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September 7, 2023  |  Written by Alyson E. Ackerman

Large Municipal Water Suppliers May Soon Have Prescribed Methodology for Calculating Water Use Efficiency Objectives Under Newly Proposed Regulations

The “Making Conservation a California Way of Life” regulation (Proposed Conservation Regulation) seeks to establish the methods and criteria that large municipal water suppliers must use to calculate their “urban water use objectives.” An urban water use objective is akin to a water use goal. It is based on the estimated aggregated quantity of water that a supplier would have delivered in a previous year, if all of that delivered water was used efficiently, as well as the water use efficiency standards and the local characteristics of the water supplier’s service area. State Water Resources Control Board (State Board) staff is hosting a workshop on the Proposed Conservation Regulation on October 4, 2023, from 9:30 a.m. to noon, at which interested persons can provide oral comments. Written comments on the Proposed Conservation Regulation may be submitted from now until October 17, 2023.

To Which Water Service Providers Do the Proposed Regulations Apply?

The Proposed Conservation Regulation will apply to certain private and public water suppliers, depending upon the quantity of water provided, or number of end users served. State Board staff estimates that the Proposed Conservation Regulation will apply to 405 urban retail water suppliers in California.

A water supplier meeting the following criteria is an “urban retail water supplier” under the Proposed Conservation Regulation.

  • A water supplier that is privately owned and either: (1) directly provides “potable municipal water to more than 3,000 end users”; or (2) supplies “more than 3,000 acre-feet of potable water annually at retail for municipal purposes.” (Wat. Code, 10608.12, subd. (t).)
  • A water supplier that owns at least one public water system and either: (1) provided “an average annual total of 3,000 acre-feet of water or more for municipal purposes” for the past two years; or (2) served “an annual average of 3,000 or more municipal service connections” for the past two years (Muni AF/Connection Threshold). (Cal. Code. Regs., tit. 23, § 980, subd. (ddd).)
  • A single water supplier owning and operating multiple public water systems where: (1) the systems individually serve at least 200 connections; (2) the systems collectively meet the Muni AF/Connection Threshold; and (3) the systems are either (a) permanently interconnected, (b) have adjacent service area boundaries, or (c) use system data (e.g., population) to calculate urban water use objectives. (Cal. Code. Regs., tit. 23, § 980, subd. (ddd).)

What Does the Proposed Conservation Regulation Do?

The Regulation prescribes the mathematical equation that urban retail water suppliers must use to calculate their water use objectives. This equation is essentially the sum of efficient water use “budgets” that are specific to certain municipal uses (e.g., indoor residential, outdoor residential, and commercial/industrial/institutional (CII) landscapes with dedicated irrigation meters or equivalent technology), “variance” uses (i.e., unique water uses materially affecting a water use objective), or water losses. The efficient water use budgets themselves are calculations and rely on criteria specific to each of the aforementioned uses, such as population and square footage of landscaped or irrigated areas, respectively.

In addition to the various use and water loss budgets, the Proposed Conservation Regulation provides “bonus” incentives where the supplier provides water from a water supply that is augmented by potable reuse water, whether direct or indirect potable reuse water. The bonus incentive is essentially an additional volume of water that a supplier may add to its urban water use objective.

Water suppliers providing CII water are also subject to “performance measures” that are not included in the water use objective. These performance measures include classifying their CII users into certain categories (e.g., laundries, large landscapes, water recreation, and car washes), imposing water use thresholds thereon, as well as banning irrigation of non-functional turf with potable water.

According to State Board staff, the Proposed Conservation Regulation does not mandate the use of any specific technologies or equipment.

When Is the Proposed Conservation Regulation Effective?

The Proposed Conservation Regulation requires each water supplier constituting an urban retail water supplier to calculate urban water use objectives, using the efficient water use budgets therein, no later than January 1, 2025, and each year thereafter. These water suppliers must also comply with their urban water use objectives by the same date. The Proposed Conservation Regulation does not require suppliers to comply with each individual efficient water use budget, just the overall objective, which may provide suppliers with a degree of flexibility in how they achieve efficient water use.

For an urban retail water supplier without the data needed to calculate any of the efficient water use budgets, the Proposed Conservation Regulation allows the water system to be excluded from calculating the urban water objective until the needed data is obtained. However, that supplier is provided a grace period only until July 1, 2028 for use in the 2030 reporting year.

Are There Penalties for Non-Compliance?

By January 1, 2025, urban retail water suppliers must submit to the State Board the supplier’s urban water use objectives, which must be both calculated pursuant to the Proposed Conservation Regulations and submitted on the State Board-provided form. Failing to timely provide this report exposes suppliers to civil liabilities under Water Code section 1846 – a general civil liability provision for violating a permit, license, certificate, or registration, regulation, or order – or Water Code section 1846.5 – a civil liability provision exclusive to urban retail water suppliers.

Possible Costs and Benefits of the Proposed Conservation Regulation.

The costs and benefits of the Proposed Conservation Regulation may be felt differently by public and private suppliers. In the Standardized Regulatory Impact Assessment regarding the Proposed Conservation Regulation, State Board staff estimates “publicly-owned [sic] suppliers would incur aggregate costs of approximately $8.45 billion and accrue benefits of approximately $9.09 billion from 2025 to 2040.” (Emphasis added.) Staff also estimates that “direct cost incurred by privately-owned suppliers with residential rebate and incentive programs is approximately $451 million in 2025, and ranges between $13 million and $35 million per year in the following years.” (Emphasis added.)

Aaron A. Ferguson, assistant managing shareholder of SSD, has concerns regarding aggregating the costs and benefits of the Proposed Conservation Regulation. “While aggregating future costs is part of the rulemaking analysis, I suspect that the fiscal impact of this regulation may not be uniform, and some urban retail water suppliers may face costs without any appreciable fiscal benefit. In addition, it is not clear whether these projected analyses include the costs associated the inability to realize the benefits of past water supply and infrastructure investments.”

Staff further estimates in the Standardized Regulatory Impact Assessment that the Proposed Conservation Regulation will “accrue benefits of approximately $10.6 billion from 2025 to 2040,” resulting in a net benefit of $500 million. Staff notes that most of the estimated benefits originate from reduced water purchases or reduced water demand. In addition, Staff expects the Proposed Conservation Regulation to incrementally reduce urban water use by 400,000 acre-feet by 2030, with a cumulative water savings total of approximately 6.3 million acre-feet between 2025-2040. The Proposed Conservation Regulation is cited as contributing to better protection for human health and water resources, mitigation of climate change impacts, and advancing equity, as efficient water use is an economical source of a new water supply.

The public comment period will also reveal additional possible costs and benefits not mentioned in the rulemaking documents, all of which are available here:

For additional information on the Proposed Conservation Regulation, please contact:

Somach Simmons & Dunn provides the information in its Environmental Law & Policy Alerts and on its website for informational purposes only. This general information is not a substitute for legal advice, and users should consult with legal counsel for specific advice. In addition, using this information or sending electronic mail to Somach Simmons & Dunn or its attorneys does not create an attorney-client relationship with Somach Simmons & Dunn.


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