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The Purple Pipe Price War, Explained

The city’s plan to raise the rates for undrinkable “purple pipe” water is inflaming tensions between north and south, rich and not-so-rich.

There’s a showdown looming over a water rate hike the city is proposing, but it’s not the one that would increase city residents’ bills by 40 percent over the next five years. It’s the city’s plan to raise the rates for undrinkable “purple pipe” water that is inflaming tensions between north and south, rich and not-so-rich.

On one side is the city’s water department and wealthy coastal communities in the northern part of the county. On the other side are poorer areas in the South Bay.

That fight is over what the city charges for recycled water. That’s wastewater the city cleans up and then distributes to customers through a system of pipes separate from the regular drinking-water system. Purple pipe water is undrinkable but cheap, so it’s good for irrigation. Golf courses and parks departments love it.

The city of San Diego’s Public Utilities Department wants to raise the price of this water for the first time since 2001. The City Council will vote Tuesday on the rate increase.

The city’s biggest customer is another water agency, the Otay Water District. Otay is fighting the increase and now has the backing of politicians and business leaders in Chula Vista, San Ysidro and East Otay Mesa, as well as County Supervisors Greg Cox and Dianne Jacob and San Diego City Councilman David Alvarez, whose district includes Otay Water District customers.

Otay buys purple pipe water from the city and then resells it to 700 customers in the South Bay. Otay accepts that rates have to go up, but calls the city’s rate increase unfair.

Right now, every customer pays 80 cents per unit. The proposed hike would raise the rate to $1.73 per unit. That across-the-board method is as much the sticking point as the actual increase: Otay and its supporters have suggested the city’s policy would intentionally overcharge South Bay customers so that wealthy golf courses in the northern parts of the county can get less-expensive purple pipe water. Otay’s argument hinges on the physical nature of the purple pipe system. The city recycles water at two treatment plants. One plant is near La Jolla, the North City Water Reclamation Plant. The second is right near the Mexican border, the South Bay Water Reclamation Plant.

A unit of water from the South Bay plant is less expensive than a unit from the North City plant.

Otay, which buys nearly all of the water produced by the South Bay plant, argues that since its water comes from the South Bay plant, the city should charge it less because the water is less expensive. Otay prefers a plan that would allow it to pay $1.17 per unit, and charge North City customers $2.14 per unit.

Alvarez backs that plan, and called the city’s approach a “simplistic way of shifting costs to the ratepayers in the south.” He’s the only City Council member whose constituents would be affected by the hike.

In a recent memo, the director of the city’s Public Utilities Department, Halla Razak, said she’d look at Otay’s proposal but “does not agree with their reason or justification.”

Since both plants are part of the same system, the city reasons that every customer should be treated the same.

“This is one system, it’s always been one system and the rates need to be the same,” City Council President Sherri Lightner told me.

Lightner worries about the precedent a two-rate system would set: Will everyone start asking for special dispensations?

The South Bay system is pretty pointless without Otay as a customer. Otay buys 99 percent of the purple pipe water from the South Bay treatment plant and has invested $43 million in pipes to bring water from plant into Otay. It has spent tens of millions more on distribution lines that deliver that water on to customers.

Otay’s general manager, Mark Watton, said the rate increase will cost $1.2 million per year for Otay, which will lead to about a 4.4 percent increase for all of his customers. The $1.2 million is a drop in the bucket for the city of San Diego, Watton said, but it’s a chunk of money for Otay.

“For us,” Watton said, “it’s a big deal.”

Watton said Otay had been accumulating some grievances with the city but kept quiet. The biggest of those grievances seems to be the nature of Otay’s contract with the city. The contract says Otay has to buy a certain amount of water, even if it can’t use it all. That’s happening now for Otay. It’s like if you bought a huge bag of apples at Costco – it’s a great deal if you eat the whole bag, but if you only eat some of the apples, maybe you should have just gone to Vons.

To make the point that the two systems are separate, Otay says the Olivenhain Municipal Water District was interested in buying the water Otay can’t use, but the two systems aren’t physically connected, so Otay’s unused surplus can’t be transferred.

But Olivenhain, which supplies water to Encinitas, Carlsbad, Solana Beach and Rancho Santa Fe, is siding with the city: Everyone should have to pay the same higher price.

“If Otay wants to get a special deal with the city to reflect it building all the pipelines down there, that’s its business,” said Kim Thorner, Olivenhain’s general manager. “My concern is we entered into it with the unitary rate restructure. And changing it – at least for us – mid-contract, is not fair.”

Thorner said she was advised to avoid making the rates into a north-south issue but that Otay has taken it there.

Otay has done so explicitly. In one of its handouts, it shows golf courses in North County and compares them with schools and libraries in the South Bay. It argues the higher-than-necessary rates in the southern part of the county subsidize those golf courses farther north, as well as the city’s own parks department, which is the second-biggest customer.

Thorner said she looked over her map of customers. Yes, there were golf courses, but she also saw schools and sports fields.

“I got poor people too,” she said.

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