Types of Rates
Most residential customers and all other customer classes (industrial, commercial, public authority, etc.) receive service under a metered rate schedule consisting of a service charge and a quantity rate. Service charges (also known as Readiness-to-Serve charges) are designed to recover 50% of the utility's fixed costs. Since this rate recovers fixed costs, which the utility incurs regardless of the amount of water sold, customers are billed the service charge even when no water is consumed. Often the monthly service charge is mistakenly referred to as a meter charge. Not only is this designation incorrect, but meter-related costs including meter reading and billing do not fully reflect the costs (shown above) that service charges are designed to recover.
Quantity rates, expressed in $/Ccf (100 cubic feet), recover all remaining costs (variable costs plus 50% of the fixed costs). As consumption increases, so does the customer's bill. Generally, all customers of a water utility pay the same quantity rates, which do not vary with the amount of water used. However, in areas with a severe water supply shortage, two or more quantity rate blocks may be established to encourage conservation. For these areas, the quantity rates increase with increased water consumption, such that the more the customer uses, the higher the quantity rate.
In addition to metered rate schedules, some utilities have residential flat rate schedules that do not have a quantity rate component. Flat rate customers are charged the same rate regardless of usage. However, flat rates can vary by customer based on lot size. During the last drought (early 1990s), legislation was signed to encourage conservation by requiring all new service connections to be metered rather than flat rate.
The rates for fire service lines are also a form of flat rate service, with the rate based upon the size of the fire service line. Since water consumption occurs only when there is a fire, metering this service is impractical.
Additionally, some utilities have reclaimed water metered rate schedules. Reclaimed (or recycled) water is wastewater that has been treated for reuse, but not for potable consumption. Because of its high infrastructure costs and restricted uses, reclaimed water is only available in limited areas through specially color-coded water pipes. Generally, irrigation and industrial customers use reclaimed water. Wholesale water agencies often price reclaimed water below wholesale potable water rates to encourage its use and allow customers to recover on-site infrastructure conversion costs.
Service Charge Ratios
Service charges (which recover 50% of the utility's fixed costs - see above) are determined by the Commission based on meter size. The Commission's Water Branch Memorandum dated January 18, 1991 (pursuant to D.85-06-064) contains the following meter ratios:
Meter Size |
Ratio |
| 5/8" x 3/4" | 1.0 |
| 3/4" | 1.5 |
| 1" | 2.5 |
| 1-1/2" | 5.0 |
| 2" | 8.0 |
| 3" | 15.0 |
| 4" | 25.0 |
| 6" | 50.0 |
| 8" | 80.0 |
| 10" | 115.0 |
| 12" | 165.0 |
| 14" | 225.0 |
Accordingly, if the monthly charge for a 5/8" x 3/4" meter is $5, the monthly charge for a 1" meter should be $12.50 ($5 x 2.5).
Fire Services
Fire protection service is the provision of sufficient water at minimum pressures over specific time periods for controlling and extinguishing fires. Every water utility must stand ready to meet the demands of a large fire. To make this service available, utilities construct large networks of water supply facilities, including hydrants, mains, supply sources, pumps, storage reservoirs and appurtenances.
Fire Protection Standards
The Commission has established fire flow requirements for California's investor-owned utilities. In setting the following standards, the Commission is aware of special conditions that might be faced by local fire protection agencies. Therefore, local fire flow standards preempt the following standards, whether higher or lower.
Land Use |
Minimum Flow (Gallons Per Minute) |
| Rural, residential with a lot density of two 250 or less per acre primarily for recreational and/or part-time occupancy | 250 |
| Lot density of less than one single-family residential unit per acre | 500 |
| Lot density of one or two single-family residential units per acre | 750 |
| Lot density of three or more single-family residential units per acre, including mobile home parks | 1,000 |
| Duplex residential units, neighborhood business of one story | 1,500 |
| Multiple residential, one and two stories, light commercial or light industrial | 2,00 |
| Multiple residential, three stories or higher,heavy commercial or heavy industrial | 2,5000 |
Investor-Owned Water Companies in California
Class A Water Companies:
Apple Valley Ranchos Water Company
Downey (San Bernardino County)
California Water Service Company*
San Jose (Alameda, Butte, Fresno, Glenn, Kern, Lake, Los Angeles, Monterey, San Joaquin, San Mateo, Santa Clara, Solano, Sonoma, Tulare, Ventura & Yuba Counties)
California American Water
Coronado (Humbolt, Los Angeles, Monterey, Placer, Sacramento, San Diego, San Mateo, Santa Cruz, Sonoma & Ventura Counties)
Golden State Water Company
San Dimas (Contra Costa, Imperial, Lake, Los Angeles, Orange, Sacramento, San Bernardino, San Luis Obispo, Santa Barbara & Ventura Counties)
Great Oaks Water Company
San Jose (Santa Clara County)
Park Water Company
Downey (Los Angeles County)
San Gabriel Valley Water Company
El Monte (Los Angeles & San Bernardino Counties)
San Jose Water Company
San Jose (Santa Clara County)
Suburban Water Systems
Covina (Los Angeles & Orange Counties)
Valencia Water Company
Valencia (Los Angeles County)
Class B Water Companies:
Alco Water Service
Salinas (Monterey County)
Del Oro Water Co., Inc.
