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Castaic Lake Water Agency defends new wholesale rate proposal

Agency says its customer's lawsuit over fee hike would burden other retailers

Posted: April 29, 2013 1:51 p.m.
Updated: April 29, 2013 1:51 p.m.

Castaic Lake Water Agency expressed confidence today that its new wholesale rate structure is fair to all four local retailers and will withstand the legal challenge being mounted by one of them, the Newhall County Water District.

“It is unfortunate that NCWD is suing CLWA over the new rate structure; however, we strongly believe the courts will agree with us that the new structure is equitable, fair and reasonably allocates CLWA’s operating costs to the Santa Clarita Valley’s water retailers, including NCWD,” said CLWA Board President Tom Campbell. “The new structure promotes efficient management of our valley’s precious water resources, and fairly distributes the fixed costs of providing an imported water ‘safety net’ to the entire community.”

The CLWA Board of Directors approved the new structure on February 27th of this year. Under the new structure, scheduled to take effect July 1, the retailers would each pay a proportionate share of CLWA’s fixed operating costs based on their total combined water demand (groundwater plus imported water from CLWA) over the prior three-year period.

Under the previous structure, wholesale rates have been 100 percent variable — which means retailers have paid CLWA solely based on how much imported water they use. However, approximately 80 percent of CLWA operating costs are fixed — they don’t fluctuate based on volume, because CLWA incurs the same expenses regardless of how much water the retailers use.

“This new rate structure enables the four retailers to equitably shoulder their fair share of the fixed cost burden,” Campbell said. “The new rates are effectively revenue-neutral for CLWA’s wholesale water operations. It’s simply a matter of more fairly and reasonably distributing CLWA’s fixed operating costs among the retailers based on their total water needs. Regardless of the relative amounts of imported water and groundwater that an individual retailer chooses to deliver to its customers, CLWA water and infrastructure have been crucial since 1980 to the retailers’ ability to ensure that water flows each and every time their customers turn on their taps.”

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