Court Opinion

ID: 4668938
Source: CourtListenerOpinion
Date Created: 2021-03-17 20:02:47.977496+00
Date Added: 2024-06-11T08:03:05.983439
License: Public Domain

Filed 3/17/21

                CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                SECOND APPELLATE DISTRICT

                       DIVISION THREE

CITY OF TORRANCE,                   B300296

    Plaintiff and Appellant,        Los Angeles County
                                    Super. Ct. No.
    v.                              19STCV10249
SOUTHERN CALIFORNIA
EDISON COMPANY,

    Defendant and Respondent.

      APPEAL from a judgment of the Superior Court of Los
Angeles County, Barbara M. Scheper, Judge. Reversed and
remanded with directions.
      Colantuono, Highsmith & Whatley, Michael G. Colantuono,
John L. Jones II, Jin Soo Lee, Matthew C. Slentz; Patrick Q.
Sullivan and Tatia Y. Strader for Plaintiff and Appellant.
      Steptoe & Johnson, Laurie Edelstein, P. Casey Matthews;
Patricia Cirucci, Lisa DeLorme and Mark Rothenberg for
Defendant and Respondent.
            _______________________________________
                         INTRODUCTION

        Southern California Edison Company (Edison) is the
exclusive provider of electricity to residents and businesses
located in the City of Torrance (Torrance). Pursuant to section
225.1.4 of the Torrance Municipal Code1 (electricity tax
ordinance), consumers of electricity must pay Torrance a tax on
the charges for electricity and ancillary services they use
(electricity users’ tax). Edison is required to collect this tax from
consumers and remit it to Torrance.
        Torrance filed this lawsuit against Edison after it
discovered that Edison had calculated the electricity users’ tax as
a percentage of the net amount Edison was billing its consumers,
i.e., the charges for electricity and other services less an annual
credit (the IA credit) relating to state-wide greenhouse gas
emissions policy.2 Torrance, however, contends that the
electricity tax ordinance does not permit Edison to apply the IA
credit to reduce electricity consumers’ tax base, thereby reducing
Torrance’s tax revenue. Torrance’s complaint seeks declaratory
relief concerning the interpretation and application of the
electricity tax ordinance and asserts that Edison failed to comply
with the ordinance by not collecting the proper amount of
electricity users’ tax from consumers. Torrance also seeks to

1 All undesignated statutory references are to the Torrance Municipal
Code, available at  [as
of Mar. 8, 2021], archived at .
2The California Public Utilities Commission (Commission) determines
the amount of the IA credit. For purposes of administrative
convenience, Edison disburses the IA credit as a credit on an electricity
consumer’s bill, as directed by the Commission.

                                   2
recover the unpaid taxes, together with penalties and interest,
from Edison.
       The trial court sustained Edison’s demurrer to Torrance’s
original complaint without leave to amend and entered a
judgment of dismissal. The court found Edison had calculated the
electricity users’ tax properly and, in addition, Torrance’s claim to
recover unpaid taxes from Edison (as opposed to electricity
consumers) failed as a matter of law. We agree with Torrance
that the electricity tax ordinance cannot reasonably be construed
in the manner proposed by Edison and adopted by the court. We
agree with Edison, however, that Torrance cannot recover unpaid
taxes from Edison and must instead amend its complaint to
include electricity consumers as defendants. Accordingly, we
reverse and remand for further proceedings.

       FACTS AND PROCEDURAL BACKGROUND 3

1.    The Electricity Users’ Tax
       Torrance, a charter city, imposes a number of utility-
related taxes on its residents including taxes on telephone
communication services, natural gas, water, cable television, and
electricity. The electricity tax ordinance provides:
       “a) There is hereby imposed a tax upon every person in the
City using electrical energy in the City. The tax imposed by this
Section shall be at the rate of six (6) percent of the charges made
for such energy; provided, however, that effective July 1, 1991,
the tax imposed by this Section shall be at the rate of six and

3Consistent with the standard of review, we accept as true all facts
alleged in the operative complaint.

                                   3
one-half (6½) percent of the charges made for such energy by an
electrical corporation franchised to serve the City and shall be
paid by the person using such services. The tax applicable to
electrical energy provided by a nonutility supplier shall be
determined by applying the tax rate to the equivalent charges the
service user would have incurred if the energy used had been
provided by the electrical corporation franchised by the City.
Nonutility suppliers shall install and maintain an appropriate
utility-type metering system which will enable compliance with
this Section. Charges as used in this Section shall include
charges made for 1) metered energy, and 2) minimum charges for
service, including customer charges, service charges, demand
charges, standby charges and annual and monthly charges.
       “b) As used in this Section, the term ‘using electrical
energy’ shall not be construed to apply to the storage of such
energy in a battery, or the use thereof in a motor vehicle or other
device apart from the premises where the battery was charged;
nor shall the term include the mere receiving of such energy by
an electric public utility or governmental agency at a point within
the City for resale.
       “c) There shall be excluded from the base on which the tax
imposed in this Section is computed, charges made for electricity
used in the production or distribution of water.
       “d) There shall be excluded from any tax imposed in this
Section, an amount equal to the amount of any Utility User’s Tax
paid by the nonutility supplier for natural gas used as fuel in the
production of electricity.
       “e) The tax imposed in this Section shall be collected from
the service user by the person supplying such energy. The tax
shall be self-imposed by nonutility suppliers as to their own use.

