Anaheim proposes rate rise to tackle capex and regulatory costs

Anaheim proposes rate rise to tackle capex and regulatory costsAnaheim Public Utilities is advancing a proposal for a 2026 water rate increase that would add $4.32 to the average monthly residential bill. The new revenue is earmarked to fund a significant capital improvement programme and cover rising costs associated with wholesale water purchases and extensive regulatory compliance mandates.

Anaheim proposes a $0.27/HCF increase to its water rates, translating to a $4.32 monthly rise for the average residential customer, starting in 2026.

The increase is split between the Water Commodity Adjustment (+$0.17/HCF) for supply and compliance costs, and the Water System Reliability Adjustment (+$0.10/HCF) for capital projects.

Revenue will fund infrastructure work like main replacements and wildfire hardening, and cover costs from regulatory mandates (e.g., PFAS treatment) and wholesale water price hikes.

The utility stresses that funds are for infrastructure and water costs only, not labour, and that rates will remain approximately 30% below the Orange County average post-increase.

A public hearing on the proposed rates has been set for February 25, 2026, in compliance with California's Proposition 218 public notice requirements.

The City of Anaheim’s publicly owned utility is moving forward with a plan to increase water rates in 2026 to fund critical infrastructure investments and manage escalating regulatory costs. During its November 19, 2025 meeting, the Anaheim Public Utility (APU) board voted to schedule a public hearing for February 25, 2026, to consider the adjustments, which would raise the average residential bill by $4.32 per month. The proposal targets two specific components of the utility’s four-part rate structure. The Water Commodity Adjustment (WCA), which recovers costs for sourcing and treating water, is proposed to increase by $0.17 per hundred cubic feet (HCF). The Water System Reliability Adjustment (WSRA), which funds capital projects, would increase by $0.10 per HCF. For a typical residential customer using 12,000 gallons (approximately 1,600 cubic feet) of water per month, this combined $0.27/HCF increase results in a total monthly bill of $80.76, up from the current $76.44. Andrew Nguyen, APU’s Utilities Financial Planning Manager, outlined the drivers behind the proposed hike. The increase to the WSRA is designated to “fund continued replacement and upgrade of water infrastructure including aged mains, service lines, pump stations and storage tanks.” The utility is also updating its wildfire mitigation plan and assessing the need to harden water infrastructure in high-fire-threat zones, with the proposed adjustment helping to fund any necessary capital improvements. The larger portion of the increase, tied to the WCA, is intended to recover “higher costs related to purchasing, treating and delivering water and meeting legislative and regulatory requirements.” Officials emphasized the significant financial impact of operating in California, a state with “aggressive and constantly evolving laws and regulations.” A major recent cost driver has been PFAS contamination. The utility previously invested $150 million to build groundwater treatment facilities to address the issue, a project that recently won a “Top Project of the Year” award from the publication Waterworld. While APU receives reimbursement from the Orange County Water District (OCWD) for the immediate capital cost, the expense translates into higher long-term wholesale costs for pumped water. Ongoing compliance also includes extensive monitoring, with staff testing at 53 different sites twice a week. Beyond PFAS, the utility is preparing for future state mandates under the “Conservation as a Way of Life” framework, which is expected to require demand reductions of up to 30% and will necessitate new investments in leak detection and customer efficiency programs. “It's state and federal,” a utility official noted. “That's really what drives the water utility across the board.” Rising wholesale water costs from regional suppliers are also a key factor. Both the Metropolitan Water District of Southern California (MWD) and the OCWD are pursuing major long-term projects to improve regional drought resilience. The presentation specifically cited MWD’s Pure Water Southern California recycling project and OCWD’s landmark Groundwater Replenishment System as examples of initiatives that, while vital for supply reliability, also “push up wholesale water costs higher.” Throughout the presentation, APU officials stressed the utility’s relative affordability. Citing a recent report from UCLA's Luskin Center for Innovation, they noted that Orange County is one of the most affordable places for water in Southern California, largely due to its vast local groundwater basin. Even with the proposed increase, APU projects that the average Anaheim water bill will remain approximately 30% below the Orange County average. Officials also made a point to clarify that the additional revenue is strictly for operational and capital needs. “It's also important to note that no part of the proposal would go for labor salaries, pensions, et cetera,” Nguyen stated. “It all goes solely into the cost of buying water and the steel in the ground.” The board’s vote was not to approve the rate hike itself, but to formally set the date for a public hearing. This procedural step is mandated by California’s Proposition 218, which requires utilities to provide property owners with 45 days' notice before holding a public hearing to consider rate increases. The hearing on February 25, 2026, will provide the venue for a final decision on the proposal.