Alameda County Flood Control & Water Conservation District v. Department of Water Resources
152 Cal. Rptr. 3d 845
Cal. Ct. App.2013Background
- California SWP contracts fund water delivery and power; Oroville power revenue credits reduce Delta Water Charge; DWR administers power rates under statutes; long-term contracts predated voters’ approval; 1967 Power Sale Contract involved utilities buying Oroville power for 50 years; contract language uses “total revenues” and omits market-value language; parties litigated whether market-rate valuation is required.
- Trial court held contract ambiguous on “total revenues” and resolved against plaintiffs; court found resale profits not included and relied on practical construction; 20-year performance thereafter supported DWR’s administration; judgment upheld on interpretation.
- DWR cancelled Power Sale Contract in 1983, replacing with State Power Contract; Project Order No. 36 credits Delta Water Charge by $14.65M plus actual OMP&R costs; power sales and system pool concept offset transportation costs.
- Plaintiffs filed 2005 suit alleging improper crediting of revenues to Delta Water Charge; trial court issued interlocutory judgment and later judgments finding no breach; appellate briefing addressed market-rate interpretation and extrinsic evidence.
- This appeal affirms trial court’s ultimate conclusions on contract interpretation and bad-faith claim; cross-appeal is moot; issues center on market-rate interpretation and treatment of resales within a system pool.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether article 22(a) requires market-rate credit | KCWA: market-rate credit required | DWR/Interveners: total revenues not market-based | Not required; contract uses total revenues not market value |
| Whether resales of system pool power affect Delta Water Charge | Resales should be creditable as revenues | Resales offset only Transportation Charge; not Delta Water Charge | Resales not included in total revenues used to reduce Delta Water Charge |
| Whether DWR acted in bad faith | DWR manipulated valuation to favor So. California | Discretion allowed by statutes; no arbitrary conduct | No bad faith; conduct within statutory discretion |
| Whether extrinsic evidence creates ambiguity | Contract language ambiguous due to contracting principles | Extrinsic evidence insufficient; language unambiguous | No latent ambiguity; extrinsic evidence insufficient |
Key Cases Cited
- Bay Cities Paving & Grading, Inc. v. Lawyers’ Mutual Ins. Co., 5 Cal.4th 854 (Cal. 1993) (contractual ambiguity analysis requires context and meaning either way)
- Marquardt, Metropolitan Water Dist. v. Marquardt, 59 Cal.2d 159 (Cal. 1963) (state to make discretionary determinations about water charges)
- Riverside Heights Water Co. v. Riverside Trust Co., 148 Cal. 457 (Cal. 1906) (extrinsic evidence limited in assessing mutual intent)
- Winet v. Price, 4 Cal.App.4th 1159 (Cal. App. 1992) (latent ambiguity standard; substantial evidence review of extrinsic conflicts)
- Goodman v. County of Riverside, 140 Cal.App.3d 900 (Cal. App. 1983) (contractual uniformity and public contract interpretation context)