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California’s Water Affordability Challenges

MCWRA Conference

21 November 2025

Brad Franklin, Research Fellow

PPIC WATER POLICY CENTER

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PPIC Water Policy Center mission and vision�

Mission: We connect nonpartisan, objective research to real-world water management debates, with the goal of putting California water policy on a sustainable and constructive path.
Vision: California’s water management supports a healthy economy, environment, and society—now and for future generations.

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High-quality, reliable water service requires sustained investment

Routine infrastructure renewal is costly and unavoidable
New treatment and monitoring mandates increase costs

PFAS (final national standard 2024)
Chromium-6 (CA state MCL effective Oct 2024)
Microplastics (testing requirements beginning implementation)

Balancing affordability with reliability and safety is increasingly difficult
Cost pressure is highest for small and disadvantaged systems
Delaying investment leads to higher long-term costs and greater burden on low-income households

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Climate Risks Also Drive Water Costs

Extreme fire weather days are expected to increase over this century
High-severity wildfire increases erosion from hillsides into streams when it rains, leading to risk of floods and mudslides
Damages lead to increased water treatment and infrastructure maintenance costs for water utilities

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Water affordability in California

The cost of water is rising
There is no single guideline for determining whether water bills are too high
Public water agencies are restricted in assisting low-income customers with water bills
Rate design can help keep prices low for basic needs
Avoiding shutoffs protects public health, but at a cost to local water systems�

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Water and wastewater rates have been rising as utilities invest in system upgrades.

California’s urban water and wastewater agencies face some fiscal challenges, including how to balance their books during emergencies, such as major droughts and recessions, when revenues decline. Overall, they are in reasonably good fiscal health. Urban utilities have generally been able to raise funds to replace aging infrastructure and to comply with new water treatment requirements. Yet bills have been rising faster than inflation to keep pace with these infrastructure updates, alongside new investments to manage a changing climate. For low-income households, rising rates can lead to affordability and access issues—a challenge heightened during the COVID-19 recession.

Rate design can help keep prices low for basic needs.

The amount of water required for basic needs—roughly 50 gallons per person per day— is low relative to the average customer’s water use. Most bills contain two parts: a fixed monthly service charge, and a volumetric portion that rises with the amount of water used. Since most water system costs do not vary with the amount of water sold, utilities have some incentives to set a high fixed service charge to maintain financial stability. But this strategy has affordability tradeoffs because it increases the costs of water for meeting basic needs. Water agencies can also support affordability by making concerted efforts to contain water system costs.

At the beginning of COVID-19, a statewide moratorium on water shutoffs maintained access for vulnerable residents. But it also reduced revenues and added to a ballooning water debt problem. The federal stimulus and the state budget propose funding to alleviate arrears. Better data on which customers are unable to pay can help tailor solutions, such as avoiding shutoffs during emergencies, reducing fees on water debt, and providing a minimum amount of water to those who cannot afford to pay.

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Local agencies are spending more to operate and maintain their systems�

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Average water bills vary considerably across urban water systems

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There is no single guideline for determining whether water bills are too high

Essential daily household use = 200 gpd for a family of 4
CPUC

Affordability ratio (10% of income less non-discretionary bills)
Hours at minimum wage
Cal EnviroScreen

SWRCB

% of median household income (1.5% threshold)
Household socioeconomic burden

Source: WATER AFFORDABILITY FRAMEWORK - California Water Association

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MWD residential water and sewer (WSS) expenditures compared to other services�

Service	% of Income
Housing	36.6
Transportation	16.5
Food	13.6
Health Care	6.2
Entertainment	3.9
Education	2.1
Telephone	1.9
Electricity	1.8
WSS (West Region)	0.97
Natural Gas	0.54
WSS 6 CCF (MWD)	0.65

Source: Schwabe and Nemati (2025)

West Region (2023): Natural Gas, Electricity, Telephone, Water & Sewer
Los Angeles MSA (2023): All other data

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Restrictions on affordability programs�

Public water utilities are constrained by Prop 218

Rates must reflect cost of service
Utilities can’t charge different rates to households for same water

To launch or expand assistance programs, these agencies need to use non-rate revenue (e.g., property taxes) or seek approval of new taxes by two-thirds of local voters
State Water Board AB 401 report (2020) recommended statewide low-income water rate assistance program, but this program has not yet been funded or implemented.

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Many large utilities offer “lifeline” rates that can subsidize bills of low-income customers, but enrollment is often low. Private water utilities have been able to expand these programs as rates have risen. In contrast, public agencies have been constrained since the 1996 passage of Proposition 218—a constitutional amendment that requires a tight connection between water rates and cost of service. To launch or expand assistance programs, these agencies need to use non-rate revenue (e.g., property taxes) or seek approval of new taxes by two-thirds of local voters. As an alternative, the State Water Board has recommended a statewide low-income water rate assistance program to benefit about 4.7 million households at a cost of about $600 million annually. Congressional bills have proposed federal water rate assistance, similar to an energy rate assistance program. Racial income disparities mean people of color are more likely to need assistance.

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SB 222 (Dodd, 2022) attempted to create a state-wide water rate assistance program�

Water Rate Assistance Program and Fund, administered by the State Water Board, to provide drinking water and wastewater bill assistance for low-income residential ratepayers and those experiencing economic hardship.
Program design drew on AB 401 recommendation for a statewide LIRA program serving around 4.7 million households at an estimated cost of $600 million per year.
Vetoed by the Governor on 9/28/22 due to lack of identified, sustainable funding source and concern over ongoing General Fund pressures.

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AB 685 (Eng, 2012). Human Right to Water

State policy that every human has the right to safe, clean, affordable and accessible water adequate for human consumption, cooking & sanitary purposes

SB 200 (Monning, 2019). Safe and Affordable Drinking Water Fund

Established annual fund to remediate drinking water problems (~$130 million)

Targets community water systems serving a disadvantaged communities

SB 222 (Dodd, 2022). Water Rate Assistance Program and Fund

Would require state to develop program guidelines and administer a low-income rate assistance program (water and wastewater)

Eligible participants: low income / experiencing temporary economic hardship

Estimated 4.7 million households at $600 million annually

Vetoed by Governor (9/28/2022) due to (mostly) no funding source identified

Affordability and State’s Response

Thoughts: Aging infrastructure and climate change => increased costs

•Need well-informed investments and policy

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Current 2-Year Bills on Water Affordability

AB 532 (Ransom)

Updates the Low-Income Household Drinking Water and Wastewater Emergency Assistance Program.
Defines public urban retail water supplier
Authorizes suppliers to provide water rate assistance
Requires annual reporting on assistance provided

SB 350 (Durazo) – Creates a statewide Water Rate Assistance Program, administered by the State Water Board, to help low-income households with drinking water and wastewater bills

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Notes on the use of these slides

These slides were created to accompany a presentation. They do not include full documentation of sources, data samples, methods, and interpretations. To avoid misinterpretations, please contact:

Brad Franklin (franklin@ppic.org)

Thank you for your interest in this work.

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