By Lois Henry, SJV Water
Residents of the Diablo Canyon housing development in Stanislaus County have four months to pony up $14 million or the Kern County Water Agency (KCWA) will cut off their water, according to a KCWA press release issued Wednesday.
That’s how much KCWA says it is owed in back water bills by the Western Hills Water District, which serves the 600-home Diablo Canyon development in the foothills west of Interstate 5.
Residents found themselves in almost the exact same predicament last June before they voted to jack up their water bills to $600 a month in order to make payments to KCWA. That only won them a short reprieve, however.
KCWA’s press release blindsided Western Hills, which has been in negotiations with KCWA to find a solution to the complex, 25-year-long deal that soured after the 2008 housing market crash and that has raised a lot of questions both in Diablo Canyon and Kern County.
In the current dust-up, both sides claim they’ve been negotiating in good faith.
KCWA’s press release states it has proposed modifying how much water Western Hills buys from KCWA. And it proposed making “…certain financial adjustments in an attempt to significantly reduce Western Hills’” debt.
But Western Hills refused, according to the release, and instead wants KCWA to “…accept payments at levels substantially below the Agency’s actual cost of the water to be delivered.”
In response to KCWA’s press release, Western Hills stated: “We believe that press release is not a realistic or accurate description of our negotiations.”
The district was “surprised and disappointed” by KCWA’s press release not only because it thought negotiations were going well, but also because KCWA revealed private, confidential details of those negotiations, according to the statement.
It also notes that the contract KCWA references was entered into by the former Diablo Grande developers who no longer have any interest in the development, nor Western Hills Water District, which residents now control. Residents are suing those former developers in a separate action.
How a mostly agricultural water agency in Kern County became embroiled in a domestic water deal more than 200 miles away is a convoluted tale going back to the 1990s.
In 1998, Western Hills bought the rights to 8,000 acre feet of state water from the Berrenda Mesa Water District for $8 million. But the Department of Water Resources kiboshed the deal because it didn’t want to add a new contractor to the system.
So, KCWA stepped in. It took over the Berrenda Mesa contract and then sold Western Hills its banked lower Kern River water “by exchange.” In reality, Western Hills took state water off the California Aqueduct and KCWA then debited a like amount of river water held in its Pioneer groundwater bank.
As part of its agreement, Western Hills reimbursed KCWA for annual state transportation and operations/maintenance costs associated with the 8,000 acre feet. That’s what has created the debt for Western Hills.
It was a confusing deal even at the time it was created.
But it likely would have continued on without concern had Diablo Grande grown to its anticipated 5,000-home buildout. Those annual state water charges would have been spread among numerous rate payers.
Instead, the 2008 market crash, an ensuing bankruptcy and lawsuits stunted Diablo Grande to just 600 homes. Residents couldn’t afford to continue paying the state charges on the 8,000 acre feet and Western Hills’ payments to KCWA stopped in 2019.
KCWA has continued paying the state charges on Western Hills’ behalf racking up what it says is $14 million.
Another twist in the tale, though, is that, because Diablo Grande never grew to its full build-out, Western Hills only ever took a fraction of the 8,000 acre feet it had bought.
It did bank 4,000 acre feet of the excess water, which, theoretically, is still a Western Hills asset in Kern County’s aquifer.
But the remaining excess water, more than 61,000 acre feet, was sold by KCWA.
SJV Water has made repeated public records requests since mid-June seeking a full accounting of how much money KCWA made off those sales and who bought the water but the agency has never provided that information stating it is too understaffed.
KCWA did provide Western Hills with a year-by-year description of how the water was allocated. But sales information is not included on that list.
Member units, local agricultural water districts, have wondered about that excess water as well. Several managers have told SJV Water they were never notified by KCWA that it had extra water for sale.
