California drought: Court rules tiered water rates violate state constitution (April 21, 2015)

In a ruling with major implications for California’s water conservation efforts during the historic drought, a state appeals court on Monday ruled that a tiered water rate structure used by the city of San Juan Capistrano to encourage saving was unconstitutional.

The Orange County city used a rate structure that charged customers who used small amounts of water a lower rate than customers who used larger amounts.

But the 4th District Court of Appeal struck down San Juan Capistrano’s fee plan, saying it violated voter-approved Proposition 218, which prohibits government agencies from charging more for a service than it costs to provide it.

The stakes are high because at least two-thirds of California water providers, including many in the Bay Area, use some form of the tiered rate system.

Gov. Jerry Brown immediately lashed out at the decision, saying it puts a straitjacket on local government at a time when maximum flexibility is needed. My policy is and will continue to be: Employ every method possible to ensure water is conserved across California.


San Jose Water Company, which provides water to 1 million people, has tiered rates, but as a private company is not affected by Proposition 218.

Water experts have cited studies for years showing that higher costs for water reduce consumption, but critics say it penalizes residents who have larger lots and live in warmer areas.


Penalties aside, the court said that tiered water rates are legal as long as the government agency can show that each rate is tied to the cost of providing the water.

The water agency here did not try to calculate the cost of actually providing water at its various tier levels, the court said of San Juan Capistrano. It merely allocated all its costs among the price tier levels, based not on costs but on predetermined usage budgets.

The highly anticipated decision comes in the wake of Brown’s executive order directing water agencies to develop rate structures that use price signals to force conservation. His order, which also requires a 25 percent reduction in urban water usage, marked the first mandatory water restrictions in state history and came as the state enters a fourth year of an unrelenting drought.


Experts say 66 percent to 80 percent of California water providers use some type of tiered rates. A 2014 UC Riverside study estimated that tiered rate structures similar to the one used in San Juan Capistrano reduce water use over time by up to 15 percent.


Source: San Jose Mercury News