Miller Starr Regalia

By Mandy Jackson

Daily Journal Staff Writer

The San Diego County Water Authority is suing the Metropolitan Water District of Southern California to stop rate hikes.

The authority's board of directors voted unanimously Thursday to challenge future rate hikes against the consortium of 26 cities and water districts serving 19 million Southern California residents.

The suit, filed in Los Angeles County Superior Court on Friday, claims the regional water district overcharges the San Diego water authority customers in violation of state law.

"MWD charges too much for using its facilities to transport water and spends those revenues to subsidize the water supply costs of other MWD member agencies," said Carlsbad Mayor Claude A. "Bud" Lewis, chairman of the county water authority's board.

The San Diego authority faced a Monday deadline to challenge the Southern California water district's decision to increase rates an average of 7.5 percent per year in 2011 and in 2012. Challenges to the district's April 13 rate-setting decision had to be filed within 60 days.

San Diego County Water Authority General Counsel Daniel S. Hentschke hired Michael G. Colantuono and Holly Whatley of Colantuono & Levin in Los Angeles and Steven L. Mayer at Howard Rice Nemerovski Canady Falk & Rabkin in San Francisco to contest the rate increase. Bob Muir, spokesman for the Metropolitan Water District, said the district had not seen a copy of the lawsuit and could not comment Friday.

The San Diego County Water Authority imports more than half of its water from Northern California via the water district's allocation from the State Water Project in the Sacramento-San Joaquin River Delta. The water district gets about half of its water from the State Water Project. The San Diego water authority said the district charges almost 80 percent of the cost of its water from Northern California to agencies that import water from other sources via Metropolitan Water District facilities.

As a result, according to the water authority, the rate structure discriminates against the San Diego County agency, which is the single largest user of the Metropolitan Water District's facilities for importing water.

The San Diego County Water Authority claims it will be overcharged by $30 million in 2011; $34 million in 2012; and up to $230 million annually by 2021.

Disputes over fees and rates are common, according to Kristina Lawson, shareholder at Miller Starr Regalia in Walnut Creek. "Whether it's interagency or between an agency and a developer, those disputes are always out there," she said. Lawson noted that water rate disputes usually end with an agreement before the parties become entangled in a lawsuit, but, in times of economic distress, when agencies are unable to increase revenue, disputes are more common.

Jan Driscoll, partner in San Diego at Allen Matkins Leck Gamble Mallory & Natsis, said there's been a long-standing feeling on the part of Southern California water agencies that the Metropolitan Water District unfairly charges other agencies, primarily San Diego County, to use its water transfer facilities.

"Unfortunately, a majority of the [MWD] members can outvote the water authority," she said. "For many of them, if the rates were computed differently, those agencies would pay more. It comes down to whose ox is being gored."