Chico (Butte & Tuolumne Counties)
East Pasadena Water Company
Pasadena (Los Angeles County)
Fruitridge Vista Water Company
Sacramento (Sacramento County)
Class C Water Companies:
Agate Bay Water Company
Carmichael (Placer County) (Agate Bay, northwest shore of Lake Tahoe)
Antelope Valley Water Corporation
Long Beach (Kern & Los Angeles Counties)
Arrowhead Manor Water Co., Inc.
Cedar Glen (San Bernardino County)
Bakman Water Company
Fresno (Fresno County)
Bass Lake Water Company
Bass Lake (Madera County)
Big Basin Water Co., Inc.
Santa Cruz (Santa Cruz County)
Erskine Creek Water Company
Lake Isabella (Kern County)
Francis Land and Water Company
Sacramento (Humboldt County)
Fulton Water Company
Tahoe City (Placer County)
Graeagle Water Company, Inc.
Graeagle (Plumas County)
Hillview Water Company
Oakhurst (Madera County)
Kern River Valley Water Company
Long Beach (Kern County)
Lukins Brothers Water Company
South Lake Tahoe (El Dorado County)
Meadowbrook Water Co. of Merced, Inc.
Merced (Merced County)
Mesa-Crest Water Company
La Canada (Los Angeles County)
North Gualala Water Works
Gualala (Mendocino County)
Penngrove Water Company
Santa Rosa (Sonoma County)
Rio Plaza Water Company, Inc.
Moorepark (Ventura County)
Rogina Water Company, Inc.
Talmage (Mendocino County)
Sea Ranch Water Company
The Sea Ranch (Sonoma County)
Searles Domestic Water Company
Trona (San Bernardino County)
Southern California Edison Company
Rosemead (Los Angeles County)
Tahoe Cedars Water Company
Tahoma (El Dorado & Placer Counties)
Yosemite Spring Park Utility Co.
Coarsegold (Madera County)
lClass D Water Companies
Alpine Village Water Company
Porterville (Tulare County)
Arroyo Center Water Co., Inc.
Greenfield (Monterey County)
Audrain Station
Sacramento (El Dorado County)
B and W Riverview Estates Water Co.
Los Molinos (Tehama County)
Baycliff Subdivision
Lower Lake (Lake County)
Beasore Meadows Water System
Oakhurst (Madera County)
Benbow Water Corporation
Garberville (Humboldt County)
Black Butte Water Co.
Orland (Glenn County)
California Hot Springs Water Serv.
California Hot Springs (Tulare County)
Cazadero Water Company
Cazadero (Sonoma County)
Central Camp Water Inc.
Friant (Madera County)
Central Water System
Porterville (Tulare County)
Cobb Mountain Water Company
Cobb (Lake County)
Cold Springs Water Company, Inc.
Cold Springs (Tuolumne County)
Cottage Springs Water Company
Avery (Calaveras County)
Easton Estates Water Company
Fresno (Fresno County)
Foothill Ditch Company
Exeter (Tulare County)
Garrapata Water Company
Monterey (Monterey County)
Geyserville Water Works
Geyserville (Sonoma County)
Goodyears Bar Water Company
Sacramento (Sierra County)
Grand Oaks Water Company
Tehachapi (Kern County)
Hat Creek Water Company
Old Station (Shasta County)
Havasu Water Company, Inc.
San Clemente (San Bernardino County)
Idylwild Water System
Los Gatos (Santa Clara County)
Interstate 5 Utility Company, Inc.
Bakersfield (Kern County)
James Water Company, Inc.
Kernville (Kern County)
January Water Company
Tulare (Tulare County)
Keene Water System
Roseville (Kern)
Kenwood Village Water Company
Penngrove (Sonoma County)
Klein Homes Water Company
Ukiah (Santa Clara County)
Lake Alpine Water Company, Inc.
Farmington (Alpine County)
Lake Forest Utility
Tahoe City (Placer County)
Lakeview Water Company
Pacific Palisades (San Bernardino County)
Lands of Promise Water System
Palo Alto (Kern County)
Larkspur Meadows Water Company
Paramount (Tehama County)
Las Flores Water Works
Gerber (Tehama County)
Lewiston Valley Water Co., Inc.
