California Court Ruling Threatens Price-Driven Conservation Efforts

Texas Water Lawyer & Texas Water Rights Attorney Trey Wilson wrote:

With the hot summer months quickly approaching, many in San Antonio are bracing for what has become almost as much of a rite of summer as a Spurs Playoff run – mandatory water restrictions.  While not quite as depressing as seeing a veteran opponent drain that miracle shot to end our season, watching thirsty landscapes wither under the Texas sun is pretty grim.  But, we are San Antonians not alone.

Scarcity of water has become a global issue that frequently makes headlines. Crises created by water shortages impact nearly every aspect of human life in the developed world:  the 2016 Olympic games in Rio de Janeiro, daily life in Sao Paulo, American Heartland crop yields, Taiwanese factories, development within the San Antonio-Austin corridor, and the very existence of Medina Lake are all facing serious and immediate threats posed by water scarcity.  There are innumerable other examples, not to mention water-related poverty and illness in the “developing world.”

One very effective tool employed by water providers in combating such shortages is the promotion of conservation. In essence, conservation – by reducing or eliminating waste - increases water availability without physically supplementing supply. That is, conservation encourages the “highest and best use” of water by stimulating responsible consumption and discouraging excessive, inefficient and/or irresponsible use.

Conservation programs have many components, including education, management practices, auditing and reporting, etc. But, an unfortunate reality is that many consumers (of all things and not just water) take notice only when you “hit ‘em in the pocketbook.” Thus, tiered “conservation rates” where customers who consume larger quantities of water are charged higher per-unit costs than those with less consumption are typical components of water conservation plans across the country, including in Texas.

One California lawsuit threatens to upend this practice, and the trial court has struck a significant blow to water utilities’ ability to use financial policies to reduce consumption and promote conservation.

In August 2012, an association of taxpayers and residents filed suit against the City of San Juan Capistrano, California seeking to prohibit that City from charging water rates that exceeded the City’s actual costs of providing water to its customers. In particular, the Plaintiffs sought (among other relief) to set-aside a tiered water rate structure that the City had employed since 1991 in an effort to promote conservation.

The Orange County Superior Court ruled against theCity, and ordered it  to abandon its rate structure and base all water rates on the cost of providing service.  The City has appealed, and the appellate court’s ruling is due any day now.  If the trial court’s opinion is upheld, the ability of California water utilities to promote conservation through the prices they charge will be significantly impacted.

Notably, the California case turns on interpretation of a state-specific proposition. However, the decision in that suit could create a nationwide ripple effect as water utility customers and their lawyers evaluate legal vulnerabilities of other conservation plans where pricing is used to advance conservation.