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Proposal Would Effectively Deregulate California StateWater Project

May 25, 2005

Proposal Would Effectively Deregulate California  StateWater Project

Recommendation to Governor Suggests Removing State Oversight

OAKLAND, Calif. – A proposal to hand administration and oversight of the massive California State Water Project to an unaccountable, quasi-public agency could have a significant impact on California tax and ratepayers and the environment by opening the public project up to speculation and insider trading, Public Citizen said today.

The proposed policy change, which was buried in the largely abandoned California Performance Review, could lead to rate hikes and further degradation of the fragile Delta ecosystem that sustains the project.

While Gov. Arnold Schwarzenegger has retreated from most of the recommendations in the 2,700-page report released last August by his California Performance Review team, he has not publicly rejected others. A Public Citizen report released today, Mismanaging the California State Water Project, details the dangers of the Performance Review plan for the state’s public water system.

“Stripping oversight of the largest and most important state water project in the country from the hands of the state is a recipe for disaster,” said Wenonah Hauter, director of Public Citizen’s Water for All campaign. “The agencies that are calling for a takeover of the water project have an unscrupulous history of meeting behind closed doors and making decisions that disregard statewide implications.”

The State Water Project is the largest state-run water and power utility in the United States. It spans 600 miles, delivers water to 23 million residents, irrigates more than 700,000 acres of agricultural land and consumes more energy than any other single energy user in the state. The State Water Project’s major hardware includes the 444-mile California Aqueduct, 19 dams (one of which, the Oroville Dam, is the highest in the United States), 10 energy plants that generate more than 7 billion kilowatt hours of power a year and 20 pumping plants.

In 2003, 27 of the 29 contractors with the State Water Project signed a joint powers agreement that enabled them to establish a separate agency, the State Water Project Contractors Authority. This new agency, called a joint powers authority, or JPA, is capable of exercising all the powers common to all of the member agencies. For example, if all of the members of the JPA are authorized to receive state or federal grants, the JPA itself would be able to receive such grants.

Two of the agencies in the JPA – the Kern County Water Agency and the Metropolitan Water District of Southern California – have a dominating political influence over the project and have written that influence into the joint powers agreement that governs the State Water Contractors. For example, the JPA agreement creates membership classifications that give those contractors located south of the Delta an unbreakable voting block.

Currently, the state Department of Water Resources administers the State Water Project. Under the proposal, the Project would be housed within the state Resources Agency but the JPA would administer it, making decisions on issues of vital statewide importance such as the acquisition of water and water rights.

“The contractors vying to take control of the State Water Project are interested in running the public water system like a private business, where market demands will trump public health, water quality and the environment,” said John Gibler, a researcher with the Water for All Campaign in California. “State oversight needs to be strengthened, not signed away to the agribusinesses and developers waiting in the wings.”

The governor could adopt the recommendation merely by issuing an executive order.