                                4
The amount of tax collected or self-imposed in one (1) month shall
be remitted to the Director on or before the 20th day of the
following month.”
       Edison is the investor-owned utility serving electricity
consumers in Torrance under a grant of franchise. As such, it is
required to collect the electricity users’ tax and remit all amounts
collected to Torrance. (§ 225.1.4, subd. (e).)
2.    The Industry Assistance Credit
      In September 2006, the Legislature adopted the Global
Warming Solutions Act of 2006 (“Act”), now codified at Health
and Safety Code section 38500 et seq. To implement the
Legislature’s stated goal of reducing statewide greenhouse gas
emissions, the California Air Resources Board has developed a
variety of programs including the Greenhouse Gas Cap-and-
Trade program—a regulated marketplace in which greenhouse
gas allowances (permits to emit an allotted amount of greenhouse
gases) are allocated, sold, and traded. (Health & Saf. Code,
§ 38501; Cal. Code Regs., tit. 17, § 95801 et seq.)
      The Commission has developed financial assistance
programs for certain electric utility customers affected by the
cap-and-trade program. One of these, the IA credit, is an annual
credit designed to incentivize and reward businesses that
implement energy-efficient programs that reduce greenhouse gas
emissions. The Commission determines on an annual basis which
businesses receive an IA credit as well as the amount of the
credit. For administrative convenience, the IA credit is passed
through investor-owned utilities, including Edison, and applied
as a credit against consumers’ electricity bills. (See Cal. P.U.C.,
Decision No. 14-12-037 (Dec. 18, 2014): Decision Adopting
Greenhouse Gas Allowance Revenue Allocation Formulas and

                                 5
Distribution Methodologies for Emissions-Intensive and Trade-
Exposed Customers available at
 [as of Mar. 8, 2021], archived at
 [pp. 66, 101].)
3.    Dispute Over Edison’s Electricity Users’ Tax
      Calculation
       Torrance and Edison disagree about the method Edison
should use to calculate the electricity users’ tax. Specifically, they
disagree regarding the proper tax base.4
       Torrance contends the tax base is equal to the total charge
for a user’s metered electricity and other services listed in
section 225.1.4, subd. (a). Under Torrance’s view, a user’s
IA credit, if any, would not affect the tax base because it is
unrelated to the charge for the electricity used by the consumer.
       Edison contends the tax base is equal to the net amount it
bills electricity consumers. Edison has calculated the tax base by
subtracting the IA credit from the total charge for a consumer’s
metered electricity and other services listed in section 225.1.4,
subd. (a). Under Edison’s methodology, the consumer’s electricity
users’ tax base (and, ultimately, the amount of the tax) will
necessarily be reduced whenever a consumer receives an IA
credit.
       A simple example illustrates the point. Assume a consumer
incurs a $100 charge for metered electricity and other services

4The “tax base” is “[t]he measure where the assessment or the
determination of a tax liability is based.” (Black’s Law Dict. (11th ed.
2019).)

                                    6
and receives a $20 IA credit. Torrance would use the charged
amount of $100 as the tax base and calculate the electricity tax
as $6.50 (6½ percent of $100). Edison would calculate the total
bill first ($100 charge less the $20 IA credit = $80 bill) and use
the $80 billed amount as the tax base to calculate the electricity
tax as $5.20 (6½ percent of $80).
4.    Torrance’s Complaint
       In March 2019, Torrance filed its original, and only,
complaint containing two causes of action styled as a request for
declaratory relief and a request for an order compelling Edison to
comply with the electricity tax ordinance. Torrance alleged
Edison failed to remit the full amount of tax owed to Torrance
under the electricity tax ordinance, noting Edison was required to
collect and then remit a tax on “charges” for metered energy,
customer charges, services charges, demand charges, and other
charges identified in the electricity tax ordinance. Torrance
claimed Edison was directly liable for the underpayment of the
electricity tax.
       In its prayer for relief, Torrance sought a declaration that
the electricity tax base is equivalent to the charges made for
metered energy and other services listed in the electricity tax
ordinance, “with no reduction for credits that may be provided for
by the Commission, or otherwise[.]” With respect to the second
cause of action, Torrance asked the court to compel Edison to
apply the electricity users’ tax to the tax base as noted above and,
further, to compel Edison to account for and pay the amounts it
failed to collect by using the incorrect tax base in prior years. As
to both causes of action, Torrance sought penalties and interest
on the outstanding electricity users’ taxes owed to Torrance as
well as costs of suit.

