America’s largest water district raising rates 40%, says conservation cut revenue

America’s largest water district says declining revenues due to increased water conservation are forcing the agency to significantly raise water rates to remain solvent.

The Metropolitan Water District of Southern California, which supplies water for 19 million Americans, is raising its rates 8.5% in 2025 and another 8.5% over baseline levels in 2026. The district’s projections include raising rates an additional 11.5% in 2027 and another 11.5% in 2028 to finance an $8.2 billion water recycling plant that could provide enough annual water for 1.5 million people.

“The difficult reality is, our costs have risen while revenues have dropped, so we need to take the fiscally responsible step of adjusting our rates,” said MWD General Manager Adel Hagekhalil in a statement.

MWD also is doubling the property taxes it levies from 0.0035% to 0.007 percent, which on a typical Southern California home will rise from approximately $30 now to $60.

MWD expected to sell 1.54 million acre feet of water in the current 2023-2024 fiscal year but now projects it will sell only 1.2 million, which staff forecast will require a $247 million withdrawal from reserves to fund daily operations. Moreover, MWD now says the rates it adopted for 2023-2024 did not cover the cost of water.

“Metropolitan’s biennial budget can no longer support the ongoing use of reserves,” wrote MWD staff in board materials. “Importantly, the FY 2023/24 adopted rates did not fully recover costs.”

MWD had already planned on spending $37 million of its reserves to make up for rising costs and selling water at a loss.

Given that MWD based its rate increases on the assumption it will sell 1.34 million acre feet of water in fiscal year 2024-2025, it’s likely water sales could still come in below MWD’s expectations, which could cause problems for the budget.

Each of the 40 members of the MWD board of directors is appointed by a public agency he or she represents, which includes cities and water districts. MWD’s board has final say on everything from staffing to budgeting and water use, and approved the latest rate increase.