Monterey Peninsula Water Management District (“Monterey”)

62 Cal. 4th 693 2016 Cal. LEXIS 45 (January 25, 2016)

In its first full opinion reviewing a Commission decision in twenty years, the California Supreme Court, unanimously, reversed the Commission decision under review.  (Pursuant to Section 1756(f) review of a Commission decision in a non-adjudicatory case involving a water utility could only be sought in that court.)  The Court “set aside” two Commission decisions which had effectively prevented the Petitioner, a local government entity (“District”), from collecting a user fee through the bills of California-American Water Company (“Cal-Am”), a Commission regulated water company.  For over thirty years, the revenues collected by the District through Cal-Am funded environmental mitigation and water supply programs administered by the District.  In 2009, the Commission began to question the level of the fee and ultimately refused to permit Cal-Am to continue to collect it on behalf of the District.  The Commission initially asserted that it was vested with the authority to review  the District’s fee pursuant to Section 451 which requires that “all charges demanded or received by any public utility” for any product or commodity furnished, or any service rendered, be just and reasonable.”  After the Court granted review, the Commission abandoned that position and instead justified its scrutiny of the District’s user fee on the fact that the user fee funded mitigation programs undertaken by the District that the Commission stated were legally the responsibility of Cal-Am.  The Court, however, pointed out that Cal-Am only became legally obligated if the District elected not to undertake those programs.  The decision is largely a straightforward application of County of Inyo (Para. 48).  It does not break any new ground legally although it is worth noting the Court’s holding that Section 451, standing alone, does not vest the Commission with any jurisdiction with which the Commission is not already vested; the Court held instead that (1) the Commission has the power to regulate privately owned utilities, (2) it may not regulate government owned utilities absent express statutory authority and (3) “Section 451 cannot fill that gap” (provide the “express statutory authority”).  Monterey is a significant opinion, principally because (1) it is the first time in over twenty years the Court has spoken on the limits of the Commission’s jurisdiction, and (2) the vast majority of large municipalities in California collect utility fees and taxes through the bills of Commission-regulated utilities.  Monterey confirms that the broad reach of the Commission’s jurisdiction does not extend to reviewing, let alone rejecting, these government fees.  Finally, one cannot overlook the significance of the fact that the court granted review; such grants are rare but a strong case, particularly one grounded in jurisdiction, will draw the Court’s attention.

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