Here's why Met is making these announcements:
- Most of its costs are fixed, e.g., Met must pay DWR for 100% of its contracted water rights in the SWP -- even when DWR is only delivering 40% of its "obligations."
- Met is buying more supply from other areas (e.g., the PVID deal @ $340/af), which raises its average cost of water.
- With less quantity at higher costs, Met is forced to raise prices on the reduced amount of water it is selling (rather, rationing among its member agencies).
- Met's rationing relies on formulas, and these formulas are subjective and flawed.
- Even worse, Met's use of average cost pricing does NOTHING to ensure that supply and demand is equal. Instead, Met threatens member agencies with massive (100% surcharge) price penalties if they exceed their quota.
- Met can set aside a "human right" allocation for each member agency (say, 75 gallons/cap/day) based on its population. Met can sell this water at cost.
- Remaining water can then be sold -- in an auction -- to member agencies. Agencies that "need" the water more can bid more for it. Since auctions prices are likely to exceed the cost of provision, auction revenue will also cover costs.
- The results is that Met will allocate all of its water with equity AND efficiency, cover its costs, and avoid all of the wangling, complaining and lawsuits that it now faces.