South Coast Water District approves 15% annual water rate hikes to fund Doheny desalination plant

South Coast Water District approves 15% annual water rate hikes to fund Doheny desalination plantThe California utility will raise water rates by 15% and sewer rates by 3% annually over the next three years to support its 60% stake in the Doheny project and maintain its credit rating.

Water rates will increase by a maximum of 15% each year starting July 1, 2026, while sewer rates will see 3% annual bumps.

The increases are designed to fund the Doheny Ocean Desalination Project and offset projected 10% annual rate hikes from the Metropolitan Water District.

The board approved the rates despite pushback from residential customers, noting the second and third year increases could be lowered during annual reviews.

District staff are concurrently preparing an application for $45 million to $50 million in federal funding for the Doheny project.

The South Coast Water District (SCWD) Board of Directors voted on June 25, 2026, to adopt a new three-year rate schedule featuring 15% annual water rate increases and 3% annual sewer rate increases. The rate adjustments, which take effect July 1, 2026, are largely driven by the need to fund the district's anticipated 60% participation in the Doheny Ocean Desalination Project, as well as to absorb rising costs for imported water. A rate study presented by consultant Sanjay from RDN indicated that without the revenue adjustments, the district would fall significantly below its reserve targets, causing its credit rating to deteriorate and complicating future debt issuance. The approved rate schedule is designed to maintain a 2.0 debt coverage ratio and preserve the district's financial health. The 15% annual water rate hike also accounts for escalating costs from the Metropolitan Water District (MWD). SCWD Director of Finance Erica Castillo noted that MWD has been deferring capital requirements and imposing compounding rate increases, with projected hikes of over 10% expected over the next several years. "We are at the mercy for the water supply costs at the moment of Metropolitan Water District," Castillo said. "Doheny Desalination Plant, as it moves forward, will help us get off of their system to a degree so that we're not reliant on them and also subject to their annual rate approvals." The sewer enterprise, which is currently in a strong position above reserve targets, will see a modest 3% annual increase to keep pace with inflation and avoid the need for sharper rate spikes in the future. The weighted average revenue increase across both water and sewer is 9.5%. The cost-of-service realignment prompted pushback from several residents during the public hearing. Customers expressed concern over "bill shock" and argued that the new tier structures place an unfair financial burden on single-family households compared to commercial and multi-family properties. The district received seven written protest letters—well short of the threshold required to trigger a Proposition 218 majority protest—and two legal objections, which staff determined did not warrant amending the proposed rates. While the board adopted the maximum allowable rates under Proposition 218 for the three-year period, Castillo emphasized that the district will conduct annual financial audits. If capital project costs come in lower than estimated, the board has the flexibility to implement lower rate increases in the second and third years. Meanwhile, the district is aggressively pursuing outside funding to offset the costs of the Doheny project. District staff reported that they are currently preparing a grant application for an additional $45 million to $50 million in federal funding through a Bureau of Reclamation Notice of Funding Opportunity. SCWD has already secured $30 million in federal funding and $10 million in state grants for the desalination facility.