MWD over-collects from ratepayers… and demands more

The Los Angeles-based Metropolitan Water District of Southern California is pushing ahead with water rate increases despite projections it will over-collect from Southern California ratepayers more than $217 million in excess of its needs this fiscal year alone. In spite of this fact, on April 9, MWD’s board decided to increase its readiness-to-serve charge by 17 percent, increase its capacity charge by 34 percent, and, keep in place its previously approved 5 percent water rate increase beginning January 2014. Since 2009, MWD rates have increased more than 100 percent.

Before the vote (item 8-2) to increase rates, the San Diego County Water Authority and the cities of Compton and Long Beach asked MWD to rethink whether these large increases in MWD charges and 5 percent rate increase were really necessary in 2014, when it is so clear that MWD’s actual water sales and costs once again varied substantially from those estimated by management. MWD set rates in 2012 for rates in 2013 and 2014, which were based on the assumption that 2012 revenues would roughly equal expenditures. MWD ended 2012 by over-collecting $100 million more than it needed.

MWD delegate Diana Sanchez, who represents the city of Compton, told the board that in her city there are families working multiple jobs just to make ends meet, and others on fixed incomes that cannot afford another rate increase. “This increase will not break MWD, but it could break a family struggling to survive.”

“We know for a fact that MWD is collecting substantially more revenues than its budget or cost of service supports,” wrote the San Diego County Water Authority’s MWD delegates in an April 8 letter. “To move ahead with higher 2014 rates is a disservice to the cities and ratepayers we serve, many of whom are struggling with their own budgets and to make ends meet. MWD does not need a 5 percent water rate increase in 2014.”

The Water Authority delegates objected to increased Readiness-to-Serve and Capacity charges being voted on by the board. In addition, the Water Authority asked MWD to return to its practice of adopting rates annually instead of every two years in order to respond to changed conditions and material differences between actual water sales and costs as contrasted with those estimated by management in setting the water rates and charges. The Water Authority delegates urged MWD to adjust its budget and water rates to better reflect its actual revenues and costs in order to be more sensitive to the cities and ratepayers it serves. Read the Water Authority letter objecting to the rate increase and over-collection by clicking here.

Further, MWD has a long track record of materially overestimating or underestimating its water sales and costs, resulting in poor financial practices such as raiding funds intended for capital projects in years when revenues are insufficient to pay operating costs.

In years like this, when MWD ends up with revenues substantially in excess of its costs – and even in excess of its allowable reserves, MWD looks for new, unplanned ways to spend the money rather than return it back to weary ratepayers.

Fighting for fair rates is nothing new for the Water Authority. Last year, the Water Authority successfully protested a 7.5 percent rate increase MWD had planned for 2013. The Water Authority instead asked the board to consider adopting a 3 percent increase, which would have preserved funding for water supply and infrastructure needs, while cutting unnecessary operational expenses. The Water Authority also asked MWD to perform a new cost of service analysis in compliance with Prop. 26 to ensure its rates are reasonably proportional to the costs of the services it provides. MWD’s board refused to consider or study this option and is continuing on this course by moving forward with the planned additional 5 percent increase in January.

Read the Water Authority’s proposal and letters here.