Supreme Court decision in Redding case could spell bad news for Modesto Irrigation District customer

A California Supreme Court decision favoring a Redding utility could boost the Modesto Irrigation District’s defense against a pending class-action lawsuit here.

The local lawsuit, alleging that MID overcharges electricity customers to subsidize farm water prices, was put on hold last year while both sides waited to see how state Supreme Court justices would rule in the Redding case, which had similar elements.

That ruling, handed down Monday, declared that money transfers from Redding’s electricity customers to the city’s general fund do not constitute a tax with rate increases requiring rate payer approval.

The decision should impact the MID case, said Grass Valley attorney Michael Colantuono, who defends both Redding and MID, as well as other utilities also awaiting Monday’s ruling.

He convinced the Supreme Court that Redding’s revenue from another source — electricity wholesales, as opposed to retail sales — more than covers the amount transferred to the city’s general fund. That concept lessens the contention that there is an illegal subsidy.

The same case will be made for MID, whose wholesaling of surplus electricity on the open market brings in several millions of dollars each year, Colantuono said. That money — not overcharging local power customers — covers the gap between MID’s true cost of delivering irrigation water to farms and the relatively low price paid by farmers, he said.

“Nobody’s overpaying, so plaintiffs (suing MID) should lose,” Colantuono said. “That’s our view. No doubt plaintiffs will have a different view.”

They do.

Attorneys for customers Andrew Hobbs and Dave Thomas, both Modesto residents, without elaborating say there are “factual distinctions” between the Redding and MID lawsuits that should help here. They hope a judge will certify a class of plaintiffs, which would allow about 100,000 families, stores and businesses in Modesto, Salida, Empire, Waterford and Mountain House as well as parts of Oakdale, Riverbank, Escalon and Ripon, to seek refunds.

“On the whole, the case in Modesto remains a strong case” despite the Redding ruling, said Glendale attorney Prescott Littlefield.

Attorney Walter McNeill, representing the losing side in the Redding case, agreed. Its ruling “isn’t any setback for the Modesto class-action lawsuit,” he said.

Seven pending lawsuits throughout California had awaited the outcome of Monday’s ruling, and Colantuono represents utilities in four of them: MID, Palo Alto, Glendale and Riverside. The other cases are in Alameda, Long Beach and Burbank.

“This affects every public power utility in the state,” Colantuono said.

The MID board has not raised electricity prices since an attorney in 2012 warned the board that doing so without letting customers vote might be illegal.