Proposed Water Legislation (SB 473) Could Raise Bills While Limiting Oversight

Californians are willing to pay their fair share for safe, reliable water. But a new bill under consideration could lead to customers being charged for water they didn’t use and would prevent state regulators from doing anything about it.

The California Public Utilities Commission (CPUC) has long rejected a flawed utility proposal known as the Water Revenue Adjustment Mechanism (WRAM). This approach essentially allows investor-owned water utilities to charge customers for water they didn’t use. The utilities argue that the mechanism supports water conservation, despite a 10-year study that showed there is no evidence supporting that claim. But the mechanism does allow the utilities to charge and keep money collected from their customers even when the companies’ actual costs are lower than expected, which results in higher profits.  

In the past year alone, the CPUC has denied four proposals from water utilities to reinstate the mechanism. Senate Bill (SB) 473 would override those decisions and mandate its adoption, even if it results in unjustified charges to customers.

What SB 473 Would Require

SB 473 would impose the mechanism across all investor-owned water utilities, despite the CPUC’s conclusion that this approach is not in the public interest.

If enacted, SB 473 would:

• Allow water utilities to recover forecasted revenue even if their actual expenses were lower than expected.
• Permit shareholder profits to exceed levels authorized by the CPUC.
• Shift the financial risk of budget management from utilities to ratepayers.

Why SB 473 Raises Concerns

While it’s no surprise that any utility-sponsored legislation may seek to protect or enhance profits, SB 473 goes further by weakening regulatory oversight and significantly limiting the CPUC’s ability to ensure that customer charges remain tied to actual costs. By reducing regulatory oversight, the bill shifts financial risk onto ratepayers and raises serious concerns about fairness, affordability, and accountability.

Supporters argue that the bill mirrors alternative ratemaking practices used by California’s investor-owned energy utilities. But given the volatility and high cost of energy bills in the state, it’s worth questioning whether that approach is appropriate for the water sector.

What's at Stake for Ratepayers

Most Californians understand the need for occasional rate increases when there’s a clear, necessary purpose – such as replacing old pipelines or upgrading water treatment systems. However, ratepayers should not be forced to subsidize excessive profit margins or pay for services they didn’t receive.SB 473 would do exactly that. It would tie the hands of the CPUC and give water utilities a legislatively-protected ability to charge customers for revenue shortfalls, even when actual costs are lower than projected. This approach rewards overestimation of the utility’s operational costs and makes it harder for households to predict and manage their bills.

Oversight Matters, Especially Now

At a time when affordability is top of mind for many California households, the Legislature should be strengthening safeguards – not weakening them in the name of utility profits.

SB 473 would undermine the CPUC’s ability to ensure just and reasonable rates, and in doing so, could place unnecessary financial burdens on customers across the state.

Maintaining strong, independent oversight is essential to making sure water rates reflect the true cost of service – not inflated forecasts or guaranteed profits.