The sweeping rate restructuring being formulated by the Metropolitan Water District of Southern California and scheduled to take effect next year may be derailed by a bill now making its way through the state Legislature.
As deregulation slowly comes to the water industry, the pending legislation could force the MWD to slash the rates it wants to charge for third parties that transport water through its pipelines.
The bill, SB 1029 by Sen. Don Perata, D-Oakland, requires water pipeline system owners like the MWD to charge third parties only for the cost to transport the water through their pipelines and prohibits them from adding a charge to help cover costs for overall maintenance of the water system. The bill passed the Senate Agriculture and Water Resources Committee last week on a unanimous vote and moves on to the Senate Appropriations Committee as early as this week.
The MWD has mounted an intense lobbying campaign against the bill, saying it would leave the agency in a situation similar to the state’s investor-owned utilities that are now insolvent because they were unable to pass on their wholesale power costs to ratepayers.
“This bill doesn’t learn from the mistakes of power deregulation,” said MWD spokesman Adan Ortega. “Agencies must recover the costs of providing access to their systems. If they can’t cover their costs, they face possible insolvency and you will see a suppliers’ market.”
Perata was unavailable for comment last week.
But supporters of his bill said its intent is to prevent the MWD or other water pipeline owners from imposing “unreasonable” costs on third parties seeking to transport water through the pipes. They said it’s all right to have some additional costs, such as a fee for the maintenance of the individual pipeline through which the water is transported. But, they argue, a third-party water transporter should not have to pay for other budget items, like the MWD’s headquarters building or that agency’s lobbying expenses.
“The costs must be within reason and have justification,” one supporter said.
The Perata bill is only the latest chapter in the long-running battle over the shape of the state’s water market, as deregulation begins to take hold. For each of the last several years, private water suppliers and some public water agencies have been pushing for minimal fees for access to existing water pipelines. Each time, the MWD and other water agencies have successfully fought off these attempts, arguing that they should have the right to set the water transfer fee at a level that covers system-wide maintenance costs.
Two things have changed the landscape this time around, however.
One is the failed power deregulation scheme that has water agencies and some Sacramento lawmakers extremely wary of deregulating the water market, the other is that the MWD is just about ready to unveil its new rate structure that addresses the issue of third-party water providers.
The chief component of this rate proposal which could take effect as early as next year is what the MWD’s Ortega calls a “uniform system access charge.”
“Everyone who wants to use the system to transport water through the pipes must pay the same fee, whether it’s MWD water or water provided by third parties,” Ortega said. “That fee covers the cost of the MWD’s investments in the water system and of water conservation programs we’ve put in place.”
