Understanding Water Rates in California: 7 Things You Need to Know

Cal Water has a long history of providing safe, reliable water service and ensuring water is available for both everyday and firefighting needs. For more than 90 years, we have been committed to providing our customers with high-quality water and service, and communicating transparently about the services we provide and the costs associated with utility service.

Every three years, Cal Water’s water rates go through an extensive oversight and review process to ensure rates reflect the actual cost of service. To help our customers better understand this process and how it ultimately impacts your monthly water bill, we recently sat down with regulatory policy and compliance expert Natalie Wales.

How are water rates established in California?

Every three years, all regulated water utilities in California undergo proceedings where we are required to submit our planned infrastructure improvements and budgets for analysis. On July 2, 2018, we formally began the 18-month review of our Infrastructure Improvement Plan, which includes a review of our operations, expenses, proposed water system improvements, and water utility rates. This process is conducted by an independent state agency called the California Public Utilities Commission (CPUC), its consumer advocates, and other interested parties to ensure that our water rates reflect the actual cost of operating, maintaining, and upgrading our water system.

Read more about our Infrastructure Improvement Plan.

How much will my water bill increase?

First, it’s important to know that the new rates will not take effect until 2020 at the earliest. Rates are based on the cost of service and are carefully evaluated by consumer advocates in the State of California. The amount of any associated change in your rates will depend on local infrastructure investments, how much water you use, and other factors. You can learn more about the proposed rate adjustment for your local Cal Water district on the district details pages.

Why is Cal Water asking for a rate increase?

We are proposing significant infrastructure projects that are vital for maintaining reliable service for our customers and firefighters. Ultimately, the state of California will determine which proposed infrastructure projects get done and how those costs affect customer bills. These are different from the day-to-day expenses I mentioned earlier. When we make infrastructure improvements, we pay those costs up front and then spread the costs out over 30-50 years to reduce the impact on customers. Additionally, the costs for construction, materials, treatment, and testing are rising across the country, but we work hard to operate efficiently to control costs.

Why aren’t Cal Water’s rates lower like some other water utilities I’ve heard of?

It is critical that we upgrade and improve our infrastructure before it fails. Low rates are not something to be proud of when infrastructure is failing or water quality standards are being violated – they lead to reliability risks and public health dangers down the road, as we have seen in other communities. In the last three years alone, Cal Water has invested more than $628 million in infrastructure improvement projects to ensure the continued safety and reliability of our water system for homes, businesses, and firefighters, and we’re very proud of our track record.

Why do we need to replace and improve our water system infrastructure?

We’ve seen what can happen when investing in infrastructure is ignored. 50-year-old pipes, for example, need to be replaced before they break. Just like with your car, preventive maintenance now saves you from more costly repairs later. Replacing aging infrastructure is essential to providing safe, high-quality drinking water anytime customers need it and having enough resources for firefighters to protect our communities when emergencies arise.

So when will I see these changes in my monthly bill?

New rates will not take effect until at least 2020. The final rate increase may be different from the initial filing, due to updated cost forecasts and/or deferral of projects; however, it will not be higher than what was initially requested. We expect to know the final amount for each community we serve by the end of 2019, and we’re committed to keeping our customers informed along the way. This is just the start of a very thorough process that includes not only the input of our experts and engineers but also input from the state’s experts as well as third parties.

My monthly water bill seems to change all the time, not every three years. Why is that?

There are several reasons why your monthly water bill may vary. Our rates are dynamic and reflect the true cost of service. When certain expenses increase, our rates increase; however, when those expenses decrease, rates will be offset with a credit. For example, in addition to your water use affecting the amount of your bill, there may also be expenses such as purchased power, purchased water, pump taxes, and temporary surcharges or credits for specific costs that are being charged to customers on a dollar-for-dollar basis. That means there is no markup on these items that are necessary to run the water system.