Our View: MID must make water pay its own way

Divorces can be ugly and antagonistic. But sometimes they’re necessary.

Modesto Irrigation District needs to divorce its two primary functions, ending once and for all the relationship that has required power customers to subsidize water customers.

Without an ironclad, irreversible promise to start raising water rates – and require those who profit from the water to pay the full cost of getting it – there is no reason to support the district’s request for a 3.5 percent electric rate increase. With such a guarantee, maybe.

Bottom line: Electric customers should not be required to subsidize low-cost water for farmers; the board must halt those costs.

For nearly 20 years, the district’s 115,000 electricity ratepayers have picked up part of the tab for water going to 3,100 farmers. This arrangement has been wildly beneficial for some of the district’s most comfortable residents. Meanwhile, each and every electric ratepayer has seen marginally higher fixed costs and fees while rates have risen steadily for a decade.

According to a story by The Bee’s Garth Stapley (“Electric rate hike mulled by district,” Nov. 16, Page A1), a “falling water” surcharge instituted in 1995 has generated $61 million from electric ratepayers in just the last 10 years. At the same time, MID farmers pay some of the lowest irrigation rates anywhere, $16.25 an acre-foot, but with fees is actually around $28. Farmers elsewhere routinely pay $200 to $300; during this drought, many farmers have paid $1,200.

In 2013, MID collected $3.7 million for water, but spent $15.3 million to deliver it – hence the shortfall.

But power costs are rising, too. Last month, the MID board approved its 2015 budget with a $12 million deficit – a significant portion due to increases in generation costs.

Blame Pacific Gas & Electric. When PG&E’s 30-inch natural gas main ruptured in San Bruno in 2010, dozens of homes were destroyed and eight people died. While the Public Utilities Commission made sure PG&E’s ratepayers weren’t stuck with the resulting $1.4 billion fine, it allowed the company to greatly increase charges for shipping natural gas to wholesale customers such as Modesto and Turlock irrigation districts. That gas accounts for roughly 20 percent of MID’s power, and those increased costs are pegged at around $6 million.

It’s true MID’s proposed rates are higher than those of most other publicly owned utilities, but not that much. MID’s summer rate would rise to 18.7 cents per kilowatt-hour compared with PG&E’s 21.5 cents. Sacramento Municipal Utility District’s summer rate is 18.3 cents and could go up.

As costs go up, energy users must pay more. We get that. But here’s where our divorce analogy applies.

Any divorcing couple must divide their debts and assets. Consider MID’s portion of the cost to relicense Don Pedro Dam, about $16 million: All of that has been put on the electricity side of the ledger and is being paid by electricity customers. Yet, much of the relicensing work has centered on how much water should be released for environmental purposes and how much can be used for irrigation. The farmers who use that water must pay their fair share of the $16 million.

MID general manager Roger VanHoy and board president Nick Blom said this week they are committed to fairer rate structures for water and electricity.

Blom recalled that a decade ago the board had a “soft policy” of raising water rates 10 percent a year until equity was reached. If the board had stuck to it, water would cost $51 an acre-foot now instead of $16. But they stopped. Similar plans have been around since the 1980s, championed by the late Chuck Billington and others. But the boards have always reneged.

We are confident board members Blom, Jake Wenger and Larry Byrd – all farmers – will act in the best interests of all their customers, not just their pals on tractors. But we believe some form of ironclad, no-reneg deal is necessary. We don’t want a “soft” commitment; we want the equivalent of a divorce decree complete with a better accounting of who pays for what.

MID’s current shortfalls are real and the money must come from somewhere. If the rate increases are seen as a down payment on smaller adjustments in the future, or even reductions, we would support them. But directors must acknowledge their sincere obligations to the district’s 115,000 electricity customers as well as to the 3,100 water customers.

They can live in the same house, but they should lead separate lives.

This story was originally published November 22, 2014 at 4:01 PM with the headline "Our View: MID must make water pay its own way."