Town council presentation — response to Mr. Brown (August 25, 2015)
Good evening. My name is Leigh Jordan and I’m the Executive Vice President of Apple Valley Ranchos.
At the August 11, Town Council meeting Town Attorney Mr. Brown said (and I quote):
In general, regulated companies get a free card out of jail when it comes to compliance with most of the constitutional limitations on ratemaking and rate-setting.
This is a gross mischaracterization of reality.
The limitations on ratemaking and rate-setting of the California Public Utilities Commission are constitutional. The CPUC is created by Section 1 of Article XII of the State Constitution. Its authority to fix rates for regulated utilities, and to establish procedures to do so, also come from Article XII of the constitution. Government-owned utilities are exempt from these constitutional limitations. The absence of this Constitutional control on the rate-setting of public entities is what triggered the public demand for Prop. 218 in the first place.
Prior to passage of Prop. 218 in 1996, there was little in the way of limitation on rate-making and rate-setting of municipal utilities for
property-related services such as water and sewer. Prop. 218 was passed to curb municipal agencies’ use of monopoly power to raise rates because, as Prop. 218 found in Section 2,
local governments have subjected taxpayers to excessive tax, assessment, fee, and charge increases …. Prop. 218 was an effort to put some limitations on municipalities similar to those already in effect for regulated utilities.
The CPUC procedures for increasing rates, unlike Prop. 218, require a process that takes over a year. This process requires noticed public meetings and a rate study. It also includes participation of a Consumer Advocate to review the utility’s rate study, which is NOT required by Prop. 218. And it provides for the active participation of other parties –like the Town — and evidentiary hearings before an Administrative Law Judge.
Another major distinction between CPUC regulation and Prop. 218 is that the CPUC provides on-going oversight of regulated utilities to ensure that its rules are followed. There is no state agency which routinely exercises such oversight over municipalities’ compliance with Prop. 218.
In the last few years there have been three audits of rate-setting conducted by the State Auditor, in the Apple Valley Area, in Antelope Valley, and in Southeast LA County. In each of those audits the State Auditor found at least one instance where a municipality had not complied with Prop. 218.
The recent Court decision on the lawsuit of the Capistrano Taxpayers Association vs. the City of San Juan Capistrano did not find that any and all tiered rates are unconstitutional. What the court found was that the specific tiered rates of that City are unconstitutional because the City had not justified them as required by Prop. 218. So this is another case where a City has been found to have violated Prop. 218 — And the citizens had to take the City to court over it.
So again I ask that, going forward, Mr. Brown refrain from editorial comments which misstate the facts.