The ruling calls on the city to recalculate its water rates for the 2006- 07 fiscal year -- when the money was collected -- and give customers either refunds or credits on future bills, The Times reported.
If upheld, the decision would represent a major victory for the Howard Jarvis Taxpayers Association, which said the state Constitution bars municipal utilities from overcharging ratepayers for water and then using the surplus to pay for other city programs.
"They can only charge those customers for the commodity that they're selling to them," Tim Bittle, the group's lawyer, said in remarks reported by The Times. Since the money has been collected over three years, more than $100 million could be due to ratepayers by the time the litigation is resolved, he said.
The Apartment Association of Greater Los Angeles also opposed the transfer.
The city has until Thursday to respond to the proposed decision.
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