Lewiston (Trinity County)
Little Bear Water, Inc.
King City (Monterey County)
Live Oak Springs Water & Power Co.
Boulevard (San Diego County)
Llano Del Rio Water Company
Llano (Los Angeles County)
Long Canyon Water Company
Bakersfield (Kern County)
Lytle Springs Water Company
Lytle Creek (San Bernardino County)
MacDoel Water Works
Klamath Falls (Siskiyou County)
Madden Creek Water Company
Tahoma (Placer County)
Mar Vista Water Company, Inc.
Aptos (Santa Cruz County)
Matt Dillon Water Company
Twain Harte (Tuolumne County)
Mayacama Golf Club, LLC
Santa Rosa (Sonoma)
McKenna Ranch Water Company
San Diego (Riverside)
Meadow Valley Water Works
Meadow Valley (Plumas County)
Mecchi Water Company
San Jose (Santa Clara County)
Metropolitan Water Company
Fresno (Fresno County)
Meyers Water Company
Napa (Napa County)
MHC Aquisition One, LLC
Chicago (Santa Cruz County)
Mira Monte Water Company
Gerber (Tehama County)
Mountain Mesa Water Company
Bakersfield (Kern County)
Mountain Springs Water Company
Tehachapi (Kern County)
Nacimiento Water Company
Bradley (San Luis Obispo County)
Nish Water Company
Visalia (Tulare County)
Owens Valley Water Company
Los Angeles (Inyo County)
Pierpoint Springs Resort Water Co.
Camp Nelson (Tulare County)
Point Arena Water Works, Inc.
Point Arena (Mendocino County)
Ponderosa Sky Ranch Water System
Paynes Creek (Tehama County)
PureSource Water, Inc.
Aptos (Santa Cruz County)
R.R. Lewis Small Water Company
Stockton (Sierra County)
Ramona Water Company
Palm Desert (Riverside County)
Redwood Water Company, Inc.
Forestville (Sonoma County)
River Island Water Company
Porterville (Tulare County)
Riverview Acres Water Company
Salyer (Trinity County)
Riverview Estates Water Company
Red Bluff (Tahama County)
Rolling Green Utilities, Inc.
Big Pine (Inyo County)
Rural Water, Inc.
Grover Beach (San Luis Obispo County)
Ryan Water
San Jose (Santa Clara County)
Sellars Water Service
Shafter (Kern County)
Sequoia Crest, Inc.
Springville (Tulare County)
Sereno Del Mar Water Company
Forestville (Sonoma County)
Sierra City Water Works, Inc.
Grass Valley (Sierra County)
Slide Inn/Snobowl Water Company
Sonora (Tuolumne County)
Sonoma Springs Water Company, LLC
Kenwood (Sonoma County)
Sonora Water Company
Sonora (Tuolumne County)
Sorsoli Water Company, Inc.
Crescent Mills (Plumas County)
Southlake Water Company
Lake Isabella (Kern County)
Spreckels Water Company
San Jose (Monterey County)
Spring Crest Water & Power Company
Mountain Center (Riverside County)
Stewart Water Company, Inc.
Lucerne Valley (San Bernardino County)
Stirling Bluffs Corporation
Chico (Butte County)
Stone Creek Water
Palm Desert (Riverside County)
Susan River Park Water Company
Susanville (Lassen County)
Tahoe Park Water Company, Inc.
Tahoe City (Placer County)
Tahoe Swiss Village Utilities, Inc.
Homewood (El Dorado & Placer Counties)
Tehachapi Mountain Water Company
Tehachapi (Kern County)
Timberland Water Service
Tahoe City (Placer County)
Toro Water Service, Inc.
Soquel (Monterey County)
Traver Water Company
Coalinga (Tulare County)
Trinity Village Water Company
Eureka (Trinity County)
Tulco Water Company
Visalia (Tulare County)
Twin Lakes Enterprises
Bridgeport (Mono County)
Twin Valley Water Company, Inc.
Morgan Hill (Santa Clara County)
Vista Grande Water System
Gerber (Tehama County)
Warring Water Service, Inc.
Piru (Ventura County)
Watertec, Inc.
Porterville (Fresno & Tulare Counties)
Weimar Water Company, Inc.
Weimar (Placer County)
Wendell Water Company
Santa Rosa (Sonoma County)
West Riverside Canal Company
Riverside (Riverside & San Bernardino Counties)
West San Martin Water Works, Inc.
San Martin (Santa Clara County)
West Water Company
Cloverdale (Sonoma County)
Yerba Buena Water Company
Paso Robles (Ventura County)
Yermo Water Company
Apple Valley (San Bernardino County)
How Water Rates are Set
Cost of Service/Rate of Return
Pricing for Commission-regulated water utilities is cost-based. Accordingly, consumers are charged the cost of acquiring and delivering water. Most goods and services in the United States are priced according to value (in other words, the price is established by what the consumer is willing and able to pay) as determined by the forces of supply and demand. Since water utilities are monopolies with exclusive service areas (no direct competition), the Commission regulates their activities to ensure adequate levels of service are provided at the lowest reasonable costs.
