[CLWA] – Castaic Lake Water Agency expressed confidence today that its new wholesale rate structure is fair to all four local retailers and will withstand the legal challenge being mounted by one of them, the Newhall County Water District.
>> READ NCWD’s press release [here].
“It is unfortunate that NCWD is suing CLWA over the new rate structure; however, we strongly believe the courts will agree with us that the new structure is equitable, fair and reasonably allocates CLWA’s operating costs to the Santa Clarita Valley’s water retailers, including NCWD,” said CLWA Board President Tom Campbell. “The new structure promotes efficient management of our valley’s precious water resources, and fairly distributes the fixed costs of providing an imported water ‘safety net’ to the entire community.”
The CLWA Board of Directors approved the new structure on February 27th of this year. Under the new structure, scheduled to take effect July 1, the retailers would each pay a proportionate share of CLWA’s fixed operating costs based on their total combined water demand (groundwater plus imported water from CLWA) over the prior three-year period.
Under the previous structure, wholesale rates have been 100 percent variable — which means retailers have paid CLWA solely based on how much imported water they use. However, approximately 80 percent of CLWA operating costs are fixed — they don’t fluctuate based on volume, because CLWA incurs the same expenses regardless of how much water the retailers use.
“This new rate structure enables the four retailers to equitably shoulder their fair share of the fixed cost burden,” Campbell said. “The new rates are effectively revenue-neutral for CLWA’s wholesale water operations. It’s simply a matter of more fairly and reasonably distributing CLWA’s fixed operating costs among the retailers based on their total water needs. Regardless of the relative amounts of imported water and groundwater that an individual retailer chooses to deliver to its customers, CLWA water and infrastructure have been crucial since 1980 to the retailers’ ability to ensure that water flows each and every time their customers turn on their taps.”
In its February 20, 2013 report, Raftelis Consultants, Inc., the firm engaged by CLWA to prepare a financial model and develop the wholesale water rate structure, stated:
The rationale for this structure is that since all retail purveyors place burdens on the Agency’s water system and the water resources of the Santa Clarita Valley and also benefit from the Agency’s activities and water management programs, regardless of whether an individual retail purveyor chooses to fully utilize these resources, each retail purveyor needs to pay in proportion to the benefits received. History has shown that the imported water supply is an important standby water resource available to all retail purveyors and there is a strong nexus between groundwater availability and imported water use. Without the imported water supply, the retail purveyors cannot meet all their water demand with groundwater alone without overdrafting the groundwater basin.
“At CLWA we work very hard to promote conjunctive use of the valley’s imported and groundwater supplies,” Campbell said. “As a result of our diverse water supply portfolio, we’re better able than most communities to withstand fluctuations due to drought and other external factors. The new wholesale structure is consistent with this overall approach, and promotes revenue stability and fairness for the retailers and the customers they serve.”
CLWA is a public agency that serves as the local wholesaler of imported water from the State Water Project and other sources. It sells water to four local retailers who then deliver a blend of CLWA water and local groundwater to Santa Clarita Valley residents, businesses and other end users. The retailers are Los Angeles County Waterworks District No. 36, NCWD, Santa Clarita Water Division and Valencia Water Company.
Despite the legal disagreement, Campbell said, CLWA will continue providing the same high level of service to NCWD that it has always provided to all four SCV retailers.
About the Castaic Lake Water Agency
The Castaic Lake Water Agency (CLWA) is the Santa Clarita Valley’s public water wholesaler. CLWA is one of 29 State Water Project contractors and receives water imported from northern California and Kern County through the California Aqueduct. CLWA operates two large treatment plants, three major pump stations, three water storage facilities and over 45 miles of large diameter transmission pipelines delivering water to four local water retailers. Our mission is to provide reliable, quality water at a reasonable cost to the Santa Clarita Valley. www.clwa.org