A potential class-action lawsuit accusing the Modesto Irrigation District of overcharging electricity customers to subsidize farmers is on hold.
Attorneys on both sides agreed to wait until the California Supreme Court rules on another case from Redding with similar elements. That could happen in coming months.
The Modesto lawsuit seeks refunds for perhaps 100,000 power customers — just about everyone paying for electricity in Modesto, Salida, Empire and Waterford as well as parts of Oakdale, Riverbank, Escalon and Ripon.
MID's profit from selling electricity has averaged more than $93 million a year since 2010. The district uses the extra money to repay debt, build reserves and cover the farm water subsidy because growers pay far less than MID's actual cost for delivering that water.
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Overcharging electricity customers might be legal under state law if voters were asked to approve the arrangement, but MID has not. Neither has the MID board — a majority of whose members are farmers — raised power rates in recent years, since an attorney in 2012 warned the board that doing so without letting customers vote might be illegal.
The Modesto and Redding cases both are based on interpretations of Propositions 218 and 26, respectively, approved by California voters in 1996 and 2010, both treating charges for government and utility services.
Appellate justices found that Redding collects some $6 million each year in what amounts to a hidden tax on electricity customers because the money is transferred to the city's general fund for other purposes. Attorney Walter McNeill, representing those challenging the transfer, had warned agencies not to depend on such cash cows, in a Modesto Bee article published a year before Hobbs and Thomas sued MID.
"These agencies that think they can get away with what they're doing are making a bad bet and jeopardizing their future," McNeill said then. "If they don't wean themselves off this bad money, they're going to be in a world of hurt when it goes away."
Opposing McNeill is attorney Michael Colantuono, who represents the city of Redding as well as MID in the local lawsuit.
The Supreme Court generally hears oral arguments about two years after receiving written briefs. That happened in July 2015 for the Redding case, but its oral arguments have yet to be scheduled.
Once the Redding decision comes down, things should move quickly for the MID case. The parties have agreed to confer within two weeks of the decision, including talking about how to notify all MID electricity customers since November 2015 that they will join the lawsuit unless they opt out. All farmers who buy MID water also will be excluded, court documents say.
Garth Stapley: 209-578-2390