We’ve been discussing the growing number of constituencies watching the San Juan Capistrano water rate litigation as it unfolds, and we’ve been trying to provide a range of facts and opinions on the case and its implications. Recently, we offered our own primer on the water rate litigation, and last week we linked to a Stanford University affiliated think tank’s summary of the water rate case. Below is another article, albeit authored by an attorney with a vested interest in the case — San Juan Capistrano’s own legal counsel. Nevertheless, it provides a helpful summary of (what we assume might be) San Juan’s position on tiered water rates and the use of recycled water.
Article source: www.sanjuancares.org
Below is the author’s biography:
This article was originally published in the ACWA Journal and reprinted on the San Juan Cares website. ACWA is the Association of California Water Agencies, and you can find out more about the organization at their website here.
I suppose Mr. Colantuono may be excused for disagreeing with the decision of the court. After all, he lost the case for the City of San Juan Capistrano. The City has relied on Mr. Colantuono’s opinions for several years. What’s worse, in my view, is the city and others continue to rely on him.
Mr. Colantuono’s interpretations of the court ruling are fanciful. For example, when he states, “The court concluded that the city’s rate-making record did not provide adequate linkage between the city’s water rates and its operation costs…”, he is attempting a feat of reincarnation. In fact, the court found that there was nothing in the rate study to link to. When the judge asked him in court that it be identified, Mr. Colantuono could offer nothing. In the absence of linkage, the matter of its adequacy was not considered. The court didn’t get into details like tiers or “conservation rates”, to used Mr. Colantuono’s shop vocabulary.
On recycled water, Mr Colantuono further relies on magical thinking when he states, “…the city believes that the court misunderstood both the record and the law. In its view, Prop. 218 does not require expensive imports to the exclusion of cheaper water supplies that rely on conservation and other local supply development.”
Mr. Colantuono employs a clever rhetorical device to attribute this “view” to the city and prefers not to own it himself. Perhaps he was being modest?
Prop. 218 says nothing about requiring more expensive imports, water supplies or conservation. Prop. 218 is about property-related fees and services. It does not deal with recycled water, water imports, or exclusions, or local supplies. But obscured by Mr. Colantuono’s magic, we may just discern the form of his conjuring when he implies that imported water is “expensive” compared to local supplies “that rely on conservation and other local supply development.”
In San Juan Capistrano, imported water is water supplied by the Metropolitan Water District (MWD). The all-in charge for this water, ready to drink, is about $900 per acre/ft, and the city has access to an allocation that is far in excess of its annual demand. In contrast, the “local supplies” are recycled water and water from the San Juan Basin Ground Water Recovery Plant or GWRP.
San Juan Capistrano has no local source of recycled water. Instead, the city will purchase this water from Santa Margarita Water District for about $775 per acre/ft. Of course, this cannot be mixed with drinking water, so an entirely new infrastructure will be installed to deliver it to point of use. Separate pipes, separate meters, and separate rates will be needed. State water safety regulations virtually prohibit delivery of this water to residential private property because of the risk of back-flow (or cross-connection) to the drinking water system. For this reason, use of recycled (purple pipe) water is limited to public property, parks, golf course, and HOA common areas.
The city gains access to San Juan Basin local water by virtue of its lease of the GWRP. Being optimistic, the GWRP can produce 3800 acre/ft of drinking water per year at a lease cost of $630 per acre/ft. The lease is tied to debt and is therefore fixed, so this price figure is very sensitive to the operational performance of the GWRP. MWD pays a subsidy of $250 per acre/ft to the city in return for developing this local (or substitute) source, so the net lease cost is $380 per acre/ft when the GWRP is performing perfectly and the subsidy from other MWD customers continues. That would appear to be a bargain compared to MWD’s $900 price, but only if you are prepared to ignore the other current and future costs of GWRP operation.
Current GWRP operational costs add roughly $900 per acre/ft to the $380 figure. These costs include electricity, filter media, special MTBE filters, staff, and debt service on the feed-water wells and collection manifolds, and routine maintenance expenses.
Future costs include depreciation of this expensive equipment and replenishment of the groundwater basin itself. Today, the city does not incur or even recognize these costs, but they are real. A recent study commissioned by the San Juan Basin Authority suggests that the need to replenish the groundwater basin has become urgent and the cost to do so will be astronomical, involving injection of $775 per acre/ft water into the basin, or creating of vast settling basins in the San Juan Creek, or both. Neglecting these needs will ultimately lead to the closure of the GWRP as the San Juan Basin is depleted and sea water intrudes.
Returning to Mr. Colantuono, in light of the figures presented above, one has to ask where are the “cheaper water supplies that rely on conservation…?” GWRP water is over $1200 per acre/ft, not including depreciation or replenishment, assuming the GWRP does not breakdown. Recycled water is $775 per acre/ft at its source (which is outside the city), and the infrastructure to deliver and meter it is yet to be installed. Even worse, the vast majority of residential customers are excluded from connecting or using it because you can’t drink it!
In conclusion, Mr. Colantuano’s magical thinking is actually muddled thinking. Local sources of water are actually more expensive compared to MWD imported water. Recycled water is not a substitute for drinking water and forcing property owners who cannot and do not receive recycled water to pay for it was the actual question ruled on by the court, not some vague misunderstanding as portrayed in Mr. Colantuono’s magic show.
From page 2 of 3, item E16 on tonight’s SJC City Council agenda:
“The City will pay for its recycled water use at the prevailing SMWD Tier I rate for recycled water, at $792.79 per acre-foot. This price is approximately $100 per acre-foot less than the current Metropolitan Water District commodity rate for import water currently used for the bulk of the current supply for the non-domestic system.”
The simple truth is that manufactured water is expensive, whether it is drinkable or not. The water discussed here is not, so the “$100 less” figure is somewhat misleading.
Elsewhere in the same agenda item, the city staff mentions that when SMWD is unable to supply recycled water in excess of its own demand, the City of San Juan Capistrano will switch to using its own non-potable wells to supply local customers. This raises a most interesting question:
Why not just use these same wells all the time and avoid the $792.79 charge imposed by SMWD? Why is the SMWD considered to the the primary supplier of recycled water when a much lower cost water is suitable for use and available locally?
For anyone who doubts that the operations and maintenance cost of the GWRP is at least $900 per acre/ft over and above the cost of debt as outlined above, here is a summary of all these costs, prepared by San Juan Capistrano’s own Utilities Director. It will be most interesting to compare these one year figures with any propaganda presented at the upcoming “Water Forum”.
https://drive.google.com/file/d/0B1HCIVEoPd4JWGZoZE5rRFN4OFE/edit?usp=sharing