On Tuesday, May 30, the Otay Water District filed a lawsuit in Superior Court against the city of San Diego challenging the rate the City charges the District for recycled or reclaimed water. Otay’s lawsuit comes after many years of failed attempts involving numerous staff discussions, community engagement, dialogue with the city council, and most recently mediation, to correct unlawful rates for recycled water, which the city adopted in November 2015. This lawsuit is not simply a complaint against high water rates. The rate that the city has adopted for recycled water violates the contract between Otay and the city and the California Constitution. Otay intends to protect its customers’ rights to pay recycled water rates that are lawful – and nothing more. The water rate must recover only the costs for the services that Otay and its customers receive. The city’s rate for recycled water is unlawful because it deliberately charges Otay customers costs that are unrelated to the recycled water they receive. When setting rates for paying customers, no government or public entity should be permitted to disregard the law.
Why are the city’s rates unlawful?
The city owns two plants that produce recycled water — the North City Plant in the UTC area, just east of I-805, and the South Bay Plant in San Ysidro, within sight of the U.S.-Mexico border. The plants are approximately 26 miles apart and have their own independent and physically unconnected distribution systems. The North City Plant has an extensive distribution system that is approximately 93 miles long and serves customers in the north, and it cannot physically serve customers in the South Bay. City customers in North County should pay the costs of the North City Plant, not Otay and Otay’s customers. Compared to the North City Plant, the South Bay Plant, serving South Bay customers, has a smaller and less extensive 6.57-mile-long distribution system. Of those 6.57 miles, the city built and owns the first approximate .76 miles of the pipeline. Otay constructed the next 5.8 miles of that pipeline solely to connect to the city’s .76 miles so the District could purchase recycled water from the city and deliver it to Otay’s reservoir and customers. Otay’s 5.8-mile pipeline from the South Bay Plant is a small fraction of Otay’s approximately 102-mile-long recycled water distribution system. Otay maintains its portion of the South Bay Plant pipeline at its own expense, and has invested more than $200 million in the South Bay system for the distribution of reclaimed water to its customers. The South Bay Plant cannot physically serve customers in the north.
Yet, the city adopted recycled water rates that comingled the costs of the two systems. It combined the higher cost of the North City system with the lower cost of the South Bay Plant to produce one unitary rate. This decision forces Otay’s customers to pay for a more expensive system in the north that does not serve them and is physically incapable of serving them.
The law requires the city to charge Otay the reasonable cost of providing recycled water from the South Bay Plant. Compelling Otay to pay for facilities that only serve northern San Diego is unfair, unreasonable, and unlawful.
Even the City’s own rate consultant advised the city that setting different rates for recycled water from each of the two plants “more closely aligns the rate charged to the cost of operating each individual facility and respective distribution system.” Instead of simply assigning the costs of each plant to the customers, who receive water from that plant, the city adopted a rate that violates the California Constitution.
There are other complaints in this lawsuit that are no less troubling. In 2010 and 2012, the City violated the Regional Water Quality Control Board requirements for recycled water delivered to Otay from the South Bay Plant more than 30 times, demonstrating an ongoing violation of the water quality provision in the contract between Otay and the city. Such actions affect Otay’s retail customers who report inferior water quality and potential property damage. In addition, the city has been well short of transparent in demonstrating compliance with another California law that requires payments made to a local agency to reserve capacity actually be used for that purpose. Otay paid the city $3.6 million for reserved capacity in the South Bay Plant and its transmission facilities. The city has stubbornly refused to provide an accounting of how it used Otay’s $3.6 million capacity payment. Finally, at a time when local water agencies continue to diversify their water supply resources, the city actually blocked Otay from expanding the use of recycled water in Otay Mesa and Otay Ranch. This has resulted in Otay ratepayers paying for water that they cannot use, while at the same time resulting in wastefully using drinking water for landscaping.
The public places trust in its local governments to get it right when it comes to the rates that it charges for public services. The Board members and I were elected by the ratepayers of the Otay Water District to do exactly that. It is our job to ensure that our ratepayers are paying rates based on the legally justifiable costs for services that they receive. It is unreasonable for Otay customers to pay for services that have nothing to do with them. Otay looks forward to this case, reminding the city of San Diego that adopting appropriate water rates, for both its southern and its northern customers, is not just the right thing to do. The law requires it.
Robak is president of the Otay Water District board of directors.