                                 7
5.    Edison’s Demurrer
       Edison demurred to the complaint, asserting that both of
Torrance’s claims failed to state facts sufficient to constitute a
cause of action and sought relief in violation of the California
Constitution. First, Edison noted that Torrance sought to recover
what it called “under-collected taxes,” i.e., the difference between
the tax Edison collected and remitted to Torrance and the higher
amount of tax owed by electricity consumers under Torrance’s
methodology. Edison asserted that Torrance could not recover
any unpaid electricity users’ tax directly from Edison because,
under section 255.1.14, the electricity tax is a debt owed to
Torrance by electricity consumers—not by Edison directly.
Accordingly, Edison claimed, Torrance could only sue electricity
consumers to recover the unpaid taxes. Edison argued on the
same basis that Torrance could only recover penalties and
interest on the unpaid taxes, if at all, from electricity consumers
and not directly from Edison.
       Alternatively, Edison urged that Torrance could not state a
valid claim because Edison had properly interpreted the
electricity tax ordinance and had thus collected all the taxes owed
to Torrance. Noting that the ordinance applies to “charges made”
to electricity consumers, Edison asserted that “charges made” for
electricity “are the charges that are actually billed to the
customer and for which the customer incurs liability.” In other
words, according to Edison, the IA credit should be applied before
calculating the electricity users’ tax.
       In addition, Edison asserted that Torrance’s interpretation
of the electricity tax ordinance would effectively require the court
to rewrite the provision, thereby imposing an additional tax upon
electricity consumers without voter approval. Such an action

                                 8
would, Edison noted, be in violation of the California
Constitution.5 (Cal. Const., art. XIIIC, § 2, subds. (a), (b) & (d).)
     Finally, Edison asserted that the court should deny
Torrance the opportunity to amend its complaint because such
amendment would be futile.6
6.    Torrance’s Opposition to the Demurrer
      Torrance opposed Edison’s demurrer on several grounds.
By way of background, Torrance explained that IA credits are
essentially rebates (a proportionate share of revenue generated in
the cap-and-trade marketplace) distributed to certain electricity
consumers by investor-owned utilities such as Edison. The
IA credits are generally passed through Edison to qualified
consumers as a credit against a consumer’s electricity bill.7
      Torrance claimed the electricity tax ordinance authorized it
to recover unpaid electricity users’ taxes directly from Edison.
Otherwise, Torrance argued, it would have no meaningful way to
enforce the electricity tax ordinance. In any event, Torrance
asserted, the ordinance authorized Torrance to sue Edison to

5 In light of our holding, we need not address Edison’s contention on
appeal that Torrance’s attempt to rewrite the electricity tax ordinance
is unconstitutional.
6Edison submitted a request for judicial notice in support of its
demurrer that attached Chapter 25, Division 2 of the Torrance
Municipal Code, Torrance Ordinance No. 3705, a tariff filed with the
Commission by Edison, and final official election returns from the
June 3, 2008 primary election. No ruling on the request is contained in
the appellate record.
7As noted, an IA credit relates to greenhouse gas emissions policy, not
the consumer’s electricity consumption.

                                   9
recover any and all taxes not remitted by Edison—not, as Edison
claimed, taxes collected but not remitted by Edison.
       Torrance also argued that Edison’s interpretation of the
electricity tax ordinance conflicted with the ordinance’s plain
language. Specifically, the ordinance applies the electricity users’
tax to “charges made for such [electrical] energy” not, as Edison
would have it, charges minus any credits to which the user might
be entitled.
       Finally, Torrance dismissed Edison’s constitutional
argument, stating that it wanted only what the electricity tax
ordinance already provided—not more.8
       In reply, Edison reiterated its prior arguments.9

8Torrance submitted a request for judicial notice in support of its
opposition to Edison’s demurrer. Torrance asked the court to judicially
notice a decision of the Commission dated December 18, 2014, the
“Amended Joint Investor-Owned Utility Cap-and-Trade Greenhouse
Gas Revenue Allowance Return Implementation Plan” and a related
proof of service, a staff report for the Torrance City Counsel, the
California Local Government Finance Almanac (2017 ed.) Utility User
Tax Facts by Michael Coleman, an excerpt from the Commission’s
Order Instituting Rulemaking 11-03-012 and a related proof of service,
an Advice Letter filed with the Commission by Edison, and the
Schedule EITE filed with the Commission by Edison. No ruling on the
request is contained in the appellate record.
9Edison submitted a supplemental request for judicial notice in
support of its reply brief. Edison sought notice of six documents issued
by the Commission and a page from the website of South Bay Cities
Council of Governments. No ruling on the request is contained in the
appellate record.

