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2019 IID - Opposition Letter re AB 854 to Assembly Member Mayes— www.iid.com POWER century of service. Since 1911 Mailed and via e-mail to: Assemblymember Mayes c/o angela.gualley@as_m.cagov February 27, 2019 The Honorable Chad Mayes California State Assembly Assembly Room Number 4098 Sacramento, CA 95814 RE: AB 854 - Strong Opposition Dear Assemblymember Mayes: The Imperial Irrigation District (IID) has taken an opposed position to Assembly Bill 854. It is our contention that you are seeking to fix something that has demonstrated effectiveness over the past 85 years. IID remains confident of its socially conscious, reliable electric service in the Coachella Valley at half the rates of neighboring private electric service providers. IID's performance on behalf of its customers provided electric services has demonstrated efficient organization and management, and has benefited the public good. AB 854 is turning to the California Legislature to resolve a legal dispute between Riverside County and IID after a Los Angeles County Superior Court found that prior related actions by the Riverside County Board of Supervisors likely constituted an unconstitutional usurpation of the California Legislature's law -making authority. (See enclosed Order) More importantly, AB 854 would allow Riverside County voters, who do not reside within the IID, and do not buy electricity or water from IID, to vote for and serve as members of its Board of Directors. The residents of Riverside County are served by their own water districts and electric companies separate and apart from IID. It is helpful to understand the historical circumstance that led to the current configuration of IID and the water districts and electric companies that serve Riverside County. IID was formed in 1911, as an irrigation district under what is referred to today as the Irrigation District Law in the California Water Code, to provide water to Imperial Valley residents. Coachella Valley Water District (CVWD) was formed in 1918, as a county water district under what is referred to today as the County Water District Law in the IMPERIAL IRRIGATION DISTRICT • P.O. BOX 937 • IMPERIAL, CA 922S1 The Honorable Chad Mayes February 27, 2019 Page 2 of 5 California Water Code, to provide water in the Coachella Valley within Riverside County. In the 1920s, a private electric company served electricity to the inhabitants within the boundaries of both IID's and CVWD's territories at a high cost to the residents. In 1926, in order to secure cheaper sources of power, IID authorized an investigation into the possibility of developing hydroelectric power along its canal system. In 1928, the U.S. Congress enacted the Boulder Canyon Project Act authorizing the development of the Hoover Dam and allowing IID and CVWD to develop facilities for generating and marketing electric power from the gravity fall of water through the canal system to these areas. In 1932, IID and the United States executed a contract under the Boulder Canyon Project Act for the development of the All -American Canal and the Imperial Dam, which diverts water from the Colorado River. The 1932 agreement set in place the boundaries of IID's water service territory and allowed IID to use all the power generation opportunities not reserved by the U.S. created by the canal system. It also allowed for CVWD to annex to IID and for IID to provide water to the Coachella area. CVWD chose not to annex to IID and challenged IID's contract seeking its own contract with the United States for the development of the Coachella Canal branching off the All - American Canal to serve the Coachella Valley. To resolve this dispute, IID and CVWD entered into the 1934 Compromise Agreement (1934 Agreement"). Under the 1934 Agreement, CVWD agreed to subordinate its water rights to IID and the parties planned to enter into a 99- year lease to address the rights CVWD would have in the hydroelectric power potential of the Coachella Canal. (A copy of the 1934 Agreement is attached.) While the Coachella Canal was eventually built without any drops and, therefore, there was never any hydroelectric power opportunities from it, IID has paid a significant amount of money to CVWD from energy revenues pursuant to the 1934 Agreement. Of course, should AB 854 be enacted and allowed to stand, the induced breach of contract would certainly relieve the IID from paying the portion of revenue. In 1934, IID also began to acquire diesel electric generators and to construct a distribution system in the Imperial Valley. In 1943, IID decided to expand its power business to the Coachella Valley when it acquired the electric system and properties of the California Electric Power Company in Imperial County and parts of San Diego and Riverside Counties. IID and California Electric Power Company entered into a purchase and sale agreement conditioned upon IID receiving appropriate regulatory approvals and agreeing not to compete in specified areas. Unlike CVWD, as an irrigation district under the California Water Code sections 22115 and 22120 (adopted in 1943), IID has the specific power to generate, transmit, distribute and sell electricity within and outside its boundaries. The purchase contract with California Electric Power Company determined the electric service territory boundaries for 25 years. Since then IID's electric service area has been formalized further by a succession of boundary service agreements with Southern The Honorable Chad Mayes February 27, 2019 Page 3 of 5 California Edison, a successor to California Electric Power Company, which has been approved by the California Public Utilities Commission. The agreements with CVWD and SCE are expressly allowed by federal law, long- standing agreements involving water rights, among other things, and state law under which the California Legislature expressly authorizes irrigation districts such as IID to "sell, dispose of, and distribute electric power for use outside of its boundaries." (Cal. Wat. Code §22120) AB 854 faces a number of additional