In my previous article, I argued that a penny a gallon makes tap water the most undervalued product in the American economy. Here is the corollary: that penny is a bargain precisely — and only — for the uses water policy intends to protect for public health and safety.
The response to “The One Penny Paradox” surfaced a fair question from readers: if water is so cheap, why do some households experience painful water bills? And, “you can’t use bottled water to irrigate the lawn.”
The answer reveals something most ratepayers — and frankly, many policymakers — have never been explicitly told.
The penny-a-gallon bargain was never meant to apply to every gallon. California water pricing is deliberately engineered so that water for drinking, cooking, bathing, and washing is nearly free — while water poured onto the ground gets progressively expensive.
That is not a flaw in the system. That is the system.
The Arithmetic of Essential Use
Water utilities bill in units called CCF — one hundred cubic feet, or 748 gallons. Six CCF comes to roughly 4,500 gallons per month.
At retail prices averaging around a penny a gallon, a household’s entire essential indoor water use — every shower, every load of laundry, every glass from the tap, every flush — costs about what a family spends on two or three streaming subscriptions.
Measured against the state’s own indoor efficiency standards, six CCF covers the health-and-safety needs of a typical household. Drinking water for a family costs pennies a day.
So where do the painful bills come from? Volume — and overwhelmingly, volume that goes outdoors. A modest lawn in a Southern California summer can swallow thousands of gallons a month, easily doubling or tripling a household’s consumption. When people say “my water bill is too high,” what they are usually describing is not the cost of drinking water. It is the cost of irrigating ornamental grass. Irrigating lawns is not the same thing as drinking water.
Regulators Already Know This — Look Where They Drew the Line
When state policymakers design low-income water assistance proposals, they consistently limit subsidies to roughly the first six CCF per household.
The state has implicitly defined which water is essential — the indoor volume necessary for health and safety — and which water is discretionary. Assistance programs are built to guarantee that no Californian is priced out of drinking, bathing, and sanitation. They are pointedly not built to guarantee that anyone can afford a green lawn.
The subsidy line at six CCF is a quiet admission of everything I argued in the first article: the essential product is extraordinarily affordable, and affordability policy should defend that essential core — not blur it into a blanket claim that “water is unaffordable.”
Tiered Rates: Making Water for Luxuries More Expensive on Purpose
The same logic is embedded in how most California retailers structure rates.
Under tiered pricing, the first block of consumption — sized around essential indoor use — is priced lowest. Consumption above that escalates through progressively higher tiers. And critically, under Proposition 218 case law, those tiers must be justified by the actual cost of service.
They generally can be — because high-volume discretionary use genuinely costs more to deliver. Outdoor irrigation drives the summer peak, and the peak drives everything: pipes, pumps, treatment capacity, and storage are all sized not for average demand but for the hottest week of August. The customer filling a modest indoor need is not the customer who most often uses the water systems full capacity.
When the price of water climbs steeply above the essential tier, the system is doing exactly what sound utility economics and three decades of California conservation policy designed it to do: send a truthful price signal that says this use is a choice, and choices have costs.
Arguing that water is “too expensive” because a large lawn is costly to irrigate is like arguing electricity is too expensive because it costs a lot to heat a swimming pool in January. The complaint mistakes a luxury price for an affordability crisis.
The State Said the Quiet Part Out Loud
If there were any doubt about where California policy is headed, the Legislature resolved it: state law now phases out the use of potable drinking water to irrigate non-functional turf — the purely decorative grass along medians, office parks, and commercial frontage that no one walks on, plays on, or gathers on. Metropolitan Water District of Southern California was a co-sponsor of the legislation by now-Congresswoman Laura Friedman, a former Metropolitan director, that made it happen.
Read that plainly. The state has declared that treated drinking water — the product we disinfect, test, pressurize, and deliver for a penny a gallon — is too valuable to pour onto grass that exists only to be looked at.
That is the Penny Paradox resolved into policy. We are not moving toward a future where all water is cheap. We are moving toward a future where essential water is protected and affordable, and discretionary water carries its true cost.
The Water Industry’s Answer: Shift the Cost to the Feds
The water industry’s leading national voices have framed affordability differently — and the contrast is worth dissecting.
The prevailing industry argument runs like this: water costs are rising by every empirical measure; surveys show a growing share of Americans perceive their water service as unaffordable; capital needs vastly exceed current investment; and the answer is federal intervention — fully funding the State Revolving Funds and WIFIA, and reviving low-income assistance to help struggling households pay their bills.
Let me be fair to what’s right in that argument. The federal loan programs are legitimately valuable — not as subsidies, but as financing. Low-interest loans reduce the cost of capital for infrastructure we must build anyway, and lower financing costs flow directly through to lower rates. That is downward pressure on cost, and Congress should fund those programs.
But the subsidy half of the argument deserves harder scrutiny, because it rests on a sleight of hand that the water industry rarely acknowledges:
The people who pay water bills and the people who pay taxes are the same people.
A federal or state assistance program does not make water cheaper. It moves the cost from a line item the household can see — the water bill — to a tax burden the household cannot.
And I would submit that the invisibility is the point. Consider what the Federal subsidy strategy allows the water industry to avoid:
1. It avoids asserting the value proposition. If the answer to “water feels unaffordable” is a government check, utilities never have to make the case I have made across these articles — that essential water service, at a penny a gallon, is the greatest bargain in the household budget, cheaper than the streaming services and hundreds of times cheaper than the bottled water bought by the same households. A subsidy concedes the unaffordability framing rather than contesting it.
