CITRUS HEIGHTS, CA (MPG) - On April 10, the Citrus Heights Water District (CHWD) and the Fair Oaks Water District (FOWD) jointly filed a lawsuit against the San Juan Water District (SJWD) to challenge what they said was an unlawful plan for annual rate increases over the next five years.

In a joint press release by the Citrus Heights Water District and the Fair Oaks Water District on April 11, the two districts stated that the lawsuit was a “last resort” but necessary to protect their rate payers from being illegally overcharged.

“SJWD approved unfair rates that also make it more expensive to use local water supplies that we’ve already invested in,” said Fair Oaks Water District Board President Chris Petersen.

Said Citrus Heights Water District Board President Caryl Sheehan, “We are committed to making sure our customers pay their fair share and no more. Local residents, business owners and our districts pleaded with the SJWD Board to work with us but they simply approved the rates over our opposition.”

The San Juan Water District Board of Directors passed a motion in December 2023 to raise their wholesale rates by 5% for 2024, 2025, and 2026, and then by 4% in 2027 and 2028, for a total 23% increase over five years. The increase passed 4-1, with only director Pam Tobin dissenting.

In an April 12 press release, the San Juan Water District described it as a “nuisance lawsuit.” San Juan Water District Board of Directors President Manuel Zamorano said the rate increases “are fair, reasonable, responsible and meet all legal requirements.”

San Juan Water District’s position is that the five-year plan for annual increases was based on the need to address inflation while covering operating and maintenance needs, planning for future capital investment projects, and repaying a $24 million State Revolving Fund loan.

“This litigation is completely unnecessary and misguided, and we anticipate that the Superior Court will rule in our favor,” Zamorano said. “The fact is, San Juan provides the best water in the state at the lowest rates going, and this litigation will be a waste of ratepayer dollars.”

In addition to Citrus Heights Water District and the Fair Oaks Water District, the other wholesale customers are Orange Vale Water Company and a portion of the City of Folsom, as well as San Juan Retail,which is part of the San Juan Water District and supplies more than 10,000 retail customers, mostly in the Granite Bay area.

California Proposition 26 states that agencies cannot charge more for services than what it reasonably costs to provide those services. But the court filing alleges that San Juan Water District is using increased wholesale rates to offset costs for their retail customers: “San Juan-Retail customers have the highest water use per customer in the Sacramento Region and one of the highest water use per customer in the State. The administrative costs of managing and responding to 10,675 customers are far greater than the administrative costs of managing and responding to 4 customers. Nonetheless, in certain contexts, San Juan has allocated a shocking 85% of these costs to its wholesale arm, and only 15% to its retail arm.”

Both the Citrus Heights Water District and the Fair Oaks Water District have their own wells to access groundwater but they do not have enough to supply all their customers, so their only option is to purchase surface water from San Juan Water District. The two districts state that San Juan Water District effectively operates as a monopoly and is abusing that position to illegally institute dramatic rate increases.

Because the new wholesale rates are flat fees charged quarterly, rather than a variable rate depending on each district’s usage, “local water agencies are disincentivized to conserve or use local, reliable groundwater,” as stated in the joint press release. “This appears to conflict with State policy or decades-long efforts to build regional water supply resiliency. The current rate plan could make the region more vulnerable to water shortages and keep rates artificially high for CHWD and FOWD customers.”

San Juan Water District’s response to the complaint is due to the court by May 27.