Surcharge Account Reform for California’s Class A Investor-Owned Water Utilities

Overview

Californians are in a water affordability crisis with water bills increasing at a higher rate than inflation over the last ten years. From 2011 to 2021, water bills for the customers of California’s largest investor-owned water utilities increased cumulatively by 57%, while inflation increased by 22%. During the same period, these utilities increased their use of Surcharge Accounts (an alternative ratemaking mechanism), imposing surcharges on customer bills. The increased use of Surcharge Accounts significantly increases customer water bills. Surcharges are often unanticipated, making it more difficult for customers to manage their household budget.

This paper examines Surcharge Account Reform, a proposal that would only allow a utility to recover surcharge amounts from customers only when the utility is earning less than its Authorized Return on Equity. This paper also examines current issues regarding recovery of amounts in Surcharge Accounts. Surcharge Account Reform is an important course correction to ensure customer bills are fair and reasonable.

Download: Surcharge Account Reform for California's Class A Investor-Owned Water Utilities