The California Public Utilities Commission (CPUC) approved and adopted a partial settlement agreement in California American Water’s General Rate Case at its meeting on December 5, 2024. The decision adopts a partial settlement between California American Water and the CPUC’s Public Advocates Office.
The decision provides incremental annualized water and wastewater revenues of approximately $20.9 million in test year 2024, approximately $15.9 million for escalation year 2025 and approximately $15.9 million for attrition year 2026. The Commission’s decision is retroactive to January 1, 2024. California American Water expects to implement new rates in February 2025.
The decision also authorizes $390 million in new infrastructure investment to maintain high-quality water and wastewater service. These investments include upgrades to distribution systems, treatment facilities, storage tanks and pump stations, and are necessary to maintain and improve water quality, reliability, fire protection as well as customer service for the communities served by California American Water.
In its application, California American Water proposed to continue full rate decoupling and sales adjustment mechanisms that promote affordability and conservation-oriented rate design.
The CPUC’s decision includes approval of an important sales adjustment mechanism, which reflects the understanding that water sales forecasting is difficult and should be adjusted annually to reflect current data
The CPUC’s decision includes approval of an important sales adjustment mechanism, which reflects the understanding that water sales forecasting is difficult and should be adjusted annually to reflect current data. The decision does not recognize the importance of a decoupling mechanism in promoting affordable rates and conservation. Decoupling separates water revenue from water sales volume and is commonly used by energy utilities. In 2022, the Legislature passed SB 1469, which expressed a clear legislative intent in support of decoupling for CPUC regulated water utilities. In 2024, the California Supreme Court struck down the CPUC’s prohibition on the use of decoupling by water utilities. California American Water intends to evaluate filing an application for rehearing with the CPUC and is exploring other avenues to help ensure that customers can achieve the affordability and conservation benefits associated with decoupling and sales adjustments mechanisms.
“The CPUC's decision overlooks the importance of decoupling to allow California American Water to be a leader in ensuring affordable rates and promoting conservation for our customers," said California American Water President Kevin Tilden. "This mechanism, widely used by energy utilities and proven effective, has strong support from state legislators.”
As part of the settlement, California American Water received adjustments strengthening its Customer Assistance Program. Discounts increased from 20 percent to 25 percent off the typical bill for qualified residential customers in Northern and Southern California and from 30 percent to 35 percent for qualified customers in Central California. Information about the Customer Assistance Program and customer applications as well as information about other assistance programs can be found at www.californiaamwater.com under Customer Service & Billing, Bill Paying Assistance.
Rate cases are proceedings used to address the capital investment needed for infrastructure, the costs of operating and maintaining the utility system and the allocation of those costs among customer classes. Large, regulated water utilities like California American Water are required by law to file a General Rate Case every three years with the CPUC to set revenues and rates.
Customers will receive specific information about rates in their bill in each of California American Water’s water and wastewater service areas, as well as information about customer assistance and conservation programs. Specific information will also be available on the company’s website at www.californiaamwater.com under Customer Service & Billing, Water and Wastewater Rates.
