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Goodin MacBride Wins a California Supreme Court Victory

Regulatory Goodin MacBride attorneys persuaded the Supreme Court of California to set aside two decisions of the California Public Utilities Commission that improperly scrutinized a user fee imposed on water users by the Monterey Peninsula Water Management District, a government entity not regulated by the CPUC. The District is governed by a Board of Directors elected by water users on the Monterey Peninsula. This is the first full decision of the court reviewing a CPUC decision in 20 years.

Goodin MacBride partner Thomas J. MacBride, Jr., along with partner Suzy Hong and associate Megan Somogyi, represented the District. The District had imposed its statutorily-authorized user fee on ratepayers in the Monterey area for over 30 years until the CPUC issued the now-vacated decisions. Pursuant to the District’s enabling act, the user fee was collected through the bills of California-American Water Company and the revenues were passed on to the District to fund environmental mitigation and water supply programs administered by the District. Despite the CPUC’s lack of authority over the District or its user fee, the CPUC scrutinized the level and elements of the user fee, and ultimately rejected a proposal by the District, California-American Water Company, and the CPUC’s Office of Ratepayer Advocates under which the Water Company would simply continue its 30-year-old practice of collecting the District’s user fee on its water bills. In California, virtually all government-imposed utility taxes and fees are collected through the bills of public utilities whether government-owned (such as the Los Angeles Department of Water and Power, or East Bay Municipal Utility District) or privately owned (such as Pacific Gas and Electric Company, Southern California Edison Company, or California-American Water Company).

The Goodin MacBride team argued to the court that the CPUC had no authority to regulate the District, a government entity, or any fees the District imposed. The Goodin MacBride team also pointed out that the District was statutorily authorized to not only impose the user fee, but to collect it through the bills of a CPUC-regulated utility. Nothing in the CPUC’s authority under the California Constitution or the Public Utilities Code gave the CPUC jurisdiction to examine the District’s user fee and make determinations as to whether the fee was appropriate.

The Supreme Court agreed with the District. On January 25, 2016, in Monterey Peninsula Water Management District v. Public Utilities Commission, ___ Cal. 4th___, the court set aside the CPUC’s original decision refusing to permit California-American Water Company to continue collecting the user fee for the District, and the CPUC’s decision on rehearing that affirmed the original decision. The court ruled that the CPUC did not have authority under Public Utilities Code section 451 to scrutinize the user fee, nor could the CPUC examine the user fee on the theory that the District’s user fee was actually a “utility surcharge” that was in some fashion part of California-American Water Company’s own rates. The court was also unpersuaded by the CPUC’s argument that scrutiny of the user fee was proper because the Water Company was responsible for the mitigation programs if the District ceased to administer them; the court found the Water Company had no current obligations with respect to the mitigation programs.

The court’s opinion provides the first exposition of the scope of the CPUC’s jurisdiction in over two decades. The decision is significant. Again, the vast majority of large municipalities in California impose utility fees and taxes through the bills of CPUC-regulated utilities. It is now clear that the CPUC’s broad reach does not extend to scrutinizing, let alone rejecting, these government fees.

For more information please contact:
Megan Somogyi, Goodin, MacBride, Squeri & Day, LLP, San Francisco, California
415 392 7900 or msomogyi@goodinmacbride.com

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