An emerging debate over fairness in electricity and irrigation bills might not be getting traction if power hadn't become so expensive.
In olden days, power sold by the Modesto and Turlock irrigation districts was relatively cheap. Steep rate increases in recent years have erased the local advantage.
Now people are questioning the age-old policy of keeping irrigation fees artificially low by making electricity users pay more. And changes in the law have focused more attention on what's fair.
A Bee review of MID and TID numbers suggests that their 211,000 power customers have paid an extra $75 million over the past decade. In the 17 years since MID leaders quietly implemented a surcharge that does not show up on power bills, subsidies to the two districts' 8,900 farmers come to about $125 million.
Each MID power customer is paying an average of $95 extra this year. TID didn't release current numbers; power customers each paid an estimated $27 extra in 2011.
News that an attorney had privately warned the MID board of possible legal trouble caused a stir five weeks ago after The Modesto Bee obtained the analysis. Board members bickered over discussing their transfers in public and eventually promised to air the issue at a January workshop.
TID leaders were similarly worried when California voters in 2010 approved Proposition 26. The district commissioned a legal review by an outside legal specialist. The TID refused to share a copy with The Bee. Leaders say it clears the district, and its subsidy to farmers is structured differently.
The Bee compared a 20-year history of increases for both districts' irrigation and power rates. Farmers in each have seen higher jumps, by percentage, than power customers, suggesting some effort to even out the inequity.
But change has been slow, and advocates on the power side might not be patient forever. The MID's board chairman, Tom Van Groningen, has said the district expects to be sued.
The debate stretches to the region's ability to attract new business by dangling low utility rates, a selling point trumpeted when the two districts built Don Pedro reservoir that has all but evaporated.
Meanwhile, farmers remind people that agriculture remains the area's economic backbone, producing $3 billion in Stanislaus County gross sales last year.
"(Some board members) have a perspective that's perhaps business-oriented," Van Groningen said. "Farmers tend to have a different business model that is more considerate of the ag community. Therein lies the difference of opinion."
MID and TID leaders had power profits in mind when the original Don Pedro reservoir was finished in 1923; a major expansion occurred in 1971. Political battles were frequent, but rarely pitted farmers against power customers who would provide "the best cash crop of an irrigation project," U.S. Bureau of Reclamation leader Elwood Mead reportedly said around that time, in a reference to Hoover Dam on the Colorado River.
The infusion of money helped the districts retire debt and reduce irrigation taxes until the MID's were officially abolished in 1959. They returned 15 years later as an irrigation user fee, according to "The Greening of Paradise Valley," an MID history published in 1987.
Leaders were well aware of the subsidy when Van Groningen joined the board in 1993, he said, and some committed to erase the inequity over time. A rate history shows fairly steady hikes for agricultural water users over the past 20 years, but the average annual increase of 6.9 percent falls short of the initial goal of 10 percent each year.
Board members approved no increases in 2002, and 2011 after hearing testimony from farmers hit hard by the recession.
TID's approach was quite different — zero irrigation rate hikes in 12 of the past 15 years, with substantial increases in the other three.
Increases in electric rates were less in the same period, but not by much. MID power customers have seen rates go up more than 100 percent in two decades, with at least one increase each year since 2000.
The districts say there are important factors behind keeping water rates reasonable.
For starters, water applied to crops slowly seeps down, replenishing underground sources. That's an incredible benefit for which farmers get no credit, both districts say. Farmer and hydrologist Vance Kennedy has figured the value at $14 million per year, computed at the rate that San Francisco might have paid MID for water if a controversial proposed sale had not been abandoned.
"If you increase the cost to farmers to where they can't afford (irrigation water), they're going to drill more wells and exacerbate the issue," said Wayne Zipser, executive manager of the Stanislaus County Farm Bureau.
In Modesto, MID canals drain away some storm water. That normally would be the city's responsibility, but MID doesn't charge, in exchange for paying City Hall nothing in franchise fees.
Power customers benefit from water falling through turbines at Don Pedro Dam, and the MID named its surcharge a "falling water" fee. Without the dam, customers would have to buy power elsewhere on the open market, the reasoning goes.
Today, the MID gets about 10 percent of its power from Don Pedro; the Turlock district roughly twice that.
The TID's subsidy argument goes deeper. Without irrigation canals, the district would not have nine mini-turbines downstream, powering turbines and making more electricity.
Canal banks provide land for power poles, such as for a recently installed transmission line from Hughson to a new power plant south of Modesto. Without that land, the TID would have had to buy private easements at a cost of more than $1 million.
Also, the TID cashes in by producing more power during summer afternoon peak usage — made possible by controlling flow in main canals above the district's Turlock Lake.
"We absolutely feel the electrical side benefits in many ways from the water department," said Michael Frantz, TID board chairman.
The TID never attempted to fix a hydroelectric value, as the MID does with its "falling water" charge. The TID prefers to acknowledge that both sides — farmers and electricity users — help each other.
"Although it's hard to quantify, the value (irrigation) brings to electric ratepayers at times may be actually lowering the rates," Frantz said. "It's a complicated and integrated business. We've always asked one side to pay a portion of the other's; MID just calls it something different."
TID general counsel Roger Masuda said the district need not lose sleep over Proposition 26, which says utilities should charge an amount equal to the cost of providing a service under most circumstances. A vote of the people may be required to approve a tax increase, and "unlike Modesto, we didn't raise (electricity) rates after Prop. 26 was adopted" in 2010, Masuda said.
The TID is in the midst of a phased electrical increase, with rates bumping up 4 percent each year for three years. The district got around Proposition 26 by calling the increase an "environmental charge," to pay for state-mandated green energy projects such as wind farms in Washington state.
The MID employed no such language when electric rates went up 9.26 percent this year. In the analysis obtained by The Bee, its contract lawyer said that could spell legal trouble because its "falling water" value may be figured arbitrarily.
Utilities throughout California are closely watching court cases filed last year in Redding and Ventura. Redding increased electric fees for a $5.9 million transfer to the city's general fund, while a water district near Ventura charges municipal and industrial customers three times more than farmers.
"I'm giving a lot of advice on how to comply with the law" to various utilities up and down California, said Penn Valley attorney
Michael Colantuono, who is involved in both cases.
Those situations seem small next to those of the MID and the TID, which have farming subsidies at the expense of power customers that came to nearly $13 million in 2011 alone.
The MID won't raise electricity rates for 2013, the district recently announced, because natural gas prices are stable and the district expects no new green energy projects needing infusions of capital.
Neither will the district sell water to San Francisco, a polarizing idea that was dropped in September under intense pressure from the public and Modesto City Hall, which gets millions of gallons of drinking water from the district.
A newly formed advisory committee will be introduced at Tuesday's MID board meeting, charged with looking at canal and other system improvements and how to pay for them. A recommendation is expected by June.
"They're going to have to tackle that whole range of considerations," Van Groningen said. "It all ties back together."
The TID in 2013 will radically change its irrigation price structure to more accurately bill farmers for water received. Ag customers could see charges go up 14 percent, on average, and the cost of meters "will be borne by farmers," Frantz said.
The MID board will meet at 9 a.m. Tuesday at the district office, 1231 11th St., Modesto. In addition to launching the advisory committee, the board will consider a $443.9 million budget. In closed session, leaders will discuss an interim successor to retiring general manager Allen Short, hiring a district lawyer, and labor negotiations.
Bee staff writer Garth Stapley can be reached at gstapley@modbee.com or (209) 578-2390.
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