New law signed by Gov. Newsom limits water/wastewater rate challenges

Water and wastewater agencies will now have more financial stability thanks to Governor Newsom signing Senate Bill 323 (Caballero) this week.

The new law requires any lawsuits challenging fees or charges for water or sewer service to be filed within 120 days of the effective date.

Water and sewer agencies for years have been exposed to lawsuits brought up to a decade after their rates were adopted, leading to a lack of budgetary certainty and placing pressure on water and wastewater agencies to modify their rates in light of the ever-changing standards following court rulings.

The law also requires challenges to be brought by way of a reverse validation action, a legal process most commonly used to challenge bond and other debt issuances. This is the very procedure the Legislature created to help ensure certainty in municipal finances, and so applies naturally to ensure certainty in agencies’ future revenue. Indeed, gas and electric rate challenges are already subject to validation, as are “connection” or “capacity” fees imposed by utilities. SB 323 makes the validation statutes applicable equally across all of these utility sectors and charges.

To take advantage of the protections provided by SB 323, retail water and wastewater agencies must include in their proposed rate increase notice a statement that there is a 120-day statute of limitations to challenge any new, increased, or extended fee or charge.

SB 323 does not apply to billing errors or overbilling.

The sponsor of the bill, the Association of California Water Agencies applauded Newsom signing the law.

“Simply put, this bill strikes a balance between protecting the rights of ratepayers and allowing public water and sewer agencies more financial certainty,” said ACWA Executive Director Dave Eggerton. “That security is essential in order for agencies to maintain a stable budget, fund critical infrastructure projects and provide reliable water and wastewater services to the public.”

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