Price of water may rise under agency's new system.

Southern California's water wholesaler, the Metropolitan Water District, is considering three proposals to position itself to compete in a changing water industry. And at least one of the proposals could end up costing L.A. businesses more money.

The three proposals, which were discussed at a workshop last week, are part of a year-long process to reassess the MWD's role in an era when water in California is quickly becoming more of a commodity to buy and sell and less of a public resource.

The stakes for all businesses and residents in Southern California are huge: the MWD supplies some or most of the water for 16 million people in the region, from Ventura County south to the Mexican border. Any change in the way the water is distributed could impact the price paid by the MWD's 27 member agencies, including the Los Angeles Department of Water and Power.

In turn, those price changes will be passed on to the end users: the region's residents and businesses.

"This is going to change the rules of the game for water supply in Southern California," said real estate consultant and MWD board member Larry Kosmont, who is heading up the agency's restructuring task force. "The stakes are very high when you start changing who gets the water, who pays for it, and how much it's going to cost. You get at the very roots of the Southern California economy."

Over the next several months, MWD staff and its 51-member board will consider the merits of each of the proposals; a decision on which proposal or combination of proposals to implement is expected early next year.

But it could be another three to five years before the restructuring actually takes effect, because whatever course the MWD chooses will likely require changes in state and federal laws.

"This is not just an arcane exercise. There will be winners and losers with each of these models," said Stephen Erie, a professor of political science at the University of California at San Diego who has written extensively on Southern California's water wars.

One proposal would essentially keep the system that exists now, with the MWD supplying water on a wholesale basis to its 27 member water agencies throughout Southern California. However; the new proposal would increase the charges paid by at least some of the member agencies to pay for more of the system's upkeep. Just which agencies would pay more and how high the increases would be have yet to be determined.

Also, in periods of drought, this proposal would impose cuts in water supplies based on water usage. Under the current plan, those water agencies that have contributed the most funding to the MWD (such as the L.A. DWP) would get the smallest cutbacks.

A second proposal would replace the current system with a series of long-term water contracts between local water agencies and the MWD.

This proposal, Erie said, would favor agencies that joined the MWD relatively recently and rely mostly on MWD water, such as the San Diego County Water Authority. Those agencies that paid for a lot of the original MWD infrastructure and have other sources of water, such as the L.A. DWP, could find themselves locked into long-term contracts for very expensive MWD water that they may only need to use on an emergency basis.

"If the contractor model is chosen, businesses in L.A. could see their water costs go up, because L.A. will have to pay more to insure its water supply during years of lean snow pack in the Sierra Nevada," Erie said.

The final proposal would assign each member agency shares of the MWD, based on past investment in the MWD's water system. The agencies would then be allowed to trade their shares at "market value."

This plan would give the MWD's original 13 founding water agencies - including the L.A. DWP - immense leverage over the entire MWD network. However, along with that leverage would come the primary responsibility for maintaining the MWD's pipelines.

Under each of the options, the MWD or its member agencies would be allowed to buy and sell water. But who pays the costs of moving that water through the aging pipelines remains a source of bitter debate between the member agencies and is not addressed in any of the proposals.