Three communities – San Diego, Oceanside and parts of East County – are entering the era of recycled water, at a crucial moment for local water politics. How that gets sorted out will be reflected in San Diegans’ water bills.

A decade ago, amid worries about the impact of drought on water supplies, those San Diego municipalities turned to recycled water, that is, turning sewage into drinking water. One local city, Carlsbad, also has a desalination plant, which turns seawater into drinking water.

All those recycled water projects now are coming to fruition. But angst about drought has been overtaken by concern about the rising cost of water from the San Diego County Water Authority, which sells water to 22 cities, water districts and other member agencies in the county.

In the past two years, the water authority’s rates have grown by 23%.

Annual rate hikes are now expected to be more modest, but they’re still forecasted to rise anywhere from 38% to 65% over the next decade, according to a new long-term financial plan the agency adopted last week.

Why is this happening? What do the new water technologies change? We try to explain.

Q: Why is the water authority’s water so expensive? 

Over the years, the water authority has secured a diverse supply of water for the region, at a time when other parts of California face shortages.

About 50% of the county’s water comes from the Colorado River under a 2003 agreement the water authority has with the Imperial Irrigation District in the Imperial Valley, other water districts and the state and federal governments.

The agreement guarantees that San Diego County will receive water from the Imperial Irrigation District until 2077. Another part of the agreement guarantees a secondary source of conserved water until 2112.

Another 17% of the county’s water comes from local surface water. Twelve percent comes from buying water from the Metropolitan Water District of Southern California, which gets water from different sources, including the Colorado River, and 5% comes from the desalination plant in Carlsbad.

But there’s a problem.

The water authority built and secured these supplies based on flawed population projections which predicted the San Diego region would have a much higher population than it currently does.

That means the region is using far less than the water authority originally thought.

But the water authority is still contractually required to buy more water from the Colorado River via the Imperial Valley than it needs under the terms of the multi-party 2003 agreement.

That’s what causes the San Diego region to have runaway water costs.

What makes this hard for some to grasp is that the water authority’s system breaks the rules of supply and demand.

Basic economics say that when supply (water) goes up and demand goes down (from less growth and water conservation efforts paying off), prices go down as well.

With the water authority, the opposite happens.

Lower water demand requires the water authority to raise rates in order to cover its built-in, set costs – mainly water purchases from the Imperial Valley.

Water authority officials defend their past moves to secure a reliable water supply, albeit a pricey one.

Others, especially leaders at the City of San Diego, feel differently.

“A reliable supply that no one can afford is not actually reliable nor in the public interest,” Jordan More, the city’s independent budget analyst, wrote in a recent report.

Q: So what do recycled water systems like Pure Water mean for water rates?

Rates are going up for everyone. The only question is, by how much. And that’s going to depend on a lot of factors yet to be determined.

Water costs vary across cities and water districts due to differences in local supply, infrastructure spending and how much they buy from the water authority. But in San Diego, officials say that once Pure Water comes online in early 2027, the water it produces will be cheaper than the water supplied by the water authority.

According to San Diego water official Lisa Ceyala, Pure Water will produce water at $2,100 per acre foot, which equates to roughly 326,000 gallons. Water from the water authority costs $2,600 per acre foot.

But because the three recycled water projects will cause a 15% drop in the water authority’s sales, according to spokesperson Jordan Beane, demand falls and the water authority’s rates have to go up to cover its built-in costs.

Beane said the water authority doesn’t have figures for how much its rates will go up because of each recycled water project. But the water authority is forecasting a rate hike of nearly 18% over 2034 and 2035, the year the second phase of San Diego’s Pure Water system will come online.

That’s bad for all the cities and water districts which won’t have access to new recycled water supplies to offset rate hikes.

Princess Norman, who represents the Ramona Municipal Water District on the water authority’s board, chastised San Diego officials over Pure Water during a board meeting last week.

“By doing Pure Water for your particular citizens or residents, you’re not acknowledging that that is what is raising the rates for the rest of us,” Norman said.

“I thought we were a team, how naive of me,” she added.

Q: What’s the water authority going to do about this? 

The water authority wants to temper future rates hikes by selling its excess water to other states. Amid ongoing, strained negotiations among states on the Colorado River over the future of its supply, a deal has yet to materialize.

In the meantime, the water authority has discussed changes to its cost structure that would be good for communities which don’t have recycled water, but bad for San Diego.

Right now, most of what cities and water districts pay to the water authority is based on how much water they buy. A smaller portion is a set, or fixed cost for things like upgrades to its network of pipes, pump stations and other infrastructure and the transportation of water.

But talks are underway at the water authority to make fixed-costs a bigger portion of its rates.

Such a move shows the “double-edged sword” communities building recycled water supplies have created for themselves, said Lindsay Leahy, general manager of the Valley Center Municipal Water District.

“Things are changing very dramatically,” Leahy said.

The more the authority goes to fixed costs, the less cost savings it means for systems like San Diego’s Pure Water recycling system. That’s because a smaller part of the city’s bill from the water authority would be based on how much water the city buys from it.

Q: What’s the city doing about this? 

The city plans to use its sway on the water authority’s board to fight back if more fixed charges are pursued.

Should that happen, the city’s independent budget analyst encouraged the city’s 10 representatives on the 34-person board to try and shrink the water authority’s budget and curb its water purchases.

So far, the city’s most recent attempt to alter the water authority’s fiscal policies have failed.

Last week, City Council member Stephen Whitburn tried to lower the water authority’s debt service coverage ratio, meaning the amount of cash it has in relation to its debt payments. Whitburn argued the water authority is holding on to more money than is needed to pay off its debt, which puts pressure on rates.

Whitburn’s proposal ultimately failed on a 6-8 vote by the board’s administrative and finance committee. All of the city’s four committee representatives voted in support alongside representatives from Carlsbad and Oceanside.

Financial officials with the water authority warned that Whitburn’s proposal could backfire and end up making the region’s water supply more expensive through higher interest rates.

“This is the city playing politics with the region,” said Kathleen Coates Hedburg, who represents East County’s Helix Water District. “I don’t know where you’re getting your financial advice.”