                                   10
7.    The Court’s Ruling; Appeal
       The court sustained Edison’s demurrer without leave to
amend for the reasons stated in Edison’s moving papers.10 As to
Torrance’s second cause of action for failure to comply with the
electricity tax ordinance, the court agreed with Edison that the
ordinance does not give Torrance the authority to recover
uncollected taxes and associated penalties directly from Edison.
Instead, the court found, Torrance was required by the plain
language of the electricity tax ordinance to recover any unpaid
taxes directly from electricity consumers.
       The court also agreed with Edison’s interpretation of the
electricity tax ordinance, finding that Edison properly applied the
electricity tax to the net amount billed to consumers after
application of the IA credit. The court stated that Torrance “does
not and cannot point to any language in the [electricity tax
ordinance] requiring Edison to calculate the [electricity tax] on
gross costs without a reduction for credits.” In addition, the court
adopted Edison’s view that “ ‘[c]harges made’ are those charges
billed to the customers and for which they are responsible. Gross
electric costs, which are not billed to the customer, are not
‘charges made’ and are not amounts for which they incur
liability.” Finally, the court noted that the utility users’ tax
ordinances applicable to other utilities, such as gas and telephone
communications service, explicitly stated that the tax base should
include the value of any credits applied, whereas the electricity

10With the exception of the utility tax ordinances, the court’s ruling
does not refer to any of the exhibits submitted to the court in
connection with the parties’ three requests for judicial notice.

                                   11
tax ordinance did not. The court inferred that the omission must
have been intentional in the electricity tax ordinance.
Accordingly, the court sustained Edison’s demurrer to the second
cause of action.
      As to Torrance’s request for declaratory relief, the court
found that request “ ‘wholly derivative’ of its statutory claim” and
therefore sustained Edison’s demurrer to the declaratory relief
claim. The court immediately signed and entered a judgment of
dismissal.
      This timely appeal followed.

                            DISCUSSION

      We consider two issues in this appeal. First, we evaluate
whether Torrance’s electricity users’ tax base should be reduced
by the value of IA credits distributed by Edison on behalf of the
State. We conclude the tax base is not affected by the value of IA
credits. Second, because those electricity consumers that received
IA credits in the past may not have paid the full amount of tax
owed under section 225.1.4, we consider Torrance’s remedy. We
agree with Edison that electricity consumers are liable to
Torrance with respect to the taxes owed but not collected by
Edison in the past. Torrance should therefore be allowed to
amend its complaint to include as defendants the electricity
consumers at issue.11

11We deny the parties’ requests for judicial notice filed June 5, 2020,
June 25, 2020, August 21, 2020, and February 4, 2021.

                                   12
1.    Standard of Review
       We independently review a trial court’s order sustaining a
demurrer to determine whether the operative complaint alleges
facts sufficient to state a cause of action. (Ivanoff v. Bank of
America, N.A. (2017) 9 Cal.App.5th 719, 725.) We assume the
truth of all properly-pled factual allegations and matters that are
judicially noticeable. (Ibid.) We also liberally construe the
complaint’s allegations with a view toward substantial justice.
(Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th
26, 43, fn. 7.) But where facts appearing in attached exhibits or
judicially noticed documents contradict, or are inconsistent with,
the complaint’s allegations, we must rely on the facts in the
exhibits and judicially noticed documents. (Ivanoff, at p. 726.)
       When a demurrer is sustained without leave to amend, we
decide whether there is a reasonable possibility that the plaintiff
can amend its complaint to cure the defect. (Blank v. Kirwan
(1985) 39 Cal.3d 311, 318.) If the defect can be cured, “the trial
court has abused its discretion and we reverse; if not, there has
been no abuse of discretion and we affirm.” (Ibid.) “The burden of
proving such reasonable possibility is squarely on the plaintiff.”
(Ibid.) Such a showing can be made for the first time on appeal.
(Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93
Cal.App.4th 700, 711.)
2.    The IA credit does not affect the calculation of
      Torrance’s electricity users’ tax base.
      We begin by determining the proper methodology to
calculate an electricity consumer’s tax under section 225.1.4 and,
more specifically, whether an electricity consumer that receives

                                13
an IA credit is entitled to a tax base reduction equal to the
amount of the credit.
      2.1.   Legal Framework
      Statutory interpretation is an issue of law, which we review
de novo. (E.g., Union of Medical Marijuana Patients, Inc. v. City
of San Diego (2019) 7 Cal.5th 1171, 1183.) “ ‘Our primary task in
construing a statute is to determine the Legislature’s intent.’
(Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 733
(Jarrow Formulas).) ‘ “Because the statutory language is
generally the most reliable indicator of legislative intent, we first
examine the words themselves, giving them their usual and
ordinary meaning and construing them in context.” [Citation.]’
(Ramirez v. City of Gardena (2018) 5 Cal.5th 995, 1000
(Ramirez).) ‘ “ ‘If the language is clear and unambiguous there is
no need for construction, nor is it necessary to resort to [extrinsic]
indicia of the intent of the Legislature ... .’ ” [Citation.]’ (Jarrow
Formulas, at p. 735.)” (Chinese Theatres, LLC v. County of Los
Angeles (2020) 59 Cal.App.5th 484, 491.) Where the language of
the statute is potentially ambiguous, “ ‘[i]t is appropriate to
consider evidence of the intent of the enacting body in addition to
the words of the measure, and to examine the history and
background of the provision, in an attempt to ascertain the most
reasonable interpretation.’ [Citation.]” (People v. Manzo (2012) 53
Cal.4th 880, 886; People v. Alaybue (2020) 51 Cal.App.5th 207,
222.)
      “The ‘plain meaning’ rule, however, ‘does not prohibit a
court from determining whether the literal meaning of a statute
comports with its purpose or whether such a construction of one
provision is consistent with other provisions of the statute. The
meaning of a statute may not be determined from a single word