2. It avoids distinguishing essential from discretionary use. The industry’s preferred benchmark — capping water costs at some percentage of household income — repeats the same flaw as California’s 1.5% metric, just at a different number. It measures the whole bill, blending the essential six CCF with the irrigation water above it, and then declares households “water burdened” without asking which gallons created the burden. Assistance targeted to essential use is humane policy. Blanket affordability framing built on total-bill arithmetic is analytical malpractice.
3. It avoids fixing the trust structure. Most tellingly, the subsidy strategy leaves entirely untouched the regulatory architecture that manufactures the perception problem in the first place — the mandated water quality language that reads like a toxicological warning instead of a safety assurance, confirming for millions of families that the tap cannot be trusted, and driving them to spend bigger sums on bottled water. If the industry and regulators redirected a fraction of its subsidy advocacy toward reforming consumer confidence reporting into language an average reader can actually understand, it would do more for low-income water budgets than any assistance program yet proposed.
There is an institutional comfort in the subsidy path. It lets utilities raise rates while pointing constituents toward Washington for relief; it converts a hard local conversation about value into an easy federal conversation about need. But it is a treadmill. Costs keep rising, subsidies chase them, taxpayers — who are ratepayers — fund the difference, and the underlying disease, the erosion of trust in the product itself, goes untreated, along with local rate capacity to keep up.
We should take the loans and skip the laundering. Finance the infrastructure at the lowest possible cost of capital, target assistance narrowly, and spend our advocacy where it compounds: on the value proposition and on regulatory reform that lets a safe product finally sound safe.
Fund the Systems, Not the Bills
None of this means abandoning low-income families or the small, aging systems that serve so many of them. It means helping them through a mechanism that actually fits the problem — and we already know it works, because we ran the experiment.
During the COVID-19 pandemic, Congress appropriated over $1 billion for the Low-Income Household Water Assistance Program. But notice the design: rather than mailing checks to ratepayers or capping rates by decree, the program moved funds through the states directly to water systems, retiring the arrearages of customers who genuinely could not pay. Over roughly two years it served more than 1.4 million households, prevented more than 750,000 disconnections, and supported more than 16,000 water and wastewater systems in low-income, Tribal, rural, and urban communities — before Congress let it lapse.
U.S. Senator Alex Padilla has proposed making that program permanent, directing grants to states to provide funds to the owners and operators of water systems to resolve the arrearages of low-income households. Whatever one thinks of the broader subsidy debate, this design deserves the water community’s support — because it is categorically different from the blanket affordability framing I criticized above, in three ways that matter:
1. It is triggered by demonstrated hardship, not a statistical benchmark. An arrearage is not a percentage-of-income abstraction; it is a family that actually could not pay. Relief flows exactly where the need is proven, rather than subsidizing every bill under an arbitrary income cap — including the discretionary gallons above the essential six CCF.
2. It preserves the price signal and the value proposition. Rates continue to reflect the true cost of service. The tiers keep telling the truth about essential versus discretionary use. Nothing about the arrearage mechanism requires us to pretend the product is unaffordable — it simply catches the households for whom, in a given season of hardship, it was.
3. Most importantly, it is a lifeline for the systems, not just the customers. This is the piece the individual-subsidy conversation always misses. When a customer of a 400-connection mutual water company or a small, older system in a disadvantaged community cannot pay, the system still must treat, test, pump, and comply — with the same state mandates and the same deadlines as a giant urban utility, spread across a tiny rate base. A handful of arrearages that a large utility absorbs as a rounding error can, for a small system, mean deferring the well repair or the treatment upgrade that keeps the water safe. Arrearage funding stabilizes the revenue of precisely the smaller, poorer, and older systems that our one-size-fits-all regulatory structure already strains hardest.
This is what right-sized assistance looks like: the household keeps its service and its dignity, the system keeps its fiscal footing, and the industry keeps its obligation to tell the truth about what water is worth. We can champion this without laundering the cost of the entire rate structure through the tax code — and we should.
The Affordability Debate We Should Be Having
This corollary sharpens the argument I made in the first article:
1. The affordability conversation must separate the bill from the product. A high water bill driven by outdoor irrigation, leaks or general inefficiency is not evidence that drinking water is unaffordable. Conflating the two distorts policy — and drives the arbitrary income-percentage caps that suppress the investment our infrastructure requires.
2. Assistance should be generous and targeted. Guaranteeing every household its essential six CCF is sound, humane policy — and it is achievable precisely because the essential product is so inexpensive. Subsidizing tier-three irrigation water is neither. And here the paradox from my first article returns: many of the same households we are told cannot afford tap water are paying luxury prices for drinking water voluntarily — hundreds of times the tap rate — one plastic bottle at a time. Industry data suggest average household spending on bottled water and jug delivery rivals what those households pay for an entire year of utility service. We have an affordability conversation that is upside down: subsidy proposals wring their hands over the cheapest water in the household while the most expensive water in the household walks out of the convenience store unquestioned. If we are serious about low-income water affordability, restoring trust in the tap — so families stop paying a thousand-fold markup on the one product we already deliver to their kitchen for pennies — would do more for household budgets than any rate cap ever could.
3. Rate design is a truth-telling instrument. Tiered rates tell customers something the flat monthly bill conceals: which of their gallons are essential and which are elective. We should defend that structure, not apologize for it.
4. The value proposition gets stronger, not weaker. When we say tap water costs a penny a gallon, and a critic responds “then why is my bill $200?” — the answer is an opportunity: because you bought 20,000 gallons, and 15,000 of them went into the ground. The essential product remains the greatest bargain in your household budget.
Water for life is nearly free, and we should keep it that way. Water for lifestyle is priced like the luxury it is — and that is not a failure of the system. It is the system working.