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Giant water agency approves rate hikes as feud escalates with San Diego users
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SAN DIEGO (AP) — California's giant water wholesaler approved a smaller rate increase Tuesday than its staff proposed, but it wasn't low enough to satisfy officials who claim a "shadow government" has seized control of the agency and is targeting consumers in San Diego.

The board of the Metropolitan Water District of Southern California approved 5 percent annual rate increases for each of the next two years after a highly unusual attack by the San Diego County Water Authority, the largest of its 26 customers.

San Diego claims Metropolitan's rate structure is stacked against the nation's eighth-largest city and its suburbs. The allegation was the basis of a lawsuit it filed in 2010 in state court.

San Diego wanted to limit annual rate increases to 3 percent.

San Diego launched a website last month to lift what it describes as a veil of secrecy at Metropolitan, its largest supplier. The site offers a trove of internal documents obtained under California's public records law, including references to a "Secret Society" and an "anti-San Diego coalition."

Metropolitan has demanded San Diego remove Metropolitan's defaced seal from the new website, The seal is altered to read, "The Truth About the Metropolitan Water District of So. Cal."

Some speakers at Tuesday's rate hearing criticized San Diego's tactics.

"The core of these allegations is that (Metropolitan) staff has met and somehow controlled the Met board," said Paul Jones, general manager of Eastern Municipal Water District, which serves the distant eastern suburbs of Los Angeles. "These allegations are not only baseless but an affront to the integrity of this board."

Thomas Wornham, the San Diego agency's vice chairman, gave faint praise to the more modest rate hike. It shaved the 2013 increase to 5 percent from the 7.5 percent that Metropolitan's staff proposed.

"It's just not good enough when it's so clear that this board can do better," Wornham said before the vote.

The rate increases were approved as part of Metropolitan's two-year budget — $1.78 billion for 2013 and $1.89 billion for 2014.

The bad blood dates back to a drought in the early 1990s, when San Diego began a drive to become less dependent on Metropolitan. Dennis Cushman, the San Diego agency's assistant general manager, said the region then got 95 percent of its water from Metropolitan and now gets less than half.

As with many water disputes in arid stretches of the West, this one is just as much about how to move water from one place to another as it is about the water itself. San Diego lacks its own water supply and — just as importantly — doesn't own pipes to get it from somewhere else.

In 2003, San Diego agreed to buy a big chunk of its water from California's Imperial Valley in the nation's largest farm-to-city water transfer. But it still needs Metropolitan's 242-mile aqueduct to carry the water from the Colorado River.

The same year, Metropolitan introduced a rate structure that levies one fee for transporting water and another for the water itself. The San Diego agency alleges the transportation fee includes lots of unrelated costs, amounting to San Diego subsidizing other agencies that buy water directly from Metropolitan.

Metropolitan, whose customers include cities and water agencies serving 19 million people in six counties, defends the new rate structure and accuses San Diego of trying to unload costs on others. It suggests San Diego overpaid for Imperial Valley's water and is trying to make up for a bad business decision.

The stakes are so high that many Metropolitan member agencies began meeting in 2009 to discuss San Diego's challenge to the rate structure and other issues. San Diego says it didn't learn the group existed until after a request for public records last October that has produced more than 60,000 pages of documents.

The San Diego County Water Authority says the documents show the group met up to 60 times and alleges that members coordinated votes with Metropolitan's board of directors, which would potentially violate the state's open-meetings law. The documents show the group paid for advice from a consulting firm that employs Ron Gastelum, a former Metropolitan general manager.

Two emails from one participant — Chris Theisen, assistant director of public works for Beverly Hills — refer to the group as the "Secret Society." Handwritten notes from one meeting mention the "anti-San Diego coalition."

San Diego packaged the documents in thick binders and sent them to reporters throughout California under the heading, "Who really runs the Metropolitan Water District of Southern California? A shadow government takes control."

Metropolitan says there is nothing unusual about staff from member agencies getting together to discuss issues. In addition, it adamantly denies the group is a forum to coordinate board votes.