of its board members.

Water Rates

Here is a look at changes over the last decade in rates the MWD charges to 27 member agencies, which in turn sell to 15 million people in Southern California.

DATE CHANGE July 1, 1985 3% reduction July 1, 1986 3% increase July 1, 1991 14% increase July 1, 1992 proposed 40% average increase

SOURCE: Metropolitan Water District of Southern California.