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Attorney General Harris Requests Depublication of Appellate Decision in San Juan Capistrano Tiered Rates Case

On June 5, 2015, California Attorney General Kamala D. Harris submitted a letter to the court on behalf of the State Water Resources Control Board (“State Board”) requesting that the court depublish the appellate court decision in California Taxpayers Association, Inc. v. City of San Juan Capistrano calling it “overbroad” and saying that the State Board believes that the decision could hinder efforts to meet the conservation objectives required in Governor Brown’s executive order.  (For background on the executive order, see “California Steps Toward Statewide Centralized Water System,” JOW April 2015).

Depublication would allow the court’s ruling in the case to stand, but would prevent it from being used as an authority or precedent in future cases, thereby reducing its reach and impact.

Attorney General Harris presents two main arguments why the decision should be depublished.  First, it could be interpreted “to cast constitutional doubt on any price structure that imposes a penalty rate for excessive water use.”  She maintains the court needlessly went beyond the case-specific basis for rejecting the argument that the city’s higher tiered rates “could ‘be justified as penalties’” and addressed the broader question of whether water suppliers are allowed to impose a higher rate as a penalty for excessive water use under Proposition 218—arguing that “…[T]he Court of Appeal included three terse paragraphs at the end of its opinion that could be construed as suggesting that any penalty rate is unconstitutional—even if the rate applies only to excessive use that is prohibited by law, and even if the water supplier ensures that its base rate for reasonable water use is tied to the actual cost of service in compliance with Proposition 218.” (emphasis in the original)

The Attorney General’s second point focuses on the court’s treatment of the state’s reasonable use standard (Article X, Section 2 of the California Constitution) arguing that the court’s discussion of that provision conflicts with longstanding precedent and could be interpreted in a manner that threatens regulatory efforts to discourage inefficient water use.  Furthermore, she presents the State Board’s argument that for the reasonable use doctrine to have teeth, there must be room for penalty or corrective rates that exceed the actual cost of service.  “The Board respectfully submits that there may be circumstances when the constitutional standard of reasonable use does require (or at least justify) ‘above-cost’ water rates, such as when the market cost of water fails to account for the actual societal costs of diversion and use.

If the appellate court decision is depublished, the pending and anticipated lawsuits against tiered water rates will have to be considered on their own case-specific merits.  Challenges are in play in Southern California against the City of Glendale and the Sweetwater Authority, with the plaintiffs in both cases represented by Benjamin Benumof, the same attorney that represented the plaintiffs in the San Juan Capistrano case.  In addition, a class action suit has been filed against Marin Municipal Water District in the Bay Area.

Meanwhile, the State Board has scheduled a workshop to gather information on the efficacy of conservation pricing and on how pricing signals can be implemented consistent with Proposition 218.  The ultimate goals are to determine actions that can be taken to help water suppliers develop or improve the efficacy of conservation price structures and to assist in demonstrating that the price structures balance the reasonable use doctrine and cost-of-service pricing requirements.

(For background on the appellate court decision in California Taxpayers Association, Inc. v. City of San Juan Capistrano, see “CA Appellate Court Holds That Tiered Pricing Must Reflect Cost-of-Service,” JOW May 2015).

Written by Marta L. Weismann