By Mary Ann Dickinson & Tia Fleming
As a world leader in environmental stewardship and with aggressive climate goals, California stands at a pivotal moment in addressing its water supply challenges. The climate crisis, intensifying droughts, and a growing population are putting increasing pressure on our water resources. Our state has often turned to temporary conservation measures, but it’s clear that we need sustainable, long-term solutions to secure California’s water future and protect our most vulnerable communities from the rising costs of inaction.
Currently, the California Public Utilities Commission (CPUC) is considering a flawed proposal that threatens to dismantle a mechanism called decoupling, a proven method of incentivizing water conservation while keeping consumer costs affordable.
Decoupling separates water sales from a utility provider’s revenue, allowing providers to promote conservation without compromising their financial stability. This means essential water use remains affordable while higher usage is charged at steeper rates, encouraging responsible consumption. By protecting the economic viability of utility providers, decoupling has played a crucial role in ensuring reliable water access and more efficient use of water resources across California.
Historically, the CPUC has employed various mechanisms to implement decoupling for both energy and water utilities, striking a balance between promoting conservation and maintaining the economic health of utilities. Without decoupling mechanisms, utility providers would struggle to cover their fixed costs, which could lead to higher rates for all Californians. Decoupling also ensures utilities neither over-collect nor under-collect revenue, keeping costs more predictable for consumers and preventing rate spikes.
Decoupling serves two key purposes. First, it enables water companies to use tiered pricing, where basic, essential water use is priced affordably, but higher usage is charged at progressively steeper rates. This encourages customers to conserve water by making excessive use more costly. Second, decoupling ensures that even if customers reduce their water use, utilities can still cover their fixed costs, which can represent up to 90% of their total expenses. These costs include critical infrastructure, maintenance, and regulatory compliance, all of which must be sustained regardless of how much water is consumed.
By decoupling water sales from revenue, California allows utility providers to prioritize conservation while still investing in infrastructure and maintaining operational health. Without this mechanism, utility providers might be forced to raise rates across the board to cover their costs, making water more expensive for everyone—especially lower-income families already struggling with increasingly higher living expenses.
The importance of decoupling was highlighted in a 2020 dissent by former CPUC Commissioner Liane M. Randolph. She warned that if these mechanisms were removed, providers would likely demand higher rates of return to offset the financial risks from reduced water sales. This could lead to even higher water bills for consumers, undermining the goal of providing affordable access to water for all Californians.
As California faces mounting environmental pressures, regulators and lawmakers must reaffirm their commitment to decoupling, and extend the same benefit to water utilities that historically has been provided to energy utilities by the CPUC. This approach is not just about managing costs; it’s about safeguarding access to affordable water for all Californians while continuing to illuminate a path to a climate resilient future.
Mary Ann Dickinson is the founder and past CEO of the Alliance for Water Efficiency. Tia Fleming is Co-Executive Director of the California Water Efficiency Partnership.