California Supreme Court Reverses State’s 2020 Order on Water Surcharges

The Supreme Court of California in San Francisco, California, as seen in a file photo. (Google Maps/Screenshot via The Epoch Times)

California’s Supreme Court has reversed a 2020 order by the state’s Public Utilities Commission that barred water company surcharges on customers during drought-related conservation efforts, saying the notice was unclear.

To encourage water conservation and reduce the financial incentive to sell more water, California’s Public Utilities Commission in 2008 allowed water companies to impose a surcharge on their customers when they face a revenue shortfall because of efforts to conserve water in droughts.

According to the five affected water companies, the Public Utilities Commission eliminated the surcharges, known as “decoupling mechanisms” or “revenue adjustment mechanisms,” without adequate notice in 2020.

However, the Public Utilities Commission argued in its response that the water companies were made aware during the process. At the same time, the commission claims the decoupling mechanisms could be abused in situations such as a rainy year, when customers require less water for landscaping, or during an economic downturn, when people conserve water.

The commission claims the decoupling mechanisms reduced the incentive to control costs and shifted risks away from the water company and onto their customers.

Court Agrees Notice Period Was Inadequate

In the July 8 court opinion authored by Justice Leondra R. Kruger on behalf of Chief Justice Patricia Guerrero and Justices Carol A. Corrigan, Goodwin H. Liu, Joshua P. Groban, Martin J. Jenkins, and Kelli Evans, California’s Supreme Court agreed the commission did not provide adequate notice.

Justice Kruger said the commission failed to clearly inform the affected water companies the surcharges were being eliminated.

“The issue before us does not concern the merits of this decision, but the process that led up to it. The question is whether the commission gave adequate notice that the elimination of the decoupling mechanism was one of the issues to be considered in the proceeding,” she said.

“We conclude that the answer is no. We further conclude that the commission’s failure to give adequate notice requires us to set the order aside.”

According to Justice Kruger, the commission’s central argument that a scoping memo made it clear to the water companies that surcharges were being removed left the judges “unpersuaded.”

“The scoping memos gave no signal that the forecasting issue included elimination of the Water Revenue Adjustment Mechanisms and Modified Cost Balancing Accounts, as opposed to, for example, improved forecast methodologies,” Justice Kruger said.

“The connection between those approaches and questions about how to improve forecasting is simply too attenuated to have given fair notice that the potential elimination of these approaches was within the scope of the proceeding.”

The Epoch Times has contacted the Public Utilities Commission for comment on the court decision.