Tapped Out: Strategies For Water Affordability

In 2012, California was the first state to recognize in statute a human right to water. As set forth in Section 106.3 of the California Water Code, it is the “established policy of the state that every human being has the right to safe, clean, affordable and accessible water adequate for human consumption, cooking and sanitary purposes.” As high utility bills are the subject of headlines and political debates, the affordability aspect of the human right to water is coming under greater scrutiny.

There are a variety of factors that contribute to increased water rates. California’s water infrastructure, the complex system of pipelines, wells, dams, reservoirs, pumping stations and treatment plants necessary to provide safe and clean drinking water is aging, making it more prone to leaks and breaks. Climate change is leading to more severe shifts between drought and flood, requiring more capacity for capture and storage. The investment needed to modernize water infrastructure and make it better suited for future needs is reflected in higher rates.

At the same time, emerging contaminants and more stringent water quality regulations are also increasing the cost of providing water service. PFAS (known as “forever chemicals”) has been found in nearly half of the tap water in the United States. These chemicals, linked to cancers, immune issues and developmental delays, do not easily break down, allowing them to accumulate in the body and persist in the environment. Public water systems must complete initial monitoring for PFAS by 2027 and implement expensive treatment solutions by 2029. The cost of the facilities, chemicals and labor needed to address PFAS and other contaminants leads to higher water rates.

Water providers are also subject to many of the higher costs that are also affecting their customers. It takes a great deal of energy to run a water system and water utilities have seen their energy bills skyrocket over the last year. Just like their customers, water utilities have also experienced pain at the pump, as the cost of the gas needed for their trucks and other vehicles has gone up substantially. All of these increased costs must be recovered through water rates.

The affordability of water should also be considered in comparison to the alternative to tap water – bottled water. On average, tap water costs less than penny a gallon. A gallon jug of bottled water costs approximately $1-2 but buying that same amount in the much more common smaller bottles can cost approximately $7 per gallon. Customers may turn to bottled water for convenience, taste, or because of concerns about the safety of their tap water. Purchasing bottled water can be a significant financial burden but it is one that customers may consider to be unavoidable if they do not trust the quality of their local tap water. In considering the affordability of water quality investments, particularly those affecting the taste, color and odor of tap water, water providers must evaluate the impact on customer bills if the investments are made, as well as the potential for customers to strain their household budgets by buying bottled water if the water quality is not improved.

Average water bills vary considerably across California. Factors such as the source of water, geography and the size of the system all contribute to this variability. There is also not a single definition of what constitutes “affordable” with respect to water. It is generally agreed, however, that 600 cubic feet per household per month represents essential water service. This amount is considered to be sufficient to cover essential indoor usage for consumption, cooking and sanitary purposes. Most efforts are focused on the affordability of this essential usage. Water used for outdoor purposes, such as landscaping or pools, is considered discretionary and is often subject to higher unit prices to encourage efficient use.

The State Water Resources Control Board (SWRCB) assesses affordability based on the water bill as a percentage of median household income and also looks at what it classifies as an “Extreme Water Bill” – drinking water charges that meet or exceed 150% of statewide average drinking water customer charges. The California Public Utilities Commission (CPUC) uses three metrics to assess the affordability of utility service, including water service. First is the affordability ratio, which quantifies the percentage of a representative household’s income that is required to pay for an essential utility service, after non-discretionary costs such as housing and other essential utility services are removed from the household’s income. Second is hours at minimum wage, which describes the work necessary for a household earning minimum wage to pay for essential utility service. Third is a metric that examines the socioeconomic characteristics of service areas based on the CalEnviroScreen a mapping tool.

Application of these metrics and others demonstrate that although water service remains generally affordable for most customers – and relatively underpriced considering the value and true cost of providing service – many economically disadvantaged households struggle to pay their water bills.

Smaller water systems often have higher rates because the cost of providing water service, much of which consists of fixed costs that do not change based on the volume of water produced, are spread over a small customer base. Regulatory policies that encourage larger water providers to purchase smaller systems can make water more affordable for these customers. Tiered rate designs, in which the first, or lowest, tier is intended to represent essential use, may help customers manage their bills. Under such rate designs, the rate for essential indoor water use is lower than the rate for discretionary use, which would fall into the higher tiers. The Water Shutoff Protection Act, which went into effect in February 2020, provides protection against disconnection for customers with delinquent water bills, and requires water providers to offer options such as payment plans, amortization of unpaid balances, or temporary deferrals. Nonetheless, many households need additional assistance.

In December 2020, Congress established the first national water assistance program, the Low Income Household Water Assistance Program (LIHWAP). LIHWAP was a federally funded program that helped low-income households pay residential water and sewer bills and manage their residential water utility costs. California water customers were allocated approximately $116 million through this program. LIHWAP ended in March 2024. In August 2025, the House of Representatives introduced the bipartisan LIHWAP Establishment Act, but it has not yet been passed.

With the end of the national LIHWAP program, the burden to fund low-income assistance programs falls on local ratepayers and taxpayers. Most large investor-owned water utilities (those with more than 10,000 customers) regulated by the CPUC have had low-income support programs for decades. These programs vary in execution, but most offer either flat dollar discount or a percentage discount on essential water use to eligible households. To increase participation in these programs, the CPUC has authorized investor-owned electric utilities to share data from their customer assistance programs with water utilities where their service areas overlap. This means that customers already enrolled in energy low-income assistance programs automatically qualify for water low-income assistance programs, making it significantly easier for these customers to get the assistance that they need. These programs are funded through rates which, while generally successful, can be concerning in disadvantaged service areas. In such areas, the majority of the customers may qualify for the customer assistance program and the minority of customers who don’t qualify, whose household income may not be much higher than the qualifying level, shoulder the burden of the cost of these programs.

It is even more challenging for municipal water providers to offer customer assistance programs. California Proposition 218, a ballot measure passed in 1996, restricts water affordability efforts by requiring public water rates to be strictly based on the cost of service. Therefore, public water providers cannot use rate revenues to support customer affordability programs. Instead, public water agencies must use non-rate revenue such as grants, property taxes, or enterprise funds to finance customer assistance programs.

In 2019, the SWRCB published a draft proposal for a statewide low-income water rate assistance program. The program was never implemented, perhaps due to the estimated annual price tag of more than $600 million. It may be time to revisit such efforts, however, since the current patchwork of policies and programs fall short of ensuring the human right to affordable water to all in California.

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