2024 Detachment Update

Mitigating Customer Costs with Detachment

June 2024

Rainbow Water’s change in water wholesaler through detachment from the San Diego Water Authority (SDCWA) is on track to finalize on or before January 2025. The goal of detachment has always been long-term mitigation of the impact of future wholesale water rate increases. While many were hopeful it would result in short-term rate decreases, that will not be possible due to multiple years of deferred increases while the detachment was pursued, combined with several years of high inflation, record-low sales, and short-term detachment-related expenses. A $15.8 million exit fee is due to SDCWA, with the first payment of $3.2 million to be paid in late 2024 and is accounted for in the fiscal year 2025 budget. In addition, as part of the detachment process, $15 million in capital improvement projects are underway, with completion planned for the end of 2024. 

Despite the upfront costs, detachment will still have an immediate benefit to customers by avoiding the impacts of a proposed 19% SDCWA rate increase on January 1, 2025, and a projected 39% rate increase over the next three years. Alternatively, a projected 3.6% Metropolitan Water District wholesale increase will be passed on to Rainbow Water customers on January 1, 2025, which is less than half of the projected 10% pass-through under SDCWA's wholesale rates. Post-detachment, Rainbow Water will use the long-term savings to fund critical infrastructure projects with lower rate increases less affected by declining water sales.

Operations and Improvements in Progress

March 2024

The four-year process for Rainbow Water to detach from San Diego County Water Authority (SDCWA) and purchase wholesale water from  Eastern Municipal Water District (EMWD), was overwhelmingly approved by voters under Measure B on the November 7, 2023 election. 

The SDCWA filed litigation to challenge LAFCO’s approval of detachment in August 2023. The SDCWA reached an agreement for detachment with Fallbrook Public Utility District and Rainbow Water in December 2023. The settlement agreement stipulated the development of an operations plan between Rainbow Water and SDCWA to define details on transferring facilities as well as operational related coordination and communication protocols post-detachment. In addition, Rainbow Water needs to complete a distribution system improvement project to allow for water service solely from the Metropolitan Water District (MWD) connections located in the central and northern areas of the District’s service area. The operations plan and system improvement are in progress and planned for completion in late 2024, at which time detachment will be complete. Rainbow Water will focus on the financial implications of the detachment as part of the budget preparation with the Board of Directors in a series of workshops starting in March. The process will analyze the wholesale water switch, exit fee payments, and on-going capital and operational needs of the District. The workshop series will update Rainbow Water's comprehensive financial plan and rates going forward. Schedules and agendas for the public workshops are available on the website: rainbowmwd.ca.gov/meetings

Detachment FAQ's

Transition and Timing of Detachment

• Rainbow Water’s detachment is expected to occur in late 2024 to allow for time to facilitate the transfer from SDCWA  to EMWD. The process is more complex than FPUD, as Rainbow Water needs time to develop an operations plan with SDCWA to transfer facilities and modify the water distribution system.
• Detachment will be completed after a distribution system improvement project is built to allow for water service solely from the Metropolitan Water District (MWD) connections located in the central and northern areas of the District’s service area. 
• The operations plan and system improvement are currently in progress and planned for completion in late 2024, at which time detachment will be complete.
• The wholesale water purchase will be from the same pipelines, the only change is Rainbow Water will be ordering water through Eastern Municipal Water District.

Rates

• Upon completion of the transfer, the wholesale water cost savings will help offset the need for future rate increases.
• At this time, we do not have formal numbers or rates to release. This is scheduled to be evaluated at a series of Spring Budget workshops at Rainbow Water.
•  FPUD and Rainbow Water will each pay an exit fee upon detachment, which will delay the full realization of Rainbow Water’s  cost savings, however, the long-term cost savings from detachment will far outweigh the exit-fee costs.
• The PSAWR program will be phased out with detachment and requirements to participate in the program will end.
• A  new single water rate tier for all agricultural rate payers will be set upon detachment and rates are anticipated to be at or below current agricultural (non-PSAWR) rates.

Water Quality

• Rainbow Water receives imported water from the Robert A. Skinner treatment plant located in Temecula, Riverside County. 
• Post-detachment ratepayers will continue to receive the same high quality, reliable, clean, and safe water from the same pipelines that meets or exceeds all state and federal water quality standards.

Post-Election Deatchment Update 

January 2024

In November of 2023, the communities served by Fallbrook Public Utilities District (FPUD) and Rainbow Municipal Water District (Rainbow Water) overwhelmingly voted in favor of Measures A and B to approve detachment from the San Diego County Water Authority (SDCWA) and concurrent annexation into the Eastern Municipal Water District (EMWD) based in Riverside County. The change in water wholesale suppliers, based on an independent analysis, is estimated to save Fallbrook and Rainbow water districts a combined $7.8 million per year.  

The SDCWA filed litigation to challenge LAFCO’s approval of detachment. Rainbow Water, FPUD and LAFCO engaged in settlement negotiations with the SDCWA that concluded with an agreement signed by all parties which resolves all litigation and allows detachment to move forward. The settlement was signed on December 21, 2023. FPUD’s transition to EMWD as their new wholesale water provider occurred in January 2024. The transition for Rainbow to detach will take additional time but will have a similar positive impact. 

“Rainbow Water’s realization of savings from the detachment will not occur until mid-to-late 2024, as the transition to full wholesale supply by EMWD is more complex than FPUD’s,” said Jake Wiley, Rainbow Water General Manager. 

“The development of an operations plan with SDCWA, including transfer of facilities as well as modifications to our distribution system, will take more time to be ready for the full transfer. Rainbow Water will be taking action to provide relief to our customers with water rate adjustments and potential reductions in future rate increases to account for the wholesale water savings as soon as the detachment process is complete.” 

The water provided to the community will be the same water, off the same pipelines. The water will be reliable, clean, and safe and will continue to meet or exceed all state and federal water quality standards.