## Facts

- The Town of Torrey operated a municipal culinary water system funded by connection fees and monthly usage charges, with different rates based on residential vs. commercial use and resident vs. nonresident status.
- In June 1989, Torrey adopted a moratorium on nonresident commercial hookups while continuing to provide residential hookups to nonresidents and both types of hookups to residents.
- In October 1989, Donna Sall (with Duane Platt) purchased property outside town limits and bought a $1,000 water connection under a written “Water Connection Agreement” signed by the mayor and attested by the town clerk.
- Plaintiffs began developing an RV park and sought a commercial one-inch service line; Torrey refused based on the moratorium and placed them on a priority list.
- In 1994, plaintiffs requested activation for residential use; Torrey conditioned service on plaintiffs extending the town’s six-inch main to their property at their expense, which plaintiffs did, and Torrey activated a three-quarter-inch residential connection.
- Torrey later proposed providing nonresident commercial service under a schedule charging higher connection and usage rates to nonresidents than residents, tied to planned system improvements and financing.
- Plaintiffs objected to the higher nonresident commercial rates but operated the RV park using the residential connection.
- Torrey terminated plaintiffs’ water service, asserting plaintiffs were using a residential hookup for a commercial facility and refusing the applicable commercial terms.
- Plaintiffs sued seeking to invalidate the rate schedule as discriminatory and to obtain injunctive relief and damages.

## Issues

1. Whether a municipality may lawfully charge nonresident water users higher connection fees and monthly rates than similarly situated resident users.
2. Whether Torrey’s rate schedule and its termination of plaintiffs’ service were arbitrary, discriminatory, or unreasonable under Utah law.

## Decision

- The Utah Supreme Court affirmed the district court’s judgment for Torrey.
- The court held Torrey’s rate schedule imposing higher charges on nonresidents was valid and enforceable.
- The court concluded plaintiffs failed to show the resident/nonresident classifications or the resulting rates were arbitrary, capricious, or unreasonable.
- The court upheld Torrey’s enforcement of its classifications, including termination of service when plaintiffs used a residential hookup for commercial operations while refusing the applicable commercial terms.

## Legal Principles

- A municipality operating a water system has broad discretion to set rate classifications, including distinctions between residents and nonresidents, because it generally has no duty to provide utility service outside municipal limits.
- Municipal rate-making is reviewed deferentially; a rate classification is presumed valid and will be set aside only if shown to be arbitrary, capricious, unreasonable, or lacking a rational basis.
- Higher nonresident rates may be justified by rational cost-allocation considerations, including residents’ tax contributions and nonresidents’ lack of participation in municipal financing.
- Differential treatment is not unlawful discrimination if the classification is reasonable and applied uniformly within each category.
- A water-connection agreement for a residential hookup does not, by itself, guarantee future commercial service at resident rates or immunize a customer from later-applied, lawfully adopted classifications and rates.

## Conclusion

The court upheld Torrey’s authority to charge nonresidents higher water rates than residents and found Torrey acted within its discretion in enforcing its residential/commercial classifications, including terminating service when plaintiffs used a residential connection to operate a commercial RV park without accepting the applicable nonresident commercial terms.


Platt v. Town of Torrey, 949 P.2d 325 (Utah 1997)