California's primary strategy for coping with its record drought was upended by an appeals court that found charging the state's biggest water users higher rates violates a law passed by voters.
Providers that set tiered pricing, a common practice throughout the state meant to promote conservation, can't charge more than water actually costs, regardless of how much a customer uses, according to Monday's ruling by a three-judge panel of the California Court of Appeal in Santa Ana.
Water agencies throughout California will need to reformulate their pricing to comply with the ruling, said Kelly Salt, an attorney for the Association of California Water Agencies, which was supporting the city of San Juan Capistrano in a constitutional challenge filed by taxpayers.
Traditionally, agencies have used tiered rates as a "pricing signal to conserve," she said. The appeals court's narrow constitutional interpretation means water agencies must now "look at water on an almost molecular level," she said.
Water districts will need to justify charging the biggest water users more based on such things as the cost of seeking far-flung sources, she said.
California, the most populous U.S. state, and its $43 billion agriculture industry are experiencing the worst of the arid conditions in the western U.S. The state has proposed rules calling for mandatory reductions in water use by municipal agencies as an historic drought drags into a fourth year.
"We would note here that in times of drought -- which looks increasingly like the foreseeable future -- providing water can become very pricey indeed," the appeals court said. While water agencies are free to pass on incrementally higher costs to bigger users, they must draft their rates based on "the true cost of water, not simply draw lines based on water budgets," the panel ruled.
The court said water-starved San Juan Capistrano may charge its residential ratepayers a fee for construction of a water recycling plant even if those homeowners can't use the service, because the plant frees up traditional water supplies for those customers.
The Capistrano Taxpayers Association challenged the constitutionality of charges imposed on residential water users who wouldn't have access to use the recycled water, which normally goes to water parks and other uses.
The association argued a voter initiative, Proposition 218, revised the state constitution to prevent fees unless a service is actually used by the property owner.
The case goes back to a lower court to reassess the city's rate structure.
The case is Capistrano Taxpayers Association v. City of San Juan Capistrano, G048969, California Court of Appeals, Fourth District, Division Three (Santa Ana).