Water utilities incur expenses and capital costs in providing water service. Expenses are costs that have short-term benefits. In general rate cases, these costs are estimated on an annual basis. Capital expenditures provide long-term value. Therefore, cost recovery is spread over the years the benefits will occur. For example, the cost of a reservoir is recovered in rates over its expected useful life. Capital expenditures are financed by stockholder equity and long-term debt. Stockholders are provided a return on the funds they invest. Returns are forecasted in general rate cases based on market conditions (inflation and interest rates) and returns in comparable risk investments.
General Rate Increase - Large Water
Rates are primarily determined in general rate cases, which are formal applications filed with the Commission in three or more year intervals. Included in the utility's application are detailed cost estimates, expenses, capital expenditures, and water sales on a forward-looking basis. The Commission staff (accountants, economists, engineers, and lawyers) reviews this information over a period of several months and issues a report with recommendations.
In a general rate case, the Commission takes a broad, in-depth look at a utility's revenues, expenses, and financial outlook and considers quality of service and other factors to arrive at just and reasonable rates. Additionally, the Commission conducts public participation hearings, at which customers are encouraged to express their views concerning the utility's service and rate request, and evidentiary hearings, during which expert witnesses testify and are cross-examined. An Administrative Law Judge (ALJ) presides over all Commission hearings. After the hearings, the ALJ prepares a proposed decision for comment. Finally, the Commission weighs all the evidence and issues a decision. To the extent that the Commission finds expenses, capital expenditures, and other rate items are necessary and reasonable, a rate increase is authorized. The entire process takes approximately 10 months.
General Rate Increase - Small Water
General rate cases are time-consuming and expensive. To lighten the burden for small water companies and minimize rate case expenses recovered in rates, the Commission allows rates for small water companies to increase periodically using an inflation factor (Consumer Price Index or CPI) in lieu of a general rate case. Informal general rate cases by advice letter are also available for small water companies. While this process does not involve hearings or a formal Commission decision, the Commission staff does perform a through investigation and presents its recommendations to the Commission. Rates are approved by a Commission resolution. Typically, advice letter general rate increases take six to nine months.
Advice Letters, Including Offset Increases
Advice letters are sequentially numbered formal letters required by the Commission to change a utility's tariffs, including rates, rules, and conditions of service. They can also be used for notification, such as triggering a catastrophic event memorandum account (discussed below). Typical advice letters include changes in service area maps, rate changes adopted in Commission decisions, rule changes, and implementation of new services not previously offered.
Offset rate increases are for changes in costs not established during a general rate proceeding. Advice letter offsets may be requested for costs that are beyond the utility's control (purchased water, pump taxes, electric power, and water quality related items) and for specific items, such as capital improvements, where the timing and/or cost can not be determined with sufficient certainty during a general rate case. An advice letter offset can be filed after the timing and costs are known with certainty, and for capital improvements after the project has been placed in service. No hearings are held, but the Commission staff examines the utility's request and supporting workpapers, and, if appropriate, recommends that the Commission authorize the rate change.
The filing requirements for advice letters are contained in the Commission's General Order No. 96-A.
Balancing/Memorandum Accounts
The Commission's ratemaking procedures do not allow a utility to charge retroactively (after the fact) for expenses previously incurred. While over- and under-recovery of costs occur for a variety of reasons, such as unexpected changes in expense or sales levels, these are considered a normal business risk. However, for items that are outside the utility's control, the Commission in limited circumstances permits a tracking mechanism. These tracking mechanisms are called balancing and memorandum accounts (there is a technical accounting difference between the two, but they operate essentially the same). Once a balancing/memorandum account has been authorized, unexpected cost changes that are not reflected in rates may be recorded for future recovery.
Commonly used balancing accounts include water supply related costs (purchased water, pump taxes, and electric power). In the water supply balancing accounts, utilities may record any differences from the expense levels reflected in rates. If an offset increase has been granted since the general rate case for a specific balancing account, both the revenue and expense changes are recorded in the account.
Another example is costs related to catastrophic events, such as earthquakes and major storms. Obviously, estimating costs related to catastrophic events in general rate cases is not practicable. Therefore, the Commission allows water utilities to open Catastrophic Event Memorandum Accounts by filing an advice letter after a catastrophic event occurs. By timely filing this advice letter, utilities are permitted to track all catastrophic event costs for subsequent recovery, after a review of their reasonableness.
In sum, balancing accounts and memorandum accounts allow water rates to more accurately reflect costs.