legal obstacles of which you should be aware. In addition to impairing historical contractual and legal obligations of CVWD and IID, AB 854 arguably is preempted by federal law. The 1934 Agreement between CVWD and IID is integral to resolution of legal disputes involving water and hydroelectric power rights. As such, it was an organic part of the whole federal legislative effort to control and mediate the differing competing interests involving the Colorado River. This extensive federal interest was acknowledged by the Supreme Court in Arizona v. California (1963) 373 U.S. 546, 588. The Supreme Court elaborated on federal involvement in California v. United States (1978) 438 U.S. 645, 673-74: "...because of the unique size and multistate scope of the [Boulder Canyon] Project, Congress did not intend the States to interfere with the Secretary's power to determine with whom and on what terms water contracts would be made." AB 854 would abrogate the IID's contracted rights in its 1932 agreement and under the 1934 Agreement. This abrogating effect would not only impact IID, but all federal contracting agencies with rights to the Colorado River within California. The legal ramifications of AB 854 would create a ripple effect of uncertainty to numerous subsequent federal and state contracts involving the Colorado River and IID's water rights, as well as IID's legal obligations to transfer water to CVWD, San Diego County Water Authority and the Metropolitan Water District of Southern California, undermining any stability to California's water supplies. In addition, AB 854 raises First Amendment issues. It overrides Imperial Valley residents' electoral control over the IID Board of Directors and it arguably denies the residents of Imperial Valley their right to association. The Supreme Court has recognized: "The freedom to join together in furtherance of common political beliefs necessarily presupposes the freedom to identify the people who constitute the association to those people only. That is to say, a corollary of the right to associate is the right not to associate." Cal. Democratic Party v. Jones (2000) 530 U.S. 567, 574. The Supreme Court recognized an association's right to "limit control over their decisions to those who share the interests and persuasions that underlie the association's being." Id. at 574. AB 854 denies the residents of Imperial Valley that right. The Honorable Chad Mayes February 27, 2019 Page 4 of 5 AB 854 also violates the "one person, one vote" principle required by the Fourteenth Amendment. Diluting the rights of Imperial Valley residents by adding a greater number of Coachella Valley residents to the voting roster fails under the Fourteenth Amendment's principle of "one person, one vote." Reynolds v. Sims (1964) 377 U.S. 533, 538; Assembly v. Deukmejian (1982) 30 Cal. 3d 638, 659. "Overweighting and overvaluation of the votes of those living here has the certain effect of dilution and undervaluation of the votes of those living there... weighing the votes of citizens differently... merely because of where they happen to reside, hardly seems justifiable." Reynolds, 377 U.S. at 563. (emphasis added). AB 854 deprives the residents of Imperial Valley that right. We have heard that the intent of AB 854 is to redress the idea that IID's electrical service in the eastern Coachella Valley is akin to "taxation without representation." Just so the record is correct, a charge for electrical service is a fee and not a tax. See, Cal. Const. art. XIII §1 (e), [ defining fees]; Isaac v. City of Los Angeles (1998) 66 Cal. App. 4th 586, 597-98. The courts have also held that fee paying ratepayers are not entitled to voting rights when paying fees. Bay Area Cellular Telephone Co. v. City of Union City (2008) 162 Cal. App. 4th 686, 693. If IID were a private electric company, such as Southern California Edison which also serves the Coachella Valley and large areas of Riverside County, no such complaint would be heard from customers. Finally, and perhaps most troublesome of all the legal obstacles AB 854 faces is the change it seeks to achieve in the ownership of IID's water rights. IID has defended its water rights for more than seventy years against various attacks that have led to decisions by the United States Supreme Court affirming the nature of IID's water rights. From Arizona v. California (1963) 373 U.S. 546 to Bryant v. Yellen (1980) 447 U.S. 352 IID has successfully defended its water rights. Even today, IID is involved in litigation defending its Colorado River water rights. AB 854 would transfer control of the IID Board of Directors to Riverside County, a political subdivision of the state holding no water rights of its own, thereby giving full control over IID's water rights to board members elected by voters from Riverside County. Neither the IID board nor its residents can allow this to happen. Indeed, a cynical view would lead one to believe that such is the real intent of this proposed legislation. Perhaps it is an unintended consequence of AB 854, nonetheless it is a real threat and unacceptable. In short, IID has done nothing more than what is in the best interest of its residents and customers and fully authorized by federal and state law, which has been memorialized in contracts among several parties. And both IID and CVWD are bound by federal law to honor the 1934 Agreement. AB 854 is more than the shoehorning of Coachella Valley or Riverside County residents onto IID's Board. Rather, it seems a precursor to The Honorable Chad Mayes February 27, 2019 Page 5 of 5 obtain leverage over IID's water rights through a forced renegotiation of the 1934 Agreement. IID hopes that upon review of these facts and law, you reconsider the pursuit of AB 854 In the spirit of continued cooperation on issues of existential importance, IID urges your office to withdraw AB 854, and instead, engage IID in a productive discussion of Coachella Valley ratepayer concerns. Very truly yours, /Fank A. swalt, IIIral Counsel Attachments: LA County Superior Court Order Tentative Order 1934 Compromise Agreement