Chico Times

Four plaintiffs are suing the California city of Gridley over allegations residents are paying higher electric bills without higher operating costs and the city is funneling the money into its general fund in violation of state law.

Gridley is a community of 7,000 in the Sacramento Valley. The town is also an electric provider to residents.

The suit filed March 1 by the McNeil Law Office (Nevada City) in Butte County Superior Court asks for damages, injunctive relief and charges unjust enrichment against Gridley city officials. The plaintiffs are Scott McMillan, Michael McMillan, Allison Woolbert and Tyrell Ford.

Roy Shepherd, a Gridley resident, told the Chico Times the alleged illegal money diversion had been going for years until it was discovered in 2019.    

“That is where I became involved with this issue and warned the Gridley City Council they were on thin ice,” Shepherd said.

The plaintiffs allege that the city is limited by the California State Constitution, mandating that electric rates should not exceed the reasonable operating costs to local government and that Gridley is using the rates in whole or part for “general revenue purposes [general fund]."

Further, they allege the imposition of a tax must be approved by a vote of residents.

According to a report in the Gridley Herald, residents are paying what amounts to a general fund tax at roughly 20% of the rates in their monthly electric bills. There are 2,250 household accounts in the community.

Shepherd said the city administrator and the electric department supervisor propose rate changes, which are then approved by the city council. However, he added that these positions have been something of a revolving door in recent years.

“The utilities director has changed four times in the last six years,” he said. “I have no idea who is presently that person. Likewise we now have no permanent city administrator.”

When asked who should be held accountable, Shepherd said the administrator, the Gridley Electric Department and the city council, as well as the city attorney, approved the rate diversions.

“They are all aware of the issue, but take the stance that they will keep it going until someone stops them,” Shepherd alleged.

Last August the city of Redding won a case involving the transfer of money from its electric utility to the city in the California Supreme Court. However, Shepherd said the funding in that case was generated outside the (electric) rate structure.

“Gridley funds 100% with sums paid by utility customers, payment of fees for electric service,” he said.