MWD's new fees would hurt L.A., task force says.

Metropolitan Water District plans for new fees to be assessed on future customers "could severely harm future development and economic vitality" in Southern California, according to a Blue Ribbon Task Force that spent the past six months studying MWD finances and operations.

In its report released last week, the task force, comprised of business and community leaders, noted that the MWD's new rate structures "do not address the severe problems many water-dependent industries are experiencing as Metropolitan water rates climb."

The future fees that concerned the task force, in relation to their possible impact on the local economy, are called the Readiness to Serve Charge and the New Demand Charge. The Readiness to Serve Charge is scheduled to be assessed beginning in 1995-96 and to generate $66 million per year. The New Demand Charge is slated to be imposed beginning in 1996-97.

The task force noted in its report that MWD's current users "which control the board" will likely come up with ways to shift the costs of system improvements "exclusively on to future users."

"Such a result could negatively affect Southern California's economic development options," the report said.

The 27-member task force was proposed by the MWD's former chairman Mike Gage and was appointed last April by the MWD board. The MWD's new chairman, John Foley, noted last week that a new seven-member MWD ad hoc committee will be formed to monitor staff efforts to implement task force recommendations.

The task force was chaired by Nelson Rising, senior partner at Maguire Thomas Partners commercial development firm, and was divided into four subcommittees -- Integrated Resources Planning and Rate Structure, External Relations, Business Practices, and Human Resources and Diversity.

The subcommittee examining rates noted in its section of the report that while MWD's cost burdens -- many resulting from capital improvement plans -- are projected to increase the wholesale price of water from $200 per acre-foot to close to $700, the proposed new rate structures "fail to recognize the dampening effect higher prices will likely have on water demand."

One of the MWD's most controversial, expensive capital projects is the Domenigoni Reservoir project in Riverside County. The task force noted that the MWD has spent $200 million "blasting apart a mountain for the required dam landfill" without adequate study of whether the project is financially feasible. "They have to be ready NOT to build these projects," said Ray Orbach, chairman of the Integrated Resources Planning/Rate Structures Subcommittee. "Are the member agencies ready to pay for what they want? ... The MWD is committed to Domenigoni, so it is reluctant to engage in the IRP process."

Orbach further noted that MWD pricing policies "are in danger" of putting some agricultural interests out of business.

The task force recommended that the IRP, or Integrated Resources Planning, process should govern MWD engineering, investment and operational decisions.

"It is important that everything be on the table," said Orbach.

In the area of external relations, the task force concluded that the MWD should beef up its lobbying efforts in Sacramento and Washington, since lawmakers' decisions can have a major effect on how much water is available in Southern California and at what cost.

"Some think that the (MWD) board is inaccessible and unrepresentative of the population it currently serves, and therefore not as influential as in the past," the report stated. "At one time, the MWD was extremely powerful, but the rise of new water policy interest groups has diluted its impact, often to the point where it cannot count on support from state and federal officials representing its member constituencies.

"The MWD is not seen as an effective coalition-builder, often ignoring opportunities to build new alliances, and sometimes alienating old allies. ... In general, but especially among member agencies, the MWD is often said to be 'arrogant' and not to care what others may think about its actions."

Rising noted in his cover letter to the MWD board that the task force believes "building the political will and effective institutions to secure affordable water supplies for Southern California users is the MWD's most critical current challenge."

At a news conference after the report was delivered to the board, Rising said the MWD has a "real need to focus on the political, instead of on engineering."