Judge: MID overcharged 122,000 electric customers to help farmers. What happens next?
A judge has ruled in favor of two Modesto Irrigation District customers who allege the utility has overcharged its electric customers to provide a subsidy to its farm water prices.
Stanislaus Superior Court Judge Roger M. Beauchesne issued his decision Dec. 30 in the lawsuit filed by Andrew Hobbs and Dave Thomas. Each sued the MID in 2016, and their lawsuits were combined into one.
The lawsuit is being litigated in two phases.
Beauchesne ruled on the first phase, which was to determine whether the publicly owned MID was overcharging its roughly 122,000 electric customers to provide a subsidy for its roughly 3,100 irrigation water customers, who farm 58,000 acres.
Beauchesne ruled the subsidy was an illegal tax under California law because the MID had not sought voter approval for electric customers to subsidize irrigation water customers.
The second phase will consider the remedy, which could include the MID reimbursing its electricity customers for some of the years they were overcharged.
Attorneys for Hobbs and Thomas allege in court documents that the MID’s electric customers have subsidized irrigation customers by more than $10 million annually.
Prescott W. Littlefield, one of the attorneys who represents Hobbs and Thomas, said it was too soon to say the amount of reimbursement and over how many years that could be sought as well as additional remedies.
No date has been set for legal proceedings on potential remedies, but Littlefield estimated it could take a year to reach a conclusion on the remedies once the proceedings start.
Another judge for remedy phase
“I think the judge’s opinion was thoughtful and accurate and it’s a step in the right direction,” Littlefield said. “There is still a lot of work to be done in this case before we have a complete resolution on the issues.”
Another judge will oversee the remedy phase. Beauchesne wrote in his ruling that he retired as of Dec. 31, the same day his ruling was filed.
MID spokeswoman Melissa Williams provided this statement in an email: “We’re still reviewing the court’s decision with our legal counsel and evaluating next steps.
“We continue to believe that our rates appropriately recover the cost of the services we provide. We look forward to judicial guidance in this unsettled area of the law.“
Littlefield said Hobbs would not comment for this story.
But Thomas — the former Stanislaus Taxpayers Association president and who now lives out of state — said in an email: “... Stanislaus County is one of the poorest counties in California and America. MID, governed by the very farmers who benefit from the victimization of the poor, is grossly negligent in its obligation to fairness and honesty to its owner-customers.”
Wholesaling surplus electricity
The MID does not dispute that what it charges for irrigation water is less than its costs to provide it, according to court documents. But an attorney for the utility has said the utility does not overcharge electricity customers to make up the shortfall.
Instead, the attorney has said, the MID uses money it makes through the wholesaling of surplus electricity on the open market to cover the gap between the MID’s true cost of delivering irrigation water to farms and the relatively low price paid by farmers.
But Beauchesne in his ruling wrote that while the MID made a compelling argument it failed to provide specifics to back up its assertions.
“The primary basis for the Court’s decision is the ubiquitous absence of actual costs throughout MID’s arguments,” he wrote.
For instance, the judge cited this statement from attorneys for Hobbs and Thomas: “The record in this case reveals a massive multimillion dollar hole in MID’s irrigation budget, with a corresponding electric utility profit.
“... It (MID) utterly failed to justify its $2.6 million (electric utility) profit and $7.6 million Inter-Utility Transfer, instead hastily pointing to its policies and procedures, but never tying these explicit subsidies to any actual costs.”
Beauchesne also wrote his decision applies to the MID and not the farmers who rely upon it for irrigation water. “Farmers are the salt of the earth who encounter drought cycles, inclement weather, market fluctuations, and other impediments.”
This story was originally published January 7, 2020 at 12:26 PM.
