San Diego Cnty. Water Auth. v. Metro. Water Dist. of S. Cal., A146901

CourtCalifornia Court of Appeals
Writing for the CourtPollak, J.
Citation220 Cal.Rptr.3d 346,12 Cal.App.5th 1124
Parties SAN DIEGO COUNTY WATER AUTHORITY, Plaintiff and Appellant, v. METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA et al., Defendants and Appellants.
Decision Date21 June 2017
Docket NumberA146901,A148266

12 Cal.App.5th 1124
220 Cal.Rptr.3d 346

SAN DIEGO COUNTY WATER AUTHORITY, Plaintiff and Appellant,
v.
METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA et al., Defendants and Appellants.

A146901
A148266

Court of Appeal, First District, Division 3, California.

Filed June 21, 2017
As Modified on Denial of Rehearing July 18, 2017


Counsel for Plaintiff and Appellant Metropolitan Water District of Southern California: QUINN EMANUEL URQUHART & SULLIVAN, LLP, John B. Quinn, Eric J. Emanuel, Valerie Roddy, Los Angeles,

220 Cal.Rptr.3d 351

MORGAN LEWIS & BOCKIUS LLP, Colin C. West, Thomas S. Hixson, San Francisco, QUINN EMANUEL URQUHART & SULLIVAN, LLP, Kathleen M. Sullivan, THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA, Marcia Scully, Los Angeles, Heather C. Beatty, Joseph Vanderhorst, John D. Schlotterbeck

The City of Los Angeles acting by and through the Los Angeles Department of Water and Power: Michael N. Feuer, City Attorney, Joseph A. Brajevich, General Counsel, Julie C. Riley, Deputy City, Melanie Tory, Deputy City Attorney, MEYERS, NAVE, RIBACK, SILVER & WILSON, Amrit S. Kulkarni, Gregory J. Newmark, Los Angeles

Municipal Water District of Orange County: ALESHIRE & WYNDER, LLP, Stephen R. Onstot

City of Torrance: John L. Fellows III, CITY ATTORNEY, Patrick Q. Sullivan, ASSISTANT CITY ATTORNEY

Las Virgenes Municipal Water District, Eastern Municipal Water District, Western Municipal Water District, Foothill Municipal Water District, and West Basin Municipal Water District: LEMIEUX & O'NEILL, Steven P. O'Neill, Westlake Village, Michael Silander

Three Valleys Municipal Water District: BRUNICK, MCELHANEY & KENNEDY, Steven M. Kennedy, San Bernardino

Counsel for amicus curiae Upper San Gabriel Valley Municipal Water District: LEMIEUX & O'NEILL, Steven P. O'Neill, Westlake Village

Counsel for Defendants and Appellants San Diego County Water Authority: KEKER, VAN NEST & Peters LLP, John W. Keker, Daniel Purcell, San Francisco, Dan Jackson, Warren A. Braunig, San Francisco, SAN DIEGO COUNTY WATER AUTHORITY, Mark J. Hattam

Pollak, J.

12 Cal.App.5th 1129

Metropolitan Water District of Southern California (Metropolitan) appeals a judgment holding that the rate it charges for transporting water, or "wheeling," violates numerous provisions of law and awarding the San Diego County Water Authority (Water Authority) substantial damages for having charged that rate in breach of a water exchange agreement between the two agencies. The Water Authority cross-appeals, disputing the trial court's decision upholding a provision in water conservation program contracts between the two parties that penalizes it for participating in litigation or supporting legislation to challenge or modify Metropolitan's existing rate structure.

The central issue in dispute is one of cost allocation: May the charge Metropolitan imposes for wheeling water purchased from a third party include an amount calculated to recover Metropolitan's allocable transportation costs over the California Aqueduct, part of the State Water Project, or must the charge be limited to costs allocable to transportation costs over those parts of its system that it owns and utilizes in the particular transaction? In Metropolitan Water Dist. v. Imperial Irrigation Dist. (2000) 80 Cal.App.4th 1403, 96 Cal.Rptr.2d 314 ( Imperial Irrigation ) it was held, and the parties do not dispute, that the "wheeling statutes" ( Wat. Code, § 1810 et seq. ) do not as a matter of law prohibit the allocation of system-wide transportation costs to reasonable wheeling charges, so that wheeling rates need not be limited to the marginal cost of transporting water over the facilities used in a

