The San Diego County Water Authority has settled long-running litigation with Southern California’s biggest water district, a legal dispute that’s cost taxpayers tens of millions of dollars but could pave the way for more predictable rate hikes in the years ahead.
The heart of the 15-year lawsuit was how the Metropolitan Water District of Southern California charged the San Diego County agency for water coming from the Colorado River, with prices based on the district’s rates rather than a fixed one. The district is made up of 26 member agencies across six different counties.
Under the deal, San Diego’s water authority will pay $152.3 million a year to secure 227,000 acre-feet — roughly 90 billion gallons — of Colorado River water. That’s a fixed price, which will be pegged to inflation over time.
The of the settlement allow San Diego County water officials to sell any excess water from the arrangement back to the district or other member agencies in Southern California. The deal also lays the groundwork for potential sales to other states in the future — a key plank of the water authority’s long-term plans to bring in more revenue.
The legal fight between the two water agencies has not only defined their relationship for over a decade but also created financial uncertainty for their budgets, since the cost of purchasing and selling the water fluctuated over time.
That’s been ed on to taxpayers and water consumers, who footed tens of millions of dollars for the legal battle and have seen how much they have to pay for water steadily rise.
But that chapter for the bureaucracy overseeing the region’s water appears to be closed, and on Monday, officials from both agencies formally signed the settlement outside the water authority’s headquarters in Kearny Mesa.
“This is the end of an era of costly, divisive litigation, and the beginning of a new chapter of cooperation, shared strategy and a new era of regionalism in Southern California,” said Nick Serrano, who is deputy chief of staff for San Diego Mayor Todd Gloria and is also chair of the water authority’s board.
For water consumers, officials portrayed the deal as a way to keep rate hikes more modest and stable in the years ahead. The water authority has proposed a 12% rate hike for the coming year, which its board will vote on later this month. Last year, rates rose 14%.
“Our ultimate goal is to keep rates smooth and predictable,” said Dan Denham, the water authority’s general manager. “Getting to a point where we don’t have to raise rates by double digits consistently, getting to something that’s lower and more predictable, perhaps at the rate of inflation, I think is what we strive for.”
How the deal impacts water sales could be a particular boon for the authority, which has long been vexed by the need to sell its excess water.
Its contracts require it to buy more water than member agencies actually need. Those built-in costs then get ed down to water consumers in higher rates.
The authority currently does not have projections for how much revenue it will be able to bring in as a result of the settlement, Denham said.
The lawsuit had long prevented the district and the authority from cooperating in a typical way, said Deven Upadhyay, general manager of the Metropolitan Water District.
“It’s been very tough, where in a normal relationship, you’d be doing water deals, trying to figure out how to capture supplies, how to better manage supplies,” Upadhyay said. “I’m seeing in the next 15 years, we’re able to move water around Southern California in ways that we haven’t really been able to do the last 15 years.”
After years of a legal battle where both sides won key judgments, officials chalked up the apparently amiable end to new personalities at the top of each agency.
Denham was appointed to the top job at the water authority in 2023, with Upadhyay, his counterpart at the water district, moving into his his position earlier this year.
