Millionaires Brew Up Court Fight Over Tiered Rates

In the San Francisco Bay Area, a fight over water rates has flared up and it’s a clash of millionaires versus local political officials.

The legal fight in the town of Hillsborough, where the median home value is reportedly $4.3 million, centers on the practice of charging higher water rates for heavy users, also known as tiered rates.

Nine people in the town, where people “historically consume three times as much water as elsewhere, say the bigger bills don’t reflect the cost of providing the water — and are therefore unconstitutional. They’re suing the town in an attempt to lower prices and recoup their payments,” the San Francisco Chronicle reported.

The lawsuit in San Mateo County Superior Court challenges tiered water rates as well as penalties for high levels of water consumption, according to the Chronicle. Tiered water rates have been the subject of lawsuits in several California cities. Opponents say water rates should reflect costs.

“The nine residents who are taking the town to court say that by imposing tiered water rates, and a $30 penalty for each unit of water used over the allotted amount, Hillsborough water officials violated Proposition 218, a state law that makes it illegal for government to charge more for a service than it costs to provide,” the San Jose Mercury News reported.

Beau Burbidge, an attorney representing the rate opponents, said, per the report: “We understand the drought is severe and water use needs to be cut, but we have to do that in a [manner] that’s consistent with the law.”

The backdrop is that, in a separate court fight, tiered water rates were struck down, according to the Chronicle report:

The dispute over water rates follows a complex decision last year by a Southern California appellate court, which struck down tiered pricing in the Orange County city of San Juan Capistrano. The court said the city was illegally charging customers more for a public service than what it cost to provide the service.

While the ruling didn’t invalidate all tiered-rate policies — just those that are out of sync with a supplier’s costs — it created confusion for many water agencies about how to effectively and legally price water during dry times. The Hillsborough case, and its challenge to penalties, could make things even murkier.

California regulators have pushed local officials to increase conversation, encouraging local officials to find strategies to lower water use, including tiered rates and penalties. “Governor Jerry Brown ordered up the state plans for improving long-term conservation in May, when he lifted a statewide mandate put in place at the height of California's drought for 25-percent water conservation by cities and towns,” KPCC reported.

To read more about how utilities structure their rates visit Water Online’s Funding Solutions Center.