In South San Joaquin Irrigation District v. The Superior Court of San Joaquin County, (— Cal.Rptr.3d —, 2008 WL 1801201, Cal.App. 3 Dist., April 22, 2008), a California Court of Appeal considered whether an irrigation district that provided wholesale electric service needed approval from the Local Agency Formation Commission before adding retail electric to the services it provides. The Court of Appeal held that approval is required because retail electric service is a different class of service than wholesale electric service.
Facts
The South San Joaquin Irrigation District (“District”) is a special district that provides irrigation water service, wholesale electric generation, and electricity marketing services. In 2005, the District developed a plan to increase the services it offered by providing retail electric service in its existing territory. The District submitted an application to the San Joaquin Local Agency Formation Commission (“LAFCO”) to proceed with its retail electric service plan. The application stated the District needed approval “to provide a new service.” LAFCO denied the District’s application.
The District filed a lawsuit against LAFCO seeking a judicial determination that it did not need LAFCO’s prior approval to provide retail electric service. The trial court found that the District was required to seek approval from LAFCO and granted judgment in favor of LAFCO. The District petitioned the Court of Appeal for a writ of mandate or prohibition to vacate the trial court’s order.
Decision
The Court of Appeal denied the District’s petition to vacate the trial court’s order. The court found that the District needed LAFCO’s approval to provide retail electric service.
In 2001, the California Legislature added Government Code section 56824.10, which provides, “Commission proceedings for the exercise of new or different functions or classes of service by special districts may be initiated by a resolution of application in accordance with this article.” Section 56824.12 provides that a special district must present a proposal to provide a new or different service that must include detailed information about its plan. Pursuant to section 56824.14, LAFCO shall review and approve or disapprove “proposals for the establishment of new or different functions or class of services within the jurisdictional boundaries of a special district after a public hearing called and held for that purpose."
The District asserted that the above provisions are merely permissive. The court rejected this argument. “There would be no point in establishing a detailed, timely, procedure for [LAFCO] approval if a disappointed applicant could simply disregard the [LAFCO’s] decision and proceed with its plan to provide a new or different service.”
The court also rejected the District’s argument that sections 56824.10 and 56824.14 only applies when a special district is already subject to regulation by LAFCO. Here, LAFCO had never adopted regulations regarding District. The court concluded there is nothing in legislation providing “that special districts must be subject to regulation by the [LAFCO] for its provisions to apply.”
After reviewing the legislative history, the court concluded that its procedures “are required when a special district seeks to exercise latent powers by providing new or different services.” The District then asserted that its plan to provide retail electric service is not a new or different service from its current provision of wholesale electric service and, therefore, there is no need for LAFCO’s approval. The District contended Water Code section 22115, which grants the right to provide electric service to irrigation districts, makes no distinction between retail and wholesale electric service. The court rejected the District’s argument finding that retail electric service is a different class than wholesale service because it requires a different distribution and customer base. Furthermore, wholesale electric service is regulated by a federal commission and retail electric service is regulated by a state commission.
The court concluded that, when District planned to expand its services to provide retail electric service, it sought to provide a new or different class of service, therefore, the District, needs approval from LAFCO.