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In a ruling that Gov. Jerry Brown says puts a "straitjacket" on local governments trying to fight the severe statewide drought, an appeals court has found that an Orange County city's tiered water rates are unconstitutional.

The ruling by the 4th District Court of Appeal on Monday against the city of San Juan Capistrano potentially deals a blow to agencies statewide that have used the pricing structure to encourage water conservation.

"The practical effect of the court's decision is to put a straitjacket on local government at a time when maximum flexibility is needed," Brown said in a statement after Monday's ruling. "My policy is and will continue to be: employ every method possible to ensure water is conserved across California."

The 3-0 ruling upholds a Superior Court judge's decision that found that charging bigger water users incrementally higher rates violates a voter-approved law that prohibits government agencies from charging more than the cost of a service.

It comes shortly after Brown issued drought orders that call for rates that encourage people to save water, including tiered pricing. About two-thirds of water districts in the state use some form of tiered pricing, and the ruling was being closely watched to see how it might apply beyond the appellate court, which is only binding in Orange County.

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