12 Cal.App.5th 1130

particular transaction. The trial court here held that although Metropolitan is required to pay its pro rata share of the costs of maintaining the California Aqueduct, these costs may not be considered in

220 Cal.Rptr.3d 352

calculating Metropolitan's wheeling charges, essentially because Metropolitan does not own the aqueduct. We conclude this was error. The inclusion of Metropolitan's system-wide transportation costs, including transportation charges paid to the State Water Project, in the calculation of its wheeling rate does not, as the trial court held, violate the wheeling statutes, Proposition 26 (Cal. Const., art. XIIIC, § 1, subd. (e)), Government Code section 54999.7, subdivision (a), the common law, or the terms of the parties' exchange agreement.1 We do agree with the trial court that the allocation of "water stewardship" charges to the wheeling rate is improper and that the Water Authority is entitled to recover the overcharges that resulted from inclusion of those charges in the rate charged by Metropolitan.

With respect to the cross-complaint, we conclude that the trial court correctly held that the condition in the water conservation program contracts penalizing the Water Authority for exercising its right to seek judicial relief from the imposition of unlawful rates is an unconstitutional condition, but that the court erred in holding that the Water Authority lacks standing to challenge that condition.

Therefore, it is necessary to remand the matter to the trial court for further proceedings consistent with this opinion.

I. Factual Background2

Metropolitan imports water from Northern California and the Colorado River along hundreds of miles of aqueducts and delivers it to a voluntary collective of public agencies, including the Water Authority. The Water Authority, in turn, delivers the water to retail water agencies serving households and businesses in San Diego County. To put the present controversy between the two agencies in proper perspective, it is necessary to begin with some history and an explanation of the manner in which the fixing of wholesale water rates has evolved.

12 Cal.App.5th 1131

A. California's Water Supply

"The history of California water development and distribution is a story of supply and demand" marked by an "uneven distribution of water resources" by region and season. ( United States v. State Water Resources Control Bd. (1986) 182 Cal.App.3d 82, 98, 227 Cal.Rptr. 161.) Regionally, most of California's rain and snow falls in the north while most of the demand arises in the south. ( Ibid. ) There is also an unequal distribution by season as precipitation occurs in the winter while demand is highest in the hot and dry summer months. ( Ibid. ) Precipitation also varies widely year to year. California has addressed its variable and uneven distribution of water resources by establishing an extensive water supply system to store and move water where and when it is needed. (Assoc. of Cal. Water Agencies, California's Water: California Water Systems < http://www.acwa.com/content/california-water-series/californias-water-california-water-systems> [as of June 21, 2017].) Over 1,000 reservoirs, "dozens of local and

220 Cal.Rptr.3d 353

regional water conveyance systems" and "[s]even major systems of aqueducts and associated infrastructure exist today to capture and deliver water within the state." (Ibid. ) This water supply system is managed by a network of agencies on federal, state, regional and local levels.

B. Metropolitan

Metropolitan was established by the California Legislature in 1928. ( Imperial Irrigation, supra, 80 Cal.App.4th at p. 1415, 96 Cal.Rptr.2d 314.) "Its mission is to combine the financial resources of cities and communities in Southern California and to bring supplemental water to the area." ( Ibid. ) Initially, Metropolitan was formed "to construct and operate the 242-mile Colorado River Aqueduct" to transport Colorado River water to the area. (The Metropolitan Water Dist. of So. Cal., Who We Are, MWD ACT & Code < http://www.mwdh2o.com/WhoWeAre/MWDAct/Pages/default.aspx> [as of June 21, 2017].) "Concurrent with the enactment of the Metropolitan Act, the U.S. Congress passed the Boulder Canyon Project Act, authorizing construction of Hoover Dam, which provided power to pump water to Southern California." (Ibid. ) Today, Metropolitan imports water from two principal sources, the Colorado River, using its Colorado River Aqueduct, and Northern California via the state-owned California Aqueduct.

