Senate BillPassed first housePublic Utilities
SB 473: Water corporations: demand elasticity: rates and surcharges.
What SB 473 does, verified December 7, 2025
This bill aims to amend existing laws regarding water corporations in California. The Public Utilities Commission will have more authority to regulate water corporations, ensuring they do not overcharge or undercharge customers due to errors in estimating demand elasticity or sales. The commission will need to consider conservation programs and ensure that any rate changes or surcharges do not result in excessive revenue. Violating the commission's requirements will be a crime, and local agencies will not be required to reimburse the state for the costs of implementing this bill.
Bill journey
✓IntroducedComplete
✓In CommitteeComplete
✓First Chamber FloorComplete
4Second ChamberCurrent
5GovernorPending
6ChapteredPending
Last action: August 29 hearing: Held in committee and under submission. (2025-08-29)Alert me
Author and sponsors
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| Aug. 29, 2025 | August 29 hearing: Held in committee and under submission. |
| Aug. 29, 2025 | Coauthors revised. |
| Aug. 20, 2025 | August 20 set for first hearing. Placed on APPR. suspense file. |
| Aug. 20, 2025 | August 20 set for first hearing. Placed on suspense file. |
| Jul. 17, 2025 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 15. Noes 0.) (July 16). Re-referred to Com. on APPR. |
Latest bill textAmended version, April 10, 2025 · 1,153 words
| Amended IN Senate April 10, 2025 |
CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION
Senate Bill
No. 473
| Introduced by Senator Padilla |
February 19, 2025 |
An act to amend Section Sections 727.5 and 739.10 of the Public Utilities Code, relating to water corporations.
LEGISLATIVE COUNSEL'S DIGEST
SB 473, as amended, Padilla. Water corporations: demand elasticity. elasticity: rates and surcharges.
The California Constitution and the Public Utilities Act vest the Public Utilities Commission with regulatory authority over electrical corporations and water corporations. The act requires the commission to ensure that errors in estimates of demand elasticity or sales do not result in material overcollections or undercollections of electrical corporations.
This bill would additionally require the commission to ensure that those errors do not result in material overcollections or undercollections of water corporations.
Existing law requires the commission, in establishing rates for water service, to consider separate charges for costs associated with customer service, facilities, variable operating costs, or other components of the water service provided to water users. Existing law requires the commission to consider, and authorizes the commission to authorize, a water corporation to establish programs, including rate designs, for achieving conservation of water and recovering the cost of these programs through the rates, as provided.
This bill would, for purposes of the above-described rates for water service, require that any changes to rates or implementation of surcharges in accordance with the above-described requirement on the commission to ensure errors in estimates of demand elasticity or sales do not result in material overcollections or undercollections of water corporations do not result in revenues above those approved by the commission.
Under existing law, a violation of the act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.
Because the above requirement requirements would be part of the act and a violation of a commission action implementing this bill’s requirements would be a crime, the bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
The people of the State of California do enact as follows:
SECTION 1.
(a) The Legislature finds and declares all of the following:(1) Adequate water supply reliability for all uses is essential to the future economic and environmental health of California.
(2) California is in a severe drought, and in 2021 the Governor issued executive orders declaring a drought emergency.
(3) Droughts in California are expected to become more frequent and more severe as a result of climate change.
(4) The frequency of droughts highlights the continued importance of encouraging both water suppliers and their customers to practice water conservation as the most cost-effective means of ensuring that there are adequate water supplies for the environment and people in the state.
(5) Because water suppliers have very significant fixed costs that do not fluctuate with changes in consumption patterns, they have a financial disincentive to encourage water conservation as reductions in water consumption directly translate into cost recovery challenges.
(6) The Legislature has addressed this same financial challenge for electricity suppliers by requiring that changes in demand do not result in material overcollections or undercollections of revenue.
(b) It is the intent of the Legislature to ensure that water corporations are authorized to establish revenue adjustment mechanisms that provide for a full decoupling of sales and revenue in order to further incentivize water conservation efforts.
SEC. 2.
Section 727.5 of the Public Utilities Code is amended to read:727.5.
(a) In establishing rates for water service, the commission shall consider, and may establish, separate charges for costs associated with customer service, facilities, variable operating costs, including fixed and variable costs associated with supplying the water, or other components of the water service provided to water users.(b) The commission shall consider, and may authorize, a water corporation to assess a fee for future water service, or a reservation charge for future water service, for persons or entities occupying or owning property within the service territory of the water corporation.
(c) The commission shall consider, and may authorize, a water corporation to establish a balancing account, rate stabilization fund, or other contingency fund, the purpose of which shall be the long-term stabilization of water rates.
(d) (1) The commission shall consider, and may authorize, a water corporation to establish programs, including rate designs, for achieving conservation of water and recovering the cost of these programs through the rates.
(2) (A) Upon application by a water corporation with more than 10,000 service connections, the commission shall consider, and may authorize, the implementation of a mechanism that separates the water corporation’s revenues and its water sales, commonly referred to as a “decoupling mechanism.”
(B) An authorized decoupling mechanism shall be designed to ensure that the differences between actual and authorized water sales do not result in the overrecovery or underrecovery of the water corporation’s authorized water sales revenue.
(C) An authorized decoupling mechanism shall not enable the water corporation to earn a revenue windfall by encouraging higher sales.
(D) The water corporation may only submit an application to the commission pursuant to this paragraph as part of its triennial general rate case application described in Section 455.2, unless the commission and the water corporation mutually agree for the application to be otherwise submitted.
(e) In establishing rates for recovery of the costs of a used and useful water plant, the commission may use a capital structure and payback methodology that maintains the reliability of water service, minimizes the long-term cost to ratepayers, provides equity between present and future ratepayers, and affords the utility an opportunity to earn a reasonable return on its used and useful investment, attract capital for investment on reasonable terms, and ensure the financial integrity of the utility.
(f) Any change to a rate for water service or the implementation of a surcharge on water service in accordance with Section 739.10 shall not result in revenues above those approved by the commission.
SEC. 2.SEC. 3.
739.10.
The commission shall ensure that errors in estimates of demand elasticity or sales do not result in material overcollections or undercollections of electrical or water corporations.SEC. 3.SEC. 4.
Text of SB 473 as amended, from the official record. Connect Plus keeps every version and highlights what changed.Compare versions