UC Law Constitutional Quarterly


Deeba Fahami


Due to the severity of the recent drought, those residing in California have realized the devastating effects of climate change. As California continues to experience amplified weather conditions and diminished water supply, the state must adapt to drought conditions and mitigate the impacts of droughts. In order to do so, municipal water pricing mechanisms that send price signals to consumers to conserve water should be enforced to ensure the longevity of California's water supply. In particular, increasing block-pricing structures are a favorable market-based solution that disincentivizes heavy water consumption while allowing essential water use to remain affordable.

The California Constitution limits conservation water pricing to the "at-cost" requirement where municipalities must prove that rates reflect the actual cost of service. This Note looks at the constitutional and judicial limitations on municipal block-pricing structures in light of the recent Fourth District Court of Appeals decision, Capistrano Taxpayers Association, Inc. v. City of San Juan Capistrano, and concludes that the case casts constitutional doubt on tiered price structures because the opinion: (1) embarked on a lengthy and unnecessary discussion on the nexus of Proposition 218 and Article X, section 2 of the California Constitution; (2) relies on incomparable precedent in analyzing conservation prices and the at-cost requirement; (3) inconsistently uses the term "true cost;" (4) fundamentally fails to understand the nature and scope of the duties of water service providers; and (5) did not limit its discussion of penalty rates to the facts of the case.

Despite these shortcomings, block water pricing structures remain constitutional so long as the municipality proves this at-cost requirement at each corresponding level of usage. This Note looks at Capistrano's implications on municipal block-pricing structures, and explains how municipalities can continue to implement these pricing mechanisms within the judicial limitations set forth in Capistrano.