                                 14
or sentence; the words must be construed in context, and
provisions relating to the same subject matter must be
harmonized to the extent possible.’ [Citations.]” (City of Redondo
Beach v. Padilla (2020) 46 Cal.App.5th 902, 911–912.)
      2.2.   The Plain Language of Section 225.1.4
       The present dispute focuses mainly on the meaning of the
word “charge” as it is used in the electricity tax ordinance and,
specifically, whether “charge” refers to the cost of electricity
consumed and services rendered or, as Edison claims, the net
amount Edison bills its electricity consumers after subtracting
the IA credit.
       “Charge” generally has a broad meaning. (See Webb v. City
of Riverside (2018) 23 Cal.App.5th 244, 252 [“The plain,
commonsense meanings of the terms ‘rate’ and ‘charge’ are broad,
encompassing a price or cost sought.”].) “Charge,” as relevant
here, may also be defined as “the price demanded for something.”
(Merriam-Websters Collegiate Dict. (11th ed. 2003) p. 208; and
see Webb, at p. 252 [referencing Webster’s Third New
International Dictionary’s definition of “charge” as “the price
demanded for a thing or service”].)
       Section 225.1.4 uses “charge” in this manner. As noted,
subdivision (a) defines the electricity users’ tax base in broad
terms, imposing a tax “upon every person in the City using
electrical energy in the City.” The tax is imposed on “the charges
made for such energy,” and it is evident that “such energy” refers
to the quantity of electricity used. Using the general definition of
“charge” and applying it to the first sentence of subdivision (a)
suggests that Torrance intended to impose a tax on the cost of
electricity used by its residents.

                                15
       We need not speculate about what Torrance intended when
it enacted section 225.1.4, however, because subdivision (a) of the
ordinance explicitly defines what “charges” means: “Charges as
used in this Section shall include charges made for 1) metered
energy, and 2) minimum charges for service, including customer
charges, service charges, demand charges, standby charges and
annual and monthly charges.” This definition makes sense, and it
comports with the general definition and usage of “charge” we
have set forth. And although subdivision (a) does not use the
phrase “tax base,” that is the effect of the subdivision.
Subdivision (a), according to its plain meaning, provides that the
electricity users’ tax base includes both the cost of electricity
consumed and the cost of ancillary services relating to the
delivery of electricity service.
       The broad definition of the tax base contained in section
225.1.4, subdivision (a) is limited by subdivisions (b), (c), and (d),
which set forth the exclusions from the tax base. Subdivision (b)
reduces an electricity consumer’s tax base by providing that “the
term ‘using electrical energy’ shall not be construed to apply to
the storage of such energy in a battery, or the use thereof in a
motor vehicle or other device apart from the premises where the
battery was charged; nor shall the term include the mere
receiving of such energy by an electric public utility or
governmental agency at a point within the City for resale.”
Subdivisions (c) and (d) expressly reduce a consumer’s electricity
tax base and tax, respectively. Subdivision (c) “exclude[s] from
the base on which the tax imposed in this Section is computed,
charges made for electricity used in the production or distribution
of water,” and subdivision (d) “exclude[s] from any tax imposed in
this Section, an amount equal to the amount of any Utility User’s

                                 16
Tax paid by the nonutility supplier for natural gas used as fuel in
the production of electricity.”
       In sum, applying the plain and commonsense meaning of
the words of the electricity tax ordinance leads us to conclude
that unless one of the three narrowly-drawn exceptions applies,
Torrance’s electricity users’ tax is imposed on the amount Edison
charges for electricity consumed and any ancillary services it
provides. Under this construction, the IA credit does not affect
the electricity users’ tax base.
       Generally, if a statute’s or an ordinance’s language is
unambiguous, we will presume the Legislature or City Council
meant what it said, and the plain meaning of the statute or
ordinance will prevail unless its literal meaning would result in
absurd consequences that the enacting body did not intend. (See
Jarman v. HCR ManorCare, Inc. (2020) 10 Cal.5th 375, 381.)
Here, the plain language of section 225.1.4 is consistent with the
general understanding that a utility users’ tax is consumption-
based. (See, e.g., Rev. & Tax. Code, §§ 7284.2 [authorizing
counties to “levy a utility user tax on the consumption of
electricity” and other utilities in unincorporated areas], 7284.3
[creating exemptions to any local jurisdiction’s “utility user tax on
the consumption of electricity”].) Nor does Edison complain that
this straightforward application of the electricity tax ordinance
produces absurd results.
       We also note that the electricity tax ordinance does not
directly conflict with the environmental policy concerns giving
rise to the IA credit. Furthermore, there is no indication that the
Legislature intended for the Global Warming Solutions Act of
2006 to impact local utility users’ taxes. (See Stats. 2006, ch. 488
(A.B. 32).) The Legislature has created other exemptions from

