Utility surcharges aren't 'taxes,' can't be challenged, appeals court says

A California appeals court ruling clarified that utility surcharges tied to a city franchise agreement are not “taxes” requiring voter approval. The case involved Annie Nguyen’s challenge to Los Angeles’ 2022 franchise agreement with Southern California Gas (SoCalGas), a 21-year deal with a franchise fee equivalent to 5.5% of gross receipts from natural gas sales. Nguyen claimed SoCalGas passed through 3.5% of that amount via a surcharge approved by the California Public Utilities Commission, and argued it was effectively a tax under a 2010 constitutional clause. A Superior Court judge, Lawrence Riff, granted summary judgment for the city, finding the charges fall under an exemption for fees tied to local government property use. The Second District Appellate Court panel, authored by Justice Kenneth Yegan and filed June 22, affirmed. It rejected Nguyen’s arguments about apportioning and factual disputes.