Several pertinent bills advanced through the 2023/24 legislative session and were signed into law: SB 1072 which makes refunds not available under Prop 218; AB 1827 is declarative of existing law around justification of tiered water rates; and AB 2257, creating an exhaustion of administrative remedies procedure for rates.
Recent case law has delivered mixed results. In Malmquist et al. v. City of Folsom, the plaintiffs sought certification of a class in a nuisance action against the City’s water system, alleging that the water treatment resulted in damages to homes. The trial court denied class certification and the Court of Appeal affirmed. While the case was initially unpublished, the Court of Appeal granted a request to publish so that other local agencies may rely upon the decision.
In Coziahr v. Otay Water District case, several issues were addressed in the ruling including making refunds available in Prop 218 cases and that policies such as water affordability and conservation cannot justify rates. While it is possible that the Supreme Court will grant review or the case be depublished, the case provides insight into rate setting practices. The primary finding around tiered water rates is that Otay’s tiered rates were based on non-cost objectives like conservation and did not correlate with the actual cost of providing water service. The court determined that Otay’s reliance on peaking factors and adherence to industry standards rather than actual agency data were insufficient to justify the tiered rates. The case underscores the need for a detailed and complete record when establishing rates.