Golden State Water Company Secures CPUC Approval for 2026 Rate Increases, Driving $32 Million in Additional Revenue
American States Water Company announced today that its wholly-owned water utility subsidiary, Golden State Water Company (GSWC), has received regulatory approval from the California Public Utilities Commission (CPUC) for the implementation of its full second-year water rate increases. This decision, finalized in December 2025, will take effect on January 1, 2026, resulting in higher adopted water revenues—net of water supply costs—of approximately $32.0 million over the 2025 adopted levels. The approval comes as part of GSWC’s current rate cycle, which spans 2025 through 2027, and ensures the utility can continue to meet both operational and capital investment needs while maintaining reliable service for its customers across California.
GSWC operates under a structured multi-year rate-setting framework. Under this framework, the utility is required to meet an earnings test in each of its rate-making areas before implementing second- and third-year step increases. The earnings test evaluates whether the utility has achieved sufficient earnings to support rate adjustments while remaining compliant with CPUC guidelines. For 2026, GSWC successfully met the necessary criteria in all relevant jurisdictions, enabling it to move forward with the approved rate adjustments.
Capital Projects Driving Rate Adjustments
A significant portion of the approved revenue increase—approximately $11.0 million—is attributable to capital projects previously agreed upon in a settlement that allowed certain expenditures to be treated as advice letter projects rather than included directly in base rates as of January 1, 2025. Advice letter projects provide a mechanism for utilities to recover the costs of essential infrastructure improvements without waiting for a full rate case, thereby ensuring timely investments in water systems while maintaining transparency and regulatory oversight.
Under the settlement agreement from the most recent GSWC water general rate case, all advice letter projects were permitted to accrue in a memorandum account with specific financial treatments. These treatments include:
- Interest Accrual During Construction – Costs associated with the projects accrue interest at GSWC’s adopted cost of debt during the construction period until the assets are placed into service.
- Post-Service Rate of Return – Once the assets are operational, the memorandum account allows the utility to earn a full rate of return, including both debt and equity components, as well as all applicable elements of the revenue requirement for the projects.
This approach ensures that GSWC can responsibly finance and implement essential infrastructure improvements, including upgrades to water distribution systems, pipeline replacements, and treatment facility enhancements, without imposing sudden or disruptive rate changes on its customers.
Impact on Customers and Service Reliability
The approved rate increases support GSWC’s ongoing commitment to providing safe, reliable, and high-quality water services across its service areas in California. By including capital project costs in the memorandum account and subsequently integrating them into the adopted rate base, GSWC can fund infrastructure investments that strengthen system reliability, reduce long-term maintenance costs, and enhance resilience to both natural and operational challenges.
Customers can expect that the 2026 rate adjustments will reflect a balance between the utility’s investment needs and the goal of maintaining fair and reasonable rates. While the revenue increase of $32 million may result in modest adjustments to customer bills, these changes are designed to be proportional to the cost of delivering high-quality water service and maintaining critical infrastructure.
Strategic Financial Planning and Regulatory Compliance
GSWC’s approval by the CPUC reflects the utility’s disciplined approach to financial planning and regulatory compliance. By leveraging the multi-year rate cycle, earnings tests, and advice letter project framework, the company ensures that it can implement capital improvements efficiently while adhering to California’s stringent regulatory standards. The integration of memorandum accounts and structured rate-making mechanisms demonstrates a transparent process for recovering capital investments, allowing the utility to maintain financial stability while meeting service expectations.
The 2026 rate adjustments also align with broader strategic goals of American States Water Company, including sustainable growth, prudent capital allocation, and ongoing modernization of water infrastructure. By investing in essential projects and securing the appropriate rate recovery, GSWC positions itself to continue delivering high-quality water services and supporting local communities across its service territories.
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