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My water district is using EPA's ETo (evapotranspiration) concept to set water budgets for retail billing. When water usage exceeds 2 x ETo x landscape area in a given month, then the HCF unit price jumps from $5.22 to $10.22. This practice in itself might actually be legal because a contract can set forth a formula for determining a price, rather than a particular dollar amount.

My question is whether the practice is still legal if the district chooses to use a proprietary formula for ETo, rather than the accepted CIMIS formula and publicly available data. For example, I was recently charged for 15 extra units at the higher price because the district used ETo=2.06 while CIMIS reported 2.60 for a nearby weather station.

When I provided the CIMIS data to the district, they said it "wasn't accurate" because CIMIS didn't consider factors like "local plant condition". While that may be the case, at least I showed my work. The district, on the other hand, said that all they could get was daily ETo values per grid cell (and, as it turns out, even those values yielded a higher budget than what was on my bill). They could not provide the "plant condition" data that they bragged about, or even basic temperature/humidity/radiation data that one might use to double-check the results.

Digging a little bit further, they are using a company called Hydropoint that is using patented formulas and interpolation techniques. Woah. If Hydropoint is so secretive with their data that multi-million-dollar water districts can't double-check it, then can this data legally form the basis for a contract, if I am not being told the actual budget value before purchasing the water?

Hydropoint advertises themselves as a water conservation company, and I'm sure that it would be legal to use them as such -- for the purpose of cutting your own water usage. But is it legal to use them in the way that my district is doing, to decide what their customers will pay, after-the-fact?

Furthermore, Hydropoint apparently makes their own irrigation controllers, which are being used by a city within my water district. Does this create a conflict of interest, since they then have an incentive to make unpredictable changes to their data, thereby making their own controllers (which have special advance and insightful access to the Hydropoint data) work better than any competitor's? And if so, doesn't this violate contract law's tenet that you must not interfere with the other party's ability to comply? How can I, the retail customer, comply with a budget that is (as noted in previous paragraphs) unpredictable, and is, furthermore, actually incentivized to be unpredictable?

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    I don't think there's a problem from contract law alone. It's perfectly legal even to contract to pay a price which nobody can determine at the time the contract is signed, e.g. "the prevailing market price for X according to the Wall Street Journal on such-and-such a date". That's how adjustable rate mortgages work, for instance. There doesn't have to be a deterministic formula, so long as all parties agree how it will be determined.
    – Nate Eldredge
    Commented Mar 19, 2021 at 4:28
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    That said, with an ordinary contract you can always choose not to enter into it if you don't like the method for determining the price, which is not so much true for water service. So there may be extra consumer protections in this case; I don't know.
    – Nate Eldredge
    Commented Mar 19, 2021 at 4:28
  • @Nate Yes, it's fine if the contract is based on something published in the Wall Street Journal. The problem here, is that, while there is an equivalent of a Wall Street Journal (namely, CIMIS) the district has decided to use something much more obscure instead. And they've done it for residential retail customers, who are least likely to have the means to obtain the more obscure data.
    – personal_cloud
    Commented Mar 21, 2021 at 3:40

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Any formula which meets the legal muster set forth in the prior Q&A you link to should be valid. If there are multiple reasonable formulas that can be used to allocate revenue to expenses, any reasonable formula available can be used, even if it is not the most accurate one or the "best" formula in some sense.

In the same vein, it isn't uncommon for banks to have contracts or promissory notes that provide for per diem interest in loans where interest is compounded monthly to be computed based upon 30 days months and 360 day years as a matter of contract, even though there are clearly more accurate rules which are available, simply because it provides rough justice and may be easier to apply logistically (e.g. that is what the bank's software could manage most easily back when computing power was expensive and scarce).

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  • That makes sense. So then what I'm wondering is, how can the proprietary formula be "reasonable". It is basically saying that you're supposed to regulate your water use based on data that can't be independently verified, and is hard to obtain. For example, a consumer-grade smart irrigation controller is going to take NWS and/or CIMIS data, not the Hydro Point data. No pure-play controller company is going to base their business on a relationship with a company like Hydro Point, so Hydro Point can charge whatever they want. Is it reasonable to assume consumers will pay for that data?
    – personal_cloud
    Commented Mar 19, 2021 at 19:10
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    “When computing power was expensive” and consisted of people with pencils and log-tables
    – Dale M ♦
    Commented Mar 19, 2021 at 21:34
  • @personal_cloud The Board has a strong presumption that it is acting in good faith and their judgment will be respected absent a showing otherwise (and sometimes even with a showing otherwise). Reasonable in this sense means it is at least a rough justice approximation of the thing it is trying to measure. Cost is irrelevant to a court and strictly for the Board to decide as a political question.
    – ohwilleke
    Commented Mar 19, 2021 at 21:56
  • @ohwilleke Yes, cost is a political question, but doesn't prop 218 also say something about that? I mean, the water district is supposed to be covering their own costs. They're not supposed to be imposing additional costs on customers by forcing them to buy access to more expensive data, or even by installing plants in certain "conditions" (whatever Hydropoint means by that) which are going to be more expensive than perfectly reasonable low-water plants that the landscape contractor would have otherwise selected? And they're certainly not supposed to be channeling irrigation controller sales.
    – personal_cloud
    Commented Mar 21, 2021 at 3:56
  • @personal_cloud A water district's costs are what it says its costs are. If it is spending the money on third-parties rather than compensation for directors or a controlling municipality it decides what it needs to do. If you don't like it, you find a way to get a different board in office, directly if it is elected, or indirectly, if it isn't. The case of some constituents thinking that a special district board is spending too much money is a generic one.
    – ohwilleke
    Commented Mar 22, 2021 at 20:02

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