Metropolitan delivers water to a voluntary collective of "26 member public agencies—14 cities, 11 municipal water districts, [and] one county water authority," the San Diego County Water Authority. (The Metropolitan Water District of So. Cal., Who We Are, Overview & Mission < http://www.mwdh2o.com/WhoWeAre/Mission/Pages/default.aspx> [as of June 21, 2017].) Metropolitan's member agencies provide "water to more

12 Cal.App.5th 1132

than 19 million people in Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties." (Ibid. ) "Metropolitan currently delivers an average of 1.5 billion gallons of water per day to a 5,200-square-mile service area." (Ibid. )

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7 practice notes
  • Beach &amp; Bluff Conservancy v. City of Solana Beach, D072304
    • United States
    • California Court of Appeals
    • October 17, 2018
    ...exchange for a discretionary benefit." ( San Diego County Water Authority v. Metropolitan Water District of SouthernCalifornia (2017) 12 Cal.App.5th 1124, 1158, 220 Cal.Rptr.3d 346 ; California Building , supra , 61 Cal.4th at p. 457, 189 Cal.Rptr.3d 475, 351 P.3d 974.) In the takings conte......
  • Coachella Valley Water Dist. v. Superior Court of Riverside Cnty., E074010
    • United States
    • California Court of Appeals
    • March 9, 2021
    ...its millions of residents and farmers. (See San Diego County Water Authority v. Metropolitan Water Dist. of Southern California (2017) 12 Cal.App.5th 1124, 1132-1133, 220 Cal.Rptr.3d 346 ( San Diego ).) In 2013, the Coachella Valley Water District (the water district) passed a resolution ad......
  • Inzana v. Turlock Irrigation Dist. Bd. of Dirs., F075810
    • United States
    • California Court of Appeals
    • April 24, 2019
    ...review to the trial court’s findings. ( San Diego County Water Authority v. Metropolitan Water Dist. of Southern California (2017) 12 Cal.App.5th 1124, 1145, 220 Cal.Rptr.3d 346 (San Diego ).) "This deferential standard requires us to presume the correctness of the administrative ruling, as......
  • People v. Smith, A155689
    • United States
    • California Court of Appeals
    • May 26, 2020
    ...of seeking relief from the court. (See San Diego County Water Authority v. Metropolitan Water Dist. of Southern California (2017) 12 Cal.App.5th 1124, 1160, 220 Cal.Rptr.3d 346 ["The right to petition includes the right to seek judicial relief."].) Moreover, as discussed above and in contra......
  • Request a trial to view additional results
7 cases
  • Beach &amp; Bluff Conservancy v. City of Solana Beach, D072304
    • United States
    • California Court of Appeals
    • October 17, 2018
    ...exchange for a discretionary benefit." ( San Diego County Water Authority v. Metropolitan Water District of SouthernCalifornia (2017) 12 Cal.App.5th 1124, 1158, 220 Cal.Rptr.3d 346 ; California Building , supra , 61 Cal.4th at p. 457, 189 Cal.Rptr.3d 475, 351 P.3d 974.) In the takings conte......
  • Coachella Valley Water Dist. v. Superior Court of Riverside Cnty., E074010
    • United States
    • California Court of Appeals
    • March 9, 2021
    ...its millions of residents and farmers. (See San Diego County Water Authority v. Metropolitan Water Dist. of Southern California (2017) 12 Cal.App.5th 1124, 1132-1133, 220 Cal.Rptr.3d 346 ( San Diego ).) In 2013, the Coachella Valley Water District (the water district) passed a resolution ad......
  • Inzana v. Turlock Irrigation Dist. Bd. of Dirs., F075810
    • United States
    • California Court of Appeals
    • April 24, 2019
    ...review to the trial court’s findings. ( San Diego County Water Authority v. Metropolitan Water Dist. of Southern California (2017) 12 Cal.App.5th 1124, 1145, 220 Cal.Rptr.3d 346 (San Diego ).) "This deferential standard requires us to presume the correctness of the administrative ruling, as......
  • People v. Smith, A155689
    • United States
    • California Court of Appeals
    • May 26, 2020
    ...of seeking relief from the court. (See San Diego County Water Authority v. Metropolitan Water Dist. of Southern California (2017) 12 Cal.App.5th 1124, 1160, 220 Cal.Rptr.3d 346 ["The right to petition includes the right to seek judicial relief."].) Moreover, as discussed above and in contra......
  • Request a trial to view additional results

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