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About this blog: The Raucous Caucus shares the southpaw perspectives of this Boomer on the state of the nation, the world, and, sometimes, other stuff. I enjoy crafting it to keep current, and occasionally to rant on some issue I care about deeply...  (More)

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Fears for Tiers

Uploaded: Apr 23, 2015
In a much misunderstood ruling, a SoCal appellate court this week invalidated the particular tiered water rates established by the City of San Juan Capistrano (SJC). A clear majority of state water agencies use such a rate structure, which typically prices the first gallons used at a much lower rate than later gallons.

Thus, heavy users pay more, on average, for leaving the water running when they brush their teeth. In this case, SJC priced its tier 1 at $2.47/hundred cubic feet (about 750 gallons) for up to six such units, and escalated the rate in tier 4 to a whopping $9.05 for every unit >34 ccf.

Progressively tiered rates encourage conservation, of course, and that has never been more important than it is now. Predictably, the Governor waxed apoplectic over the ruling, and consternation seems to have ruled the press coverage of the outcome. How could some out-of-touch/to-lunch pointy-heads have outlawed conservation ? during an unprecedented drought emergency?

The disappointing answer, for lovers of absurdist drama, is: they didn't.

Constrained as they are to follow the state Constitution, the 4th Appellate District panel simply ruled that tiers are fine, but they need to be cost-justified. Per Prop 218, we voters read into the Constitution a requirement that local governments could not profit from the provision of their services, and that their rates for service need to be cost-justified.

SJC violated the second provision, by never attempting to relate their tiered structure in Any way to the cost of providing the service. As Judge Bedsworth noted: "? the difference between tier 1 and 2 is a tidy 1/3 extra, the difference between Tiers 2 and 3 is a similarly exact ½ extra, and the difference between 3 and 4 is precisely 5/6 extra. ? Such mathematical tidiness is rare in multi-decimal point calculations."

As an aside, I should admit that I am a big fan of Hizzoner, primarily because in his spare time he writes the hilarious "A Criminal Waste of Space" monthly column, and is not afraid to spike his opinions with humor (or, here, a reference to the late Marc Reisner's classic history of water in the west "Cadillac Desert"). That he is retiring is a major loss to the legal profession, whose shirts generally tend toward the stuffy.

Prop 218 was enacted to reel-in public agencies whose billing proclivities had taken an acquisitive turn (not unlike how a traffic infraction can end-up costing many times the face amount in various fees and penalties, but I grumpily digress. Perhaps that's for another election?). The Court could not avoid or ignore it.

But what they did do was to specifically indicate that there are all kinds of ways to cost-justify the tiers of a publicly provided service, so long as the tiers are somehow "based on usage, not budgets." Agencies are invited to develop any of a wide variety of rate structures, including those that take account of capital and other costs "given usage levels that require them to tap more expensive supplies?" The judges even give a nod to the evident higher costs of desalination plants being built or re-commissioned along the coast, and how they could be passed-on.

So, we can expect water agencies to sharpen their pencils and find ways to tier their rates so that they bear some arguable relationship to the higher marginal costs of providing unnecessarily wasteful gallonage. As the Court noted, "Precedent and common sense both support such an approach. "

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