MWD Restructures Rates, Regulations on Water Supplies

Southern California’s governing water agency set up a structure of rates and regulations Tuesday to prepare for a new system in 2002 in which cities, public agencies and private companies will be able to trade water supplies.

The significance of the new rates, which the Metropolitan Water District will experiment with in the next year, is that they presage open markets for part of the region’s water supply in years to come.

The water system will be partially deregulated to allocate supplies throughout the West at a time when Southern California must reduce its water consumption. The region must cut water use by 5% over 15 years, despite the fact that its population is projected to rise by 6 million in that time.

Under the proposed system, the MWD will supply water from the Colorado River and Northern California under contracts to the agencies and companies--such as Los Angeles Department of Water & Power and California Water Service Co.--that deliver water to consumers.

A two-tier pricing system will be set up, with one rate for basic supplies allocated on a city’s usage over the last 10 years and a presumably higher rate geared to market transactions. Cities will be able to buy water from each other or from suppliers independently, something they cannot do now.

The MWD, a consortium of 27 cities and water districts serving six Southern California counties, will stop bundling its charges, specifying prices for the water, access to the infrastructure of aqueducts and piping that deliver the water, conservation and growth.

If a city is putting in new residential developments or attracting industrial users, it will pay a charge to offset the MWD’s cost of adding capacity, a spokesman said.

“With this pricing structure,” the MWD’s member cities and public agencies “will have more options to control their own destiny when it comes to keeping water flowing for their customers,” said MWD board Chairman Philip J. Pace.