San Diego County water costs could more than double over a decade, officials warn. Here’s why.

San Diego County Water Authority officials expect wholesale water rates to soar by as much as 150% over the next decade, driven in part by the agency’s struggles to sell some of its supply — struggles it expects to get worse because of San Diego’s billion-dollar Pure Water project.

A grim reality of high water costs might persist for residents and businesses in much of the region if the authority doesn’t find new buyers for its water, according to a draft of the water authority’s long-term financial plan presented to water officials on Thursday.

If sales aren’t boosted, volumetric water rates could jump from about $2,000 per acre-foot next year to anywhere from $3,500 to $5,000 per acre-foot in 2035, according to the plan.

San Diego City Councilmember Stephen Whitburn, who sits on the water authority’s board of directors, asked officials to gather more options for blunting the impact of rate hikes.

Over the last six years, the water authority has done that by tapping $80 million from its rate stabilization fund, and the board has said it wants to use even more of the fund in the years ahead.

“I think it is critical that we also earn and maintain the confidence of our ratepayers,” Whitburn said.

There is hope that the sale of water to water-strapped Western states like Arizona and New Mexico — a longtime though elusive goal of the water authority — could soften future rate hikes.

Water Authority General Manager Dan Denham said on Thursday that by the spring, the agency expects to have a clearer picture on where it stands with securing out-of-state sales.

The agency’s recent settlement of a long-running legal fight over water costs with the Metropolitan Water District of Southern California has also helped make out-of-state sales easier, he said.

“We’re kind of all in this mode of hurry up and wait,” Denham said.

Other factors could moderate rate increases, the draft financial plan said. Those include possible lower interest rates, securing more grants and the optimization of the agency’s debt.

High water costs in the San Diego region are driven by the water authority’s outsized infrastructure, which was overbuilt to meet population growth and water demands that didn’t pan out as conservation efforts improved.

That’s meant that the costs of servicing the debt for that infrastructure get passed on to consumers.

The water authority’s member agencies have also steadily been buying less wholesale water over the last 20 years, further contributing to its rate hikes.

Declining water sales will worsen once San Diego’s Pure Water system comes online over the next decade, county water officials said on Thursday.

The massive project to recycle sewage into potable water is expected to account for half of the city system’s drinking water once it’s complete by 2035. The first phase of the project is expected to go online in 2027.

San Diego is currently the county water authority’s biggest customer, and over the next decade, Pure Water will coincide with anywhere from roughly a 25 to 40% drop in water sales for the water authority, the financial plan said.

The city system buying less water means the water authority’s other member agencies could get stuck passing along higher rates to ratepayers to compensate for the agency’s falling revenues.

In anticipation of the second phase of Pure Water coming online in 2035, the water authority’s financial plan calls for ramping up wholesale rates throughout the 2030s to make the hit on water affordability more gradual.

Lindsay Leahy, who represents Oceanside on the water authority’s board, urged San Diego officials to be mindful of how Pure Water could saddle other communities with higher costs.

“Unless we do sell water to other organizations, we are going to continue to feel that impact, and we are going to continue to pay for water that we’re not using,” Leahy said.

The financial plan does come with good news for how predictable the inevitable rate hikes will be. The settlement with Metropolitan is a main driver of that.

The main crux of the legal dispute was whether the water authority should pay a fixed rate for Metropolitan’s water as opposed to paying the water giant’s regular rates, which fluctuate each year.

Nine percent of the water authority’s supply comes from Metropolitan. The cost of that water is now set at about $186 million annually, rather than fluctuating each year with Metropolitan’s rates.

The impact of those fixed costs is to make forecast year-to-year rate hikes more steady. For example, the water authority raised rates for next year by 8.3%. Previously, it raised rates by 14.8%.

But over the next decade, rates should only rise by between 5.5% and 9.5% percent annually, the water authority’s financial report said.