Water Transport Charges and the California Divide: Implications of Ruling for Future State Capital Water Projects

Abstract

This article discusses the recent case of Alameda County Flood Control & Water Conservation District Zone 7 et al v. State of California Department of Water Resources et al, Case No. 05AS01775, Sac. Sup. Ct. [Aug. 21, 2009], which centers around the California Department of Water Resources (DWR) use of revenues from the Hyatt‐Thermalito Dam, operated near the large storage facility of Lake Oroville, to offset the fees it charges contracting water agencies to the California State Water Project (SWP) for transporting water through the system. The article discusses the grave importance of these transportation charges to Southern California water agencies, along with how the court's decision was influenced by the ambiguity of the text of the contract. The court found that the state acted within its discretion in setting the fee structure in the first place. DWR has a statutory authority to sell power and set the price for it under California Water Code §11454. Other sections of the water code authorize DWR to cancel power sale contracts with utilities on the condition that it continued to pay at least as much for at least as long as the utilities paid for Hyatt‐ Thermalito power. DWR developed a policy regarding how it would value Hyatt‐Thermalito power for the purposes of calculating the credit to the SWP transportation charges, and the court held that this policy decision was entitled to deference.