The Metropolitan Water District

The MET is the wholesale distributor of water in southern California. The MET obtains an average of approximately 800-900 KAF/yr from the Colorado River. The Colorado River Aqueduct is shown in the map. It brings water from the Colorado River across the southern deserts of California. This supply is expected to decline in the future as the State of Arizona's rights on the Colorado are more fully used due to the Central Arizona Project).

The MET obtains an average of 700-800 KAF/yr from the SWP, the State Water Project. You can see the state's aqueduct in the map. It begins in the sensitive "Bay-Delta" region (between San Franciso and Sacramento). It ends in a long climb over the Tehachapi mountains before the water flows into the Los Angeles Basin.

The City of Los Angeles is one of many cities that purchase water from the MET at wholesale rates. The MET supplies approximately half of the water used by over 13 million people in southern California. The MET was formed in 1928. As of 1985, there were 27 member agencies.


Map of Aqueducts in California
(courtesy of the Metropolitan Water District)


The sketch on the previous page used a thin arrow to represent MET purchases as comprising around 10% of the Los Angeles water supply in a year with average weather. The City's total demand in the 1980s was around 600 KAF/yr, so a 10% contribution was around 60 KAF/yr.

The actual purchases over the past 25 years are shown in the bar chart. The purchases range from a low of 19 KAF/yr to a high of 401 KAF/yr. The average is 130 KAF/yr which the LADWP reports as approximately 20% of the City's total water supply.

The MWD purchases are largely dependent on water supply conditions from the eastern Sierra Nevada, which determines how much water the City obtains from the LAA. Wet conditions mean large deliveries from the LAA; dry conditions mean less. When LAA deliveries fall, the City turns to the MET.

 
Annual Purchases from the MET by the City of Los Angeles, 1970 to 1995
(Courtesy of the water supply page of the LADWP website, click on MWD)


Economic Issues
Since the City of Los Angeles relies on the MET as the marginal supply of water, the MET's wholesale prices are an important part of the economic analysis of the City's long term plan. Back in 1985, the MET's short run marginal cost was 224 $/AF. The City used this cost in its 1985 plan as the marginal cost for evaluating alternative sources of water.

Under the California's Urban Water Management Planning Act of 1983, all water utilities are required to evaluate alternative sources of wter supply, both on the supply side of the system (i.e., new reservoirs) and on the demand side (i.e., water reclamation or efficiency programs). The City does not have significant prospects on the supply side, but the demand side potential is quite important. A key factor in the evaluation of demand side programs is the marginal cost of water -- the higher the cost, the greater the effectiveness of programs to promote improved efficiency. So it is worth looking at the marginal cost of water that was under debate back in the 1980s -- the decade when the City's water rights were challenged.

The City reported its marginal cost of water at 224 $/AF in their 1985 plan. based on the MET purchases as the marginal source and the MET's rate making rules at the time. This estimate drew criticism from the Mono Lake Committee. (The criticism appears in the published comments at the end of the plan.) The Committee argued that the 224 $/AF was based on short run considerations, and it urged that a long term perspective should be used in evaluating demand side programs. They advocated 500 $/AF as a benchmark for evaluating efficiency programs.

Others argued for still higher values during this time period. For example, the State Department of Natural Resources discussed the long run marginal cost in the documentation accompanying the "Water Plan" cost-benefit analysis software. They suggested that the least expensive source of new water supplies in California might come from a project like the Auburn Dam in the hills around Sacramento. The long run cost of water from such a dam (and the pumping cost to bring the water to Los Angles) was estimated at 685 $/AF.