California Supreme Court Denies Petitions for Review, Upholds Metropolitan Water District in Wheeling Case.

Business Editors

LOS ANGELES--(BUSINESS WIRE)--Sept. 14, 2000

Upholding the validity of water wheeling rates set by the Metropolitan Water District of Southern California, the California Supreme Court today denied petitions to review the wheeling case.

Last May 30, a California Appellate Court panel unanimously reversed the January 1998 trial court decision and ruled that Metropolitan was within state law in setting rates to move, or wheel, water through its aqueduct and pipelines.

Importantly, the Appellate Court had also ruled that nothing in state law supported the trial court's conclusion that system-wide costs could not be included when calculating a wheeling rate.

Metropolitan's wheeling rate and rate-setting methodology were challenged by the San Diego County Water Authority, the El Centro-based Imperial Irrigation District, and others.

"We are certainly very pleased by the Supreme Court decision," said Phillip J. Pace, chairman of Metropolitan's board of directors.

"It confirms our strongly held belief that the Metropolitan wheeling rate structure complies with the law," Pace said. "The rate was designed to put everyone, including water wheelers, on an equal footing so that no one had a competitive advantage."

Roderick E. Walston, MWD general counsel, said, "We look forward to the development of an orderly water market based on the realities of systems that keep semi-arid areas like Southern California viable."

The issue arose when the San Diego County Water Authority announced its intention to buy water from Imperial Irrigation District, and wheel it to San Diego through Metropolitan's regional distribution system. San Diego and Imperial claimed they should pay only for the facilities used in moving the water; Metropolitan argued that it was entitled to include a fair portion of its system-wide costs into the wheeling rate.

Metropolitan was concerned that if its water sales to Southern California water utilities were displaced by wheeling transactions, and if system-wide cots were not included in the wheeling rate, then Metropolitan would be required to eliminate or scale back its support of conservation and recycling programs; shift costs to member agencies through increased rates; or require taxpayers to absorb the difference.

The Metropolitan Water District of Southern California is a consortium composed of 27 cities and water agencies serving 17 million people in six counties. The District imports water from the Colorado River and Northern California to supplement local supplies, and helps its members to develop increased water recycling, desalination, conservation, storage and other water management programs.