October 30, 2015

South Bay and East County Leaders Fight San Diego Proposed Water Rates

By La Prensa San Diego

By Sandra G. Leon

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No one likes to overpay, and a coalition of leaders are fighting a proposal by the City of San Diego to overcharge the South Bay and East County $7.2 million over the next six years for recycled water.

The local leaders claim that San Diego is proposing rates for recycled water that overcharge Otay customers in order to undercharge the City’s recycled water customers north of the City.  These leaders include County Supervisors Greg Cox and Diane Jacob, San Diego City Councilman David Alvarez, Chula Vista Mayor Mary Casillas Salas and the Chula Vista City Council, State Senator Ben Hueso, the Southwestern College Board of Trustees, and ten local chambers of commerce and business associations.

They point out that the South Bay’s water rates should be based on the costs to serve the South Bay, not on the costs to serve customers north of the City who are served by a separate, physically independent system that is unconnected to the system that serves the South Bay and parts of East County.

The South Bay and adjoining parts of the East County use recycled water to irrigate greenways along streets, areas managed by homeowners associations, parks, golf courses, and other public areas.  These customers are provided water by the Otay Water District, which purchases 99 percent of the recycled water produced at the City’s South Bay Water Reclamation Plant in the Tijuana River Valley.  Otay distributes that water over a $200 million distribution system that it built, owns, and operates.

According to the City of San Diego’s cost analysis, the rate to serve the South Bay is based on the cost to produce recycled water alone – $1.14 per hundred cubic feet of water (hcf).  Distribution costs are not included because Otay owns its own distribution system.  Separately, the analysis estimates the cost to produce and distribute recycled water for customers north of the City to be $2.14 hcf.  These customers depend on San Diego for both production and distribution on the City-owned distribution system.

The City has proposed a single rate that combines the costs of both the South Bay and the North City to create a rate of $1.73 hcf – more than what it costs to serve the South Bay and less than what it costs to serve the North.
“The City’s proposed rates are unfair and inequitable to our customers,” said Mark Watton, General Manager of the Otay Water District.  “If the City needs to raise rates to cover its cost, that’s fine, but this is a deliberate attempt to force our customers in the South Bay and East County to pay the costs of the North system to subsidize both the City of San Diego and water users north of the City.”
The coalition notes that of the 600 recycled water accounts north of the City, 100 are City of San Diego accounts for golf courses, parks, and other outdoor uses.  “It’s an inherent conflict of interest for the City to set rates to benefit itself at the expense of others,” said Watton.

The City contends that the system that serves the North and the system that serves the South Bay are one integrated system.  They also contend that the South Bay receives credits from two regulatory agencies for its purchase of recycled water and for its distribution system.

Watton’s response to the City on these points is emphatic.  “The City cannot show anyone where the system that serves the South Bay and the system that serves the North are physically connected – because they aren’t.  They have completely separate permits, contracts, costs, and customers.”

Watton also notes that the credits it receives are irrelevant to setting fair rates.  “Credits that Otay receives for recycled water have nothing to do with setting the City’s water rates.  Otay relies on the City only to produce recycled water, and rates for Otay should be set to recover the costs to produce water, not to produce and distribute it. It’s that simple.”
Otay has proposed an alternate zone rate based on the costs to serve the South Bay system. Watton notes that zone rates are supported by the American Water Works Association and that the Metropolitan Wastewater Joint Powers Authority, an advisory body of eight cities and several local water districts, voted to support zone rates as the fair and equitable way to set rates in San Diego.

The San Diego City Council is expected to vote on the proposed rates on November 17.