The water district might become like the state's energy companies: still delivering a commodity, but unable to recoup costs - thus left with no funds or incentive to look for new supplies unless customers' rates are raised. The bill would strip the water district of authority to set rates for its "conveyance facilities" and give that power to the State Water Resources Control Board, which has its members appointed by the governor.

A consultant's report prepared for the Agriculture and Water Resources Committee suggests that the committee "may want to investigate whether this bill sets good water policy for the state or is simply an attempt to use the Legislature to gain a better business position for its sponsor."

The committee endorsed the bill and forwarded it to the appropriations committee. The water district says that it should charge not just the "point-to-point" cost, but also for a portion of the massive system's upkeep and expansion. Three bills failed last session. A lawsuit to clarify the issue ended in a tangle of conflicting rulings. The issue was a major sticking point in the bid by the San Diego County Water Authority to buy water from the Imperial Irrigation District. The dispute was resolved only through intervention by then-Gov. Pete Wilson, the Legislature and then-Interior Secretary Bruce Babbitt.

In 1986, the Legislature passed a bill providing that publicly financed water systems - such as the state's California Aqueduct or MWD's Colorado River Aqueduct - should be made available to buyers and sellers. That law lacked a clear definition of what constitutes "fair compensation" for using such systems.