SoCalGas and the City of Los Angeles Reached a Settlement in Class Action Lawsuit

A settlement has been reached with the City of Los Angeles (the “City” or “Defendant”) in a class action lawsuit with Southern California Gas Company (“SCGC”) that claimed that the City improperly included in its natural gas utility user tax (“GUT”) calculation the Service Establishment charge (“SEC”) and the Customer Charge.

The City denies the allegations, and the Court did not issue a final decision in favor of either Plaintiffs or Defendant. Instead, the parties agreed to a settlement to avoid the expense and risk of continued litigation.

As part of the settlement, the City must stop imposing the on the SEC and Customer Charge 70 days after the effective date of the settlement, unless such a tax is approved by applicable voters in the future, if ever.

This change will result in an estimated $8.2 million of tax savings per year. The City has also agreed to create a Settlement Fund of $32,500,000 plus 75% of any tax remitted by SCGC on the SEC and Customer Charge after May 1, 2021. After deducting settlement administrative expenses, court approved service awards, payment to non-profit charitable organizations (Alliance for Children's Rights and The Utility Reform Network), and court approved attorneys' fees and expenses, the remaining settlement fund will be distributed to SCGC customers by applying a reduced GUT rate.

The hearing is set to take place on March 17, 2021. For more information about the case, visit https://www.gastaxsettlementla.com.

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