                                 17
local jurisdiction taxes. (See, e.g., Rev. & Tax. Code, § 7284.1
[exempting religious leaders and nonprofit organizations from
local license taxes].) And, in furtherance of environmental policy
goals encouraging the use of clean energy, the Legislature
exempted the use of compressed natural gas to charge electric
public transit vehicles from local utility users’ taxes. (Rev. & Tax.
Code, § 7284.3, added by Stats. 2012, ch. 213, § 3 (S.B. 1257).)
The Legislature did not take a similar approach, however, in
adopting the Act. (See Stats. 2006, ch. 488 (A.B. 32).) We
therefore presume the Legislature did not intend for methods
used to encourage the reduction of greenhouse gas emissions
adopted pursuant to the Act, such as the issuance of IA credits by
the Commission, to reduce Torrance’s electricity users’ tax base.
      2.3.   Edison’s arguments are unpersuasive.
      Although Edison contends the electricity tax ordinance is
unambiguous, it construes the ordinance in a manner that
reduces the electricity users’ tax base by the amount of any
IA credit received by its customers. Although we do not hold that
section 225.1.4 is ambiguous, we will look to some extrinsic aids
as needed to assist in our analysis of Edison’s arguments.
      Without engaging in any substantive analysis, Edison
contends that “charges made,” as used in the electricity tax
ordinance, equates to the net amount Edison bills to an electricity
consumer in a given month, taking into account all customary
charges for electricity consumed and services provided, which
charges are then reduced by the amount of any credit Edison
might apply, such as the IA credit. Edison claims, for example,
that section 225.1.4 “makes clear that the ‘charges made’ are the
charges actually billed to the customer and for which the
customer incurs liability.” (Italics omitted.) “ ‘Charges made’ thus

                                 18
are those charges that ultimately are billed to customers and for
which they are responsible—that is, the charges made and billed
after the application of the IA Credit. As the trial court ruled:
‘Gross electric costs, which are not billed to the customer, are not
“charges made” and are not amounts for which they incur
liability.’ ”
       Notably, Edison cites nothing—aside from the court’s order,
to which we do not defer—in support of its assertion that the
term “charges made” is equivalent to the net amount billed to an
electricity user by Edison. Edison ignores the structure of the
ordinance, which, as we have explained, defines the electricity
users’ tax base broadly in subdivision (a) and then lists three
narrow exclusions from the tax base in subdivisions (b), (c), and
(d). Instead, Edison notes that the electricity tax ordinance
provides that “[t]he tax applicable to electrical energy provided by
a nonutility supplier shall be determined by applying the tax rate
to the equivalent charges the service user would have incurred if
the energy used had been provided by the electrical corporation
franchised by the City.” Edison insists that the “term ‘incurred’
assumes a liability for the charge has attached” and “ ‘[c]harges
made’ thus are those charges that ultimately are billed to
customers and for which they are responsible—that is, the
charges made and billed after the application of the IA Credit.”
We reject Edison’s construction of the statute in this manner
because the very next sentence in subdivision (a) states:
“Nonutility suppliers shall install and maintain an appropriate
utility-type metering system which will enable compliance with
this Section.” The purpose of meter installation is to measure
electricity consumption—i.e., the critical information necessary to
calculate the user’s tax base.

                                19
       Edison also asserts that “Torrance ‘does not and cannot
point to any language in the [electricity tax] Ordinance requiring
Edison to calculate the [tax] on gross costs without a reduction
for credits.” Although Edison is correct that the statute does not
contain specific language to that effect, it does not need to.
“Under the familiar rule of construction, expressio unius est
exclusio alterius, where exceptions to a general rule are specified
by statute, other exceptions are not to be implied or presumed.
[Citations.]” (Wildlife Alive v. Chickering (1976) 18 Cal.3d 190,
195; Krupnick v. Duke Energy Morro Bay (2004) 115 Cal.App.4th
1026, 1029–1030.) As we have explained, section 225.1.4 contains
a broad definition of the tax base followed by three—and only
three—limited exclusions, none of which can be read to include
the IA credit. We will not presume, as Edison urges, that the
value of IA credits should also be excluded from the electricity
users’ tax base. As Edison notes, we have “no power to rewrite an
ordinance or statute so as to make it conform to a presumed
intention which is not expressed.” (County of Madera v. Superior
Court (1974) 39 Cal.App.3d 665, 668.)
       Edison also references one of the canons of statutory
construction—namely, that a legislature’s use of “different
language in statutory provisions addressing the same subject”
means that provisions with different language should have
different meanings. (E.g., People v. Trevino (2001) 26 Cal.4th 237,
242; Rutgard v. City of Los Angeles (2020) 52 Cal.App.5th 815,
827.) Citing this canon, Edison notes that Torrance’s utility users’
tax ordinances relating to natural gas and telephone service
specifically state that “charges” subject to taxation “include the
value of … credits.” (§§ 225.1.3(d), 225.1.5(a).) But as we have
said, it was not necessary for Torrance to change the statute to

