March 19, 2026 | Dani Morgutia, Senior Program Manager
CalWEP has signed onto a coalition letter led by the Association of California Water Agencies (ACWA) in support of AB 2180 (Ward), legislation that would clarify how water agencies comply with Proposition 218 when setting water rates.
Proposition 218 requires that water rates be proportional to the cost of service. In practice, many agencies use tiered rate structures to reflect differences in water use and the higher incremental costs associated with serving higher demand. However, recent appellate court decisions have created uncertainty around how proportionality must be demonstrated, increasing litigation risk and creating challenges for agencies seeking to implement conservation-oriented pricing structures.
AB 2180 would provide important statutory clarification by affirming that agencies may rely on reasonable cost-of-service methodologies when allocating costs, including system-wide costs such as water supply, infrastructure, and peak demand. The bill also confirms that agencies are not required to determine the exact cost of service at the parcel level and that tiered and uniform rate structures remain permissible when supported by reasonable cost allocation principles.
For water agencies across California, this clarification is critical. Tiered rate structures are a foundational tool for promoting water use efficiency, sending a clear price signal as usage increases while helping agencies recover the higher costs associated with supplying additional water. Without this clarity, agencies face growing legal challenges, often from high-volume water users, that can discourage the use of conservation-based pricing and divert public resources toward litigation.
By providing clear and consistent guidance, AB 2180 will help reduce unnecessary legal disputes, improve rate-setting predictability, and support long-term water conservation goals across the state.
CalWEP appreciates the leadership of Assemblymember Ward and ACWA in advancing this legislation and looks forward to working with coalition partners to support its passage.
Read the coalition letter.