fbpx FAQ - California Water Association
1 Regulated Water Utilities 101

Regulated water utilities provide safe, reliable water service for drinking, cooking, sanitation and more. Every day, more than 6 million Californians who turn on the tap are being served by professional water service providers who own and operate the water utility in their community.

These utilities are regulated by the California Public Utilities Commission (CPUC). The CPUC establishes rates and terms of service, as well as provides safety and security oversight and shares regulatory oversight with the State Water Resources Control Board. In the course of regulating these public utilities, the CPUC reviews company costs, audits systems, holds hearings on general rate cases, oversees applications for capital projects and other formal proceedings, and renders decisions that govern the utility’s relationship with its customers.

Because they are regulated by the California Public Utilities Commission (CPUC), regulated water suppliers are among the most scrutinized utilities in the state. The CPUC establishes rates for regulated water utilities by reviewing requests for service changes and the company’s costs, as well as system needs. Then, the CPUC conducts public hearings for customers and holds formal legal hearings adjudicated by an administrative law judge.

Regulated water utilities own the infrastructure used to treat and distribute water to customers. Shareholders invest in that infrastructure, building and maintaining a facility’s water and delivery system in order to provide the best water service at competitive rates. They also pay franchise, property, and other business taxes –which municipal utilities do not.

Regulated water utilities use a combination of shareholder capital (e.g. stock), short- and long-term debt (e.g. commercial paper, bonds) and contributed funds (e.g. from builders) to construct and expand their water treatment and delivery system. All financing costs are approved by the California Public Utilities Commission.

High quality, reliable, and dependable water service is vital for communities to grow and thrive. 

Regulated water utilities help local economies by paying franchise, property and other business taxes. These taxes help support community services and facilities. 

Employees of regulated water utilities live and work in the communities they serve. 

The regulation of water utilities has evolved significantly since the 19th century when westward expansion catalyzed the development of infrastructure, including water services. Initially, utilities were primarily privately owned and expanded alongside the railway system, requiring regulation to ensure fair pricing and reliable service. The establishment of state regulatory commissions began in the 1870s with the advent of electricity and telephone services. These commissions were particularly focused on ensuring fair financial practices and service provision by these private entities, given their monopoly status.

By the mid-1920s, many new systems were operated by local governments and the expansion of government run water systems became common. This expansion continued, and now  roughly 12% of the population in the US is served by investor-owned utilities, some receive water from private wells, and,, the majority of people receive water from some form of public water provider managed by municipalities, counties, or other governmental entity. 

The landscape of water utility management reflects the expansion of people and communities across the United States. Despite the prevalence of publicly owned systems, private water companies play a crucial role.

A shareholder is a person, company, or institution that owns at least one share of a company’s stock or in a mutual fund. Any person with a retirement or investment fund may be investing in water utilities. Like shares in any publicly traded company, regulated water companies can also be invested in.

2 Rates and Services

Rates are set by the California Public Utilities Commission (CPUC). In setting rates every three years, as mandated by California state law, the CPUC thoroughly reviews the company’s costs, audits system needs, conducts public hearings for customers, holds formal evidentiary hearings overseen by judges, and issues final decisions authorizing the utilities to establish approved rates and terms of service.

Municipal water providers sometimes have access to certain loans and grants that regulated water utilities do not, however, regulated water utilities continue to seek equal access of such loans and grants for the benefit of their customers. After all, taxes paid by regulated water utility customers provide for and subsidize these loans and grants, just as the taxes paid by customers of municipal suppliers do.

Every community in California is different, so it is difficult to compare rates among water providers—whether municipal or regulated—even in the same geographic region. The factors that impact rates are diverse and unique to each water provider. These factors include the sources of supply, condition of the water system, water quality compliance costs, cost of purchasing water, the level of existing and needed investment and geographic location.

All water providers, public and regulated alike, must maintain and upgrade their systems’ infrastructure and meet the same water quality standards. These changes in standards can have high costs that impact rates. To avoid raising rates, a municipality may choose funding sources, such as developer impact fees, reserves, or new local taxes–options that are not available to regulated water utilities. Some regulated water utilities offer the advantage of economies of scale, which means that they reduce costs and improve quality to the customer by centralizing and sharing costs for certain services that are paid for through CPUC approved rates.

3 Water Quality

All water systems, whether regulated- or municipal, must meet stringent water quality standards set by the state and federal governments. The State Water Resources Control Board oversees regulated and municipal suppliers to ensure that they are complying with all standards. Additionally, the California Public Utilities Commission oversees regulated water utilities to ensure that they are meeting these standards.  The regulated water sector has a long track record of meeting and surpassing water quality standards to protect customers’ health and safety.

Per- and polyfluoroalkyl substances (PFAS) are compounds that have been used in manufacturing processes for decades. They have been used to make carpets, clothing, fabrics for furniture, paper packaging for food, and other materials that are resistant to water, grease, or stains. 

Protecting customers’ health and safety is the highest priority of regulated water utilities. CWA members are committed to complying with all standards set by the public health experts.  

Testing and treatment for PFAS are currently being developed and implemented across service areas, where high concentration levels are detected. You can learn more about specific actions each of our members are taking by visiting their respective websites.

4 Hot Water Topics

Cyber-attacks against public water systems are increasing. Implementing basic cyber hygiene practices is essential to help utilities prevent, detect, respond, and recover from cyber incidents. Recently, the U.S. Environmental Protection Agency (EPA) Administrator Michael Regan and National Security Advisor Jake Sullivan sent a letter to all U. S. Governors inviting state environmental, health and homeland security secretaries to a convening by their deputies to discuss the urgent need to safeguard water sector critical infrastructure against cyber threats. You can learn more here about EPA’s Cybersecurity Resources for Drinking Water and Wastewater Systems.