                                20
include the value of credits because the broad definition already,
if impliedly, includes them. Moreover, “the canons of statutory
construction are merely ‘ “guides to help courts determine likely
legislative intent.” ’ (Burris v. Superior Court (2005) 34 Cal.4th
1012, 1017.)” (Rutgard, at pp. 827–828.) And where, as here, the
statutory language is clear, canons of construction cannot be used
to undermine it. (Ibid.)
3.    Edison is not directly liable for uncollected electricity
      users’ taxes.
       Torrance’s original complaint sought to hold Edison directly
liable for taxes it failed to collect from electricity consumers, as
well as penalties and interest. We agree with the court’s
conclusion that uncollected electricity users’ taxes constitute a
debt owed to Torrance by electricity consumers for which Edison
may not be held directly liable.
       Initially, we note that Edison does not challenge Torrance’s
authority to require it to collect the electricity users’ tax. Nor
could it. It is well established, as the Supreme Court recently
observed, that “ ‘[t]he field of taxation is replete with examples of
a government entity making businesses generally its agent in tax
collections and prescribing certain regulations in the accounting
therefor ... such as withholding taxes and social security taxes for
the United States government, unemployment taxes and
numerous excise taxes for the state— “a familiar and sanctioned
device.” ’ (Ainsworth v. Bryant (1949) 34 Cal.2d 465, 477.) When a
governmental entity lays a tax on a particular type of
transaction, it often tasks one party to the transaction with the
duty to see the tax is paid. Without such arrangements, a great
many valid tax laws … would simply go unenforced. (Ibid.)” (City

                                 21
and County of San Francisco v. Regents of University of
California (2019) 7 Cal.5th 536, 551–552.)
       Edison objects, however, to Torrance’s initial assertion that
Edison is directly liable to Torrance for taxes it fails to collect
from electricity consumers due to, as relevant here, an erroneous
construction of section 225.1.4. For example, in its prayer for
relief, Torrance seeks an order “requiring Edison to account for
and remit all previously underpaid Electricity Taxes owed the
City” as well as “all penalties and interest” on those amounts. It
appears that Torrance concedes the point, as it now asserts that
it “does not seek to make [Edison] into a guarantor. Nor does it
demand[ ] [Edison] pay the tax from its own funds (except to the
extent it has wrongfully withheld taxes actually collected).” In
order to avoid any uncertainty, however, we briefly address
Edison’s concern.
       Edison characterizes itself as a “pass-through” with respect
to Torrance’s electricity users’ tax. We agree. Under Public
Utilities Code section 799, for example, a utility company such as
Edison is viewed as a pass-through in that the statute immunizes
the utility company from liability to consumers for collecting
taxes that may ultimately be determined to be unlawful.12 It

12 Public Utilities Code section 799 provides, in pertinent part,
“(a) With respect to all taxes enacted by any local jurisdiction,
including any city, county, or city and county, including a chartered
city or county, any district, including an agency of the state, formed
pursuant to general law or special act, for the local performance of
governmental or proprietary functions within limited boundaries, or
any public or municipal corporation, and imposed on the customers of
public utilities or other service suppliers, which taxes have been
collected by the public utilities and other service suppliers and

                                  22
makes sense that the opposite would also be true, i.e., that
Edison is not liable to Torrance with respect to an electricity
consumer’s failure to pay taxes owed.
      Section 225.1.14 of the Torrance Municipal Code confirms
that proposition. Section 225.1.14 provides that “[a]ny tax
required to be paid by a service user under the provisions of this
Chapter shall be deemed a debt owed by the service user to the
City. Any such tax collected from a service user which has not

remitted to the local jurisdiction all of the following shall apply: [¶]
(1) The public utility or other service supplier shall have no duty to
independently investigate or inquire with the local jurisdiction
concerning the validity of the tax ordinance. [¶] (2) In connection with
any actions or claims relating to or arising from the invalidity of the
tax ordinance, in whole or in part, the public utility or other service
supplier shall not be liable to any customer as a consequence of
collecting the tax. [¶] (3) In the event a local jurisdiction is ordered to
refund the tax, it shall be the sole responsibility of the local
jurisdiction to refund the tax. Unless a public utility or other service
supplier is reimbursed by the local jurisdiction for the actual cost of
assisting the local jurisdiction, including, but not limited to,
calculating or verifying refunds, distributing refunds, providing data,
or providing data processing assistance, the public utility or other
service supplier shall not be required to assist the local jurisdiction to
refund the tax, including, but not limited to, calculating or verifying
refunds, distributing refunds, providing data, or providing data
processing assistance. [¶] (4) In any action seeking to enjoin collection
of taxes imposed on customers of utilities or other service suppliers and
collected by the utilities or other service suppliers, in any action
seeking declaratory relief concerning the taxes, in any action seeking a
refund of the taxes, or in any action seeking otherwise to invalidate the
taxes, the sole necessary party defendant in the action shall be the
local jurisdiction on whose behalf the taxes are collected and the public
utility or other service supplier collecting the taxes shall not be named
as a party in the action.”

