The Supreme Court today granted review in Dreher v. City of Los Angeles Department of Water and Power. It limited the issue for briefing to: “Do the methods adopted by the City of Los Angeles to set water budgets and allocate water supply costs result in tiered water rates that violate the proportionality requirement of article XIII D, section 6, subdivision (b)(3) of the California Constitution?” (Link added.) The case concerns in part an agency’s ability to set tiered rates to encourage water conservation.
Section 6(b)(3) requires that any agency fee or charge imposed on a parcel “shall not exceed the proportional cost of the service attributable to the parcel.”
In an 83-page published opinion, the Second District, Division One, concluded regarding the limited issue: “The City was required to prove that the rates it charged were proportional to the cost of service attributable to the parcel. It was not required to meet the [plaintiffs’] proposed standard of proving it determined the exact water supply costs for each individual parcel by, among other things, tracing each of its four separate sources of water from its genesis to the parcel where it was used.”
Division One disagreed with the 2-1 decision of the Fourth District, Division Two, in Patz v. City of San Diego (2025) 113 Cal.App.5th 225. It said the Patz majority was wrong that, “to comply with section 6(b)(3), a water agency must have a cost based justification for where it sets tier breakpoints (e.g., that it costs the agency more to supply the next HCF of water that places the customer in the higher tier).” (Division One said “HCF” is “the unit price of each source of supply per hundred cubic feet.”)
Division One rejected the “assertion that basing tier breakpoints on conservation measures or general assumptions about customers’ water use violates section 6(b)(3).” It said “[a]n agency may consider its water conservation obligations and goals in setting its water rates” if its conservation goals are not used “as a justification for imposing rates that exceed the cost of service attributable to a parcel.”
The Supreme Court denied review in Patz, but Justice Joshua Groban recorded a vote to grant. (See here.)
