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Newhall County Water District files suit over proposed water rate increase

Water retailer claims rate increase proposed by wholesaler violates Proposition 26

Posted: April 29, 2013 12:29 p.m.
Updated: April 29, 2013 12:29 p.m.

April 29, 2013 (Newhall, Calif.) -- The Newhall County Water District (NCWD) announced today that it has filed a lawsuit in Los Angeles County Superior Court to stop a harmful and costly water rate increase that would directly impact more than 44,000 residents that it serves.

The lawsuit challenges a controversial new rate adopted by Castaic Lake Water Agency (CLWA), a wholesale agency responsible for selling imported water to Santa Clarita Valley’s four retail water agencies, including NCWD.

NCWD’s lawsuit alleges a violation of Proposition 26, enacted by California voters in November of 2010, which requires governmental charges to bear a fair or reasonable relationship to benefits provided. To view a copy of NCWD’s lawsuit, please click here

If fully implemented, CLWA’s plan would cost NCWD’s customers more than $850,000 per year in increased rates, at a time when all businesses and residents have had to cut back.

“We are standing up on behalf of our customers in opposition to this unfair, unprecedented rate increase,” said NCWD Board of Directors President Maria Gutzeit. “It’s very disappointing that Castaic Lake Water Agency has chosen to ignore the concerns of our District’s residents and businesses and move forward with this rate increase, which we will vigorously fight in court.”

Unprecedented and Unfair Rate Changes

For more than a decade, CLWA has implemented a “variable rate” structure for imported water, which means it charged Newhall and the other three water retailers only for the water each needed. This “pay as you go” formula provided the greatest amount of certainty and fairness for the local water agencies.

However, on February 27, 2013, CLWA’s board of directors voted 10-1 to impose a new fee that recovers 80 percent of CLWA’s budget from a “fixed rate” — or flat fee — that it plans to charge the local water retailers for imported water, regardless of the amount of imported water each local water retailer needs.

This fixed rate will redistribute costs for all water imported by CLWA effectively penalizing NCWD, which has historically relied on a higher percentage of local groundwater than the other retailers. NCWD continues to rely on local groundwater at the same levels it has historically over its 60 year existence.

CLWA is the only wholesale water agency in southern California that has imposed a rate structure that recovers such a large percentage of its costs on a fixed fee basis. By doing so, it discourages use of local resources and encourages use of CLWA’s more expensive imported water that comes via the environmentally sensitive Sacramento-San Joaquin Delta. Given the state legislature’s mandate that all California water retailers reduce water consumption by 20 percent by 2020 and spare the Delta as much as possible, these rates are not consistent with current public policy.

“We’ve done our part to innovate and become more efficient, but now NCWD and its customers are being punished by this rate increase,” said NCWD General Manager Steve Cole. “To not account for the use of our historic groundwater rights is just not right, and our Board took the necessary action to protect our customers.”

CLWA’s fixed rates will also include salaries, retirement benefits, public relations and other administrative overhead eliminating the need to consider more cost effective solutions. Additionally, as a wholesale water agency with no direct customers except its four member agencies, CLWA was not required to conduct a transparent public process to adopt the rates under Proposition 218, the state law that requires public notifications and, hearings before imposing water rate increases. See the table below which illustrates the impact of the new rate structure on NCWD customers.

This is the second controversial policy implemented by CLWA in recent months. The wholesale water agency is also being investigated by the California Public Utilities Commission (PUC) for the claimed illegal acquisition of the Valencia Water Company, a private retail water agency. NCWD believes this acquisition is a clear violation of the state law which expressly prohibits CLWA from serving as a retail agency in Valencia Water Company’s service area. This case is under investigation by the PUC with a local hearing scheduled for May 16, 2013.

About Newhall County Water District

Newhall County Water District traces its roots back to 1913 and is the Santa Clarita Valley’s first public water utility, currently providing service to more than 44,400 residents in portions of the City of Santa Clarita and unincorporated Los Angeles County communities, including Newhall, Canyon Country, Valencia and Castaic.

For more information about the District, visit

Note: The Signal delivers press releases from reliable sources to provide up-to-the-minute information to our website readers. Information directly from news sources has not been vetted by The Signal news room. It may appear subsequently in news stories after it has been vetted.




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