MID water rate structure in flux

A radical change in how farmers’ irrigation prices are structured was put in motion Tuesday by Modesto Irrigation District leaders, who will make a final decision in a few weeks.

Whether the change would lessen massive agricultural subsidies borne by customers of MID’s other core service – electricity – is in doubt, because the money to be paid by farmers would not change from the amount collected in 2014. But the board agreed to wrestle with questions of fairness in workshops scheduled for Jan. 27 and Feb. 10.

Irrigation fees last year were much higher than usual because of one-time drought surcharges that forced farmers to pay about 40 percent more than they had in 2013. If the new proposal is approved, total water revenue would remain about the same as last year – meaning base rates would rise 40 percent on average, with some farmers paying more and others less under the new structure.

“It’s a significant jump and it’s going to make an impact,” said board member Jake Wenger.

The board still could impose a drought surcharge this year, pushing water prices even higher, but that won’t be decided until more of the winter has passed.

On the losing end of Tuesday’s 4-1 vote was board member John Mensinger, who noted the historic inequity favoring farmers over city dwellers. He advocated a higher charge for farmers using large amounts of water under the proposed formula.

“We’re selling it cheaply,” said Mensinger, whose district is largely urban. “Even if we sold it at cost of service to farmers, it would still be a bargain.”

The term “cost of service” was bounced around in Tuesday’s wide-ranging discussion and goes to the heart of the subsidy dispute. It refers to how much the district charges customers for services versus how much it spends to provide them.

Using one measure, MID annually has been undercharging farmers $11 million while overcharging electricity customers $44 million.

Board member Nick Blom called for a new reckoning that gives credit to farmers for unrecognized benefits. Farmer Vance Kennedy, for instance, said farmers who flood irrigate help to replenish aquifers, a critical public benefit especially in times of drought.

“We need to assess a value for everything the MID does, on the electric side and the water side,” Blom said.

The water rate proposal would discontinue the district’s practice of charging based on how much water MID is able to deliver to each acre. Farmers not receiving water have paid lesser amounts to reserve rights for the future; they amount to less than 7 percent of the district’s 58,000 total acres.

If approved, the district would begin charging a $40-per-acre fixed fee, regardless of whether land is irrigated. That poses a hit to customers fallowing land; instead of paying $325 in 2014 “facilities and maintenance” fees for 20 nonirrigated acres, for example, a farmer would pay $720 under the proposal.

The fixed-fee component would bring in 90 percent of water revenue, irrigation operations manager John Davids said.

Farmers would pay an additional “variable” fee on a sliding scale to receive water, depending on how much is available in a given year. The net result would have most farmers paying less than in 2014, when the drought surcharge was in effect.

All told, the district would receive $3.24 million in water revenue under the new proposal – about the same as last year. The proposal claimed revenue neutrality as a key objective when unveiled Friday, but such references were removed by Tuesday’s meeting, when officials focused on the 40 percent revenue jump when the surcharge isn’t factored in.

The $40-per-acre fixed fee in Tuesday’s presentation also had been increased since Friday, when it was pitched as $36; that presumably affected Friday’s proposed per-acre-foot charge of $11.86 in a normal year, bumped to $13 per acre-foot by Tuesday. That compares with $7.71 charged by the Oakdale Irrigation District, $9.86 in the South San Joaquin Irrigation District and $19.57 adopted Tuesday by the Turlock Irrigation District board.

Charging enough to cover MID’s true cost of delivering water, however, would mean charging farmers $160 per acre-foot, Davids said.

The total true cost of service is estimated at $18.8 million, while farmers would pay $3.24 million if the new proposal is adopted.

Mensinger said it’s helpful to compare MID’s prices with TID, its partner in Don Pedro Reservoir and the Tuolumne River. “I’m not sure why we should be selling water for less than they (do),” he said.

Wenger said TID has more growers and crops and gets twice as much water. TID also sells retail electricity, and customers have subsidized its irrigation service.

Tuesday’s action allows MID to notify customers of the proposed rate change, kicking off a 45-day period during which people can protest and culminating in a final board decision at a date yet to be announced. Board chairman Larry Byrd noted that the board could opt for a more modest rate hike, but by law could not agree to one with revenue higher than the 40 percent increase.

The Jan. 27 and Feb. 10 MID board meetings, including cost-of-service workshops, will begin at 9 a.m. at 1231 11th St., Modesto.

This story was originally published January 13, 2015 at 5:29 PM with the headline "MID water rate structure in flux."