Cal Water Bills to Rise as Larger Rate Case Decision Looms

SAN JOSE, CA – December 29, 2025 – California Water Service customers will see their bills increase by 3% starting January 1, 2026, after state regulators approved a temporary rate adjustment for the utility. The move provides a financial stopgap for the company while the California Public Utilities Commission (CPUC) continues its lengthy review of a much larger, multi-year rate proposal tied to a massive infrastructure overhaul.

The interim hike, which applies to nearly all of Cal Water’s service areas, is a direct result of delays in the CPUC’s decision-making process for the utility's 2024 General Rate Case (GRC). While the temporary increase is intended to prevent a larger, retroactive surcharge on customers later, it serves as a prelude to potentially steeper increases on the horizon. The interim rates are subject to refund or adjustment once the CPUC issues its final ruling.

"Because delayed rate case decisions can adversely impact customers by requiring higher retroactive recovery surcharges on top of final rate changes, these interim rates will help mitigate those impacts," said Martin A. Kropelnicki, California Water Service Group Chairman and CEO, in a statement. He added that the measure enables the company "to continue making important infrastructure improvements to help keep the water we deliver safe, clean, and reliable.”

The Regulatory Balancing Act

The approval of interim rates shines a light on the complex and often protracted nature of utility regulation in California. Investor-owned utilities like Cal Water must file a General Rate Case every three years, submitting a detailed justification for proposed rates and capital expenditures. This kicks off an 18-month review cycle where the CPUC, along with its independent consumer advocacy branch, the Public Advocates Office, scrutinizes every aspect of the utility's request.

The goal is to ensure that customers pay "just and reasonable rates" for safe and reliable service. However, the sheer volume of data, technical analysis, and public input involved can extend the process beyond its intended timeline. When a decision is not reached by the time new rates are scheduled to take effect, the CPUC may authorize interim rates.

This mechanism is designed to avoid the "pancaking effect" that has frustrated customers in the past. In a recent instance, a delayed GRC decision for Cal Water resulted in rate hikes for both 2023 and 2024 being implemented simultaneously in the summer of 2024. The sudden, compounded increase during a high-usage season led to "sticker shock" and public outcry in some communities, with some residents in the Bayshore District reporting their bills had doubled. The current interim rate is a proactive attempt to smooth out the financial impact on customers.

What This Means for Your Wallet

While the 3% interim adjustment is the immediate change, it represents only a fraction of what Cal Water has requested in its full GRC application. The utility is seeking approval for a cumulative revenue increase of more than 30% over three years: 17.1% in 2026, followed by 7.7% in 2027 and 8.1% in 2028.

Compounding the potential financial impact, consumer advocates have pointed out a critical omission in the utility’s rate case filing. The GRC application excludes the significant costs required to comply with new federal standards for treating per- and polyfluoroalkyl substances (PFAS), a class of persistent chemicals found in water sources. Cal Water has projected that this separate compliance effort will add an additional 25% to customer bills, on top of any increases approved in the GRC.

This looming combination of rate adjustments has raised concerns about water affordability, a growing issue across the state. A UCLA report highlighted that average household water bills in Los Angeles County climbed nearly 60% between 2015 and 2025, far outpacing inflation. For Cal Water customers, the final decision from the CPUC will determine the full extent of the financial burden for the coming years.

The High Cost of Aging Pipes

The driving force behind Cal Water's request is a proposed $1.6 billion Infrastructure Improvement Plan for 2025 through 2027. The utility argues these investments are not optional but essential to the continued delivery of safe and reliable water.

Nearly half of the proposed budget—approximately 46%—is earmarked for replacing aging water mains. Much of California's water infrastructure was built decades ago and is now reaching the end of its useful life, leading to increased risks of leaks, main breaks, and service interruptions. Proactive replacement is considered more cost-effective than emergency repairs and is crucial for both daily water supply and firefighting capabilities.

Beyond pipeline replacement, the capital plan includes:
* Water quality upgrades to treat existing and newly regulated contaminants.
* System resilience projects, such as installing backup generators to withstand power outages and investing in solar installations to reduce grid reliance.
* Enhanced physical and cybersecurity to protect critical facilities and customer data.
* Advanced Metering Infrastructure (AMI) to provide customers with better water-use data and support conservation efforts.

This push for modernization reflects a statewide reality. California's overall infrastructure received a C- grade in the most recent national assessment, signaling widespread weaknesses. For water utilities, adapting to climate change, securing long-term water supplies, and maintaining aging systems requires immense and continuous capital investment.

A Statewide Trend of Rising Water Costs

Cal Water's situation is not an anomaly. Other major investor-owned water utilities across California are on a similar trajectory, filing for significant rate increases to fund their own ambitious infrastructure programs.

San Jose Water, for example, recently received approval for a rate plan to support its $540 million capital program, which includes replacing 24 miles of water mains annually and addressing PFAS contamination. Golden State Water Company has also filed a GRC requesting a 23% rate increase by 2025 to fund upgrades to its treatment facilities and pipelines.

This consistent trend underscores the immense financial pressure on water systems throughout the state. As utilities work to replace deteriorating assets and comply with stricter water quality regulations, the costs are inevitably passed on to customers. The CPUC is left with the difficult task of verifying the necessity of these multi-billion-dollar investments while attempting to shield ratepayers from unaffordable increases, a balancing act that will define the cost of water in California for years to come.