                                    23
been remitted to the Director shall be deemed a debt owed to the
City by the person required to collect and remit. Any person
owing money to the City under the provisions of this Chapter
shall be liable to an action brought in the name of the City for the
recovery of such amount.” Therefore, if Edison collects a tax from
its consumers, it must remit the tax to Torrance and is liable to
Torrance if it fails to do so. But because the tax is imposed on the
utility consumer, not the utility provider, Edison is not liable to
Torrance for taxes that have not been paid by its consumers.13
The other Municipal Code provisions cited by Torrance do not
undermine this basic precept and we need not examine them in
detail.
4.    Torrance must be given leave to amend its complaint.
       It is often said that leave to amend a complaint should be
liberally granted, particularly with respect to a party’s initial
complaint. “The policy favoring amendment is so strong that it is
a rare case in which denial of leave to amend can be justified.”
(Howard v. County of San Diego (2010) 184 Cal.App.4th 1422,
1428.) “ ‘Where [a] complaint is defective, “[i]n the furtherance of
justice great liberality should be exercised in permitting a
plaintiff to amend his complaint, and it ordinarily constitutes an

13 We do not consider whether Edison may be compelled to assist
Torrance in collecting any taxes owed by electricity consumers but not
billed and collected as a result of Edison’s incorrect tax calculations.
Our opinion, however, should not be interpreted as preventing
Torrance from obtaining prospective equitable relief against Edison.
(See City of Modesto v. Modesto Irrigation Dist. (1973) 34 Cal.App.3d
504, 508 [“It is basic that the power to tax carries with it the corollary
power to use reasonable means to effect its collection; otherwise, the
power to impose a tax is meaningless.”].)

                                    24
abuse of discretion to sustain a demurrer without leave to amend
if there is a reasonable possibility that the defect can be cured by
amendment.” ’ ” (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th
962, 970–971.) “ ‘If there is any reasonable possibility that
plaintiff can state a good cause of action, it is error and an abuse
of discretion to sustain the demurrer without leave to amend.’ ”
(Campaign for Quality Education v. State of California (2016)
246 Cal.App.4th 896, 904.)
        A court’s denial of leave to amend is reviewable on appeal,
“ ‘even in the absence of a request for leave to amend’ [citations],
and even if the plaintiff does not claim on appeal that the trial
court abused its discretion in sustaining a demurrer without
leave to amend.” (Aubry v. Tri-City Hospital Dist., supra, 2
Cal.4th at p. 971; Baldwin v. Marina City Properties, Inc. (1978)
79 Cal.App.3d 393, 413–414; see Code Civ. Proc., § 472c, subd. (a)
[“When any court makes an order sustaining a demurrer without
leave to amend the question as to whether or not such court
abused its discretion in making such an order is open on appeal
even though no request to amend such pleadings was made.”].)
        Where a plaintiff has not been given a “ ‘fair prior
opportunity’ ” to correct a substantive defect in a complaint,
“ ‘[l]iberality in permitting amendment is the rule’ ” even when
the complaint is “ ‘deficient in substance.’ ” (Colich & Sons v.
Pacific Bell (1988) 198 Cal.App.3d 1225, 1241.) If no leave has yet
been requested, as is the case here, a plaintiff should be

                                25
permitted to amend a substantively deficient complaint if there is
a reasonable probability the defect can be cured.14
       As noted ante, the electricity users’ tax is a debt owed to
Torrance by electricity consumers within its boundaries. And
pursuant to section 225.1.14, Torrance may assert its claim for
unpaid taxes against any consumer that has underpaid its
electricity user’s tax due to Edison’s incorrect tax base
calculations. On remand, Torrance must be given the opportunity
to amend its complaint to include those defendants as well as any
other viable claims or defendants.

14Because we conclude that Torrance must be given leave to amend its
complaint, we need not address Torrance’s claim that the court erred
by denying its motion for reconsideration.

                                 26
                           DISPOSITION

       The judgment of dismissal is reversed. The court shall
vacate its order sustaining Edison’s demurrer without leave to
amend and shall allow Torrance at least one opportunity to
amend its complaint. The court shall resolve the declaratory
relief claim, and conduct further proceedings, consistent with this
opinion. Torrance shall recover its costs on appeal.

     TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                                LAVIN, Acting P. J.
WE CONCUR:

      EGERTON, J.

      SALTER, J.*

*Judge of the Orange County Superior Court, assigned by the Chief
Justice pursuant to article VI, section 6 of the California Constitution.

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