On Monday, an Orange County appeals court judge issued a ruling declaring that San Juan Capistrano's tiered water rates are unconstitutional, striking a major blow to water agencies across the state that use a similar pricing structure as an incentive for people to save water.

San Juan Capistrano's punitive water pricing was intended to encourage conservation in wake of California's historic drought and the governor's mandate to cut water use in the state by 25 percent. As a result, the agency charged nearly four times as much per unit of water for users in the highest tier.

However, residents filed a lawsuit against the agency, arguing that the tier system was arbitrary and unfair.

"They were exponential, arbitrary and they magically appeared out of thin air," said attorney Benjamin Benumof, who represented San Juan residents, according to ABC 7. "We feel vindicated and feel the constitution was upheld."

The 3-0 ruling by the 4th District Court of Appeal sided with the plaintiffs, forbidding San Juan Capistrano to charge people who used more water at a higher rate. According to the Superior Court judge, the pricing system violated a voter-approved law that prohibits government agencies from charging more than the cost of a service.

Although the ruling is only binding in Orange County, it will have implications on about two-thirds of the water agencies in other California counties that also use tiered pricing water rates.

"City Water also had to correlate its tiered prices with the actual cost of providing water at those tiered levels," the ruling states, reports UT San Diego. "Since City Water didn't try to calculate the actual costs of service for the various tiers, the trial court's ruling on tiered pricing must be upheld simply on the basis of the constitutional text."

"Nothing in our record tells us why, for example, they could not figure out the costs of given usage levels that require City Water to tap more expensive supplies, and then bill users in those tiers accordingly," the court wrote.

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