Wendy Y. Wang

Partner and Litigator, Best Best & Krieger LLP

She serves on the Board of Trustees for Southern California Water Coalition and is the chair of the Environmental Section of the International Municipal Lawyers Association. She has been named as The Best Lawyers in America(r) 2025 in Water Law and Litigation-Environmental.

Samuel Johnson

Associate, Best Best & Krieger LLP

Environmental Law

For nine out of the last 13 years, California was in a state of drought. The five-year drought from 2012 and 2016 is one of the top five most severe droughts California experienced in the last 120 years. Many wells went dry during this period; farmers fallowed land; some rural communities had no running water; and trees died in mass in the Sierra.

Against this backdrop, Governor Jerry Brown issued a record number of executive orders and emergency proclamations regarding drought and water conservation during this period. California Legislature also enacted several legislations to protect the state's valuable water resources, including: the Sustainable Groundwater Management Act (Water Code §§ 10720 et seq.), which created a framework to monitor and manage groundwater basins to ensure sustainability; and Senate Bill 679, which requires urban water suppliers to report and limit water losses.

Even after the drought ended, the Legislature continued to enact legislations to further water conservation. In 2018, the Legislature passed Senate Bill 606 and Assembly Bill 1668, which directed the State Water Resources Control Board (State Board) and the Department of Water Resources to develop and implement water use efficiency standards, including specific standards for per capita daily indoor residential water use.

In October 2023, the State Board proposed a draft regulation--known as the "Make Conservation a California Way of Life" regulation-as mandated by SB 606 and AB 1668. Under the regulation, public and private urban retail water suppliers that serve 3,000 or more municipal service connections or deliver 3,000 or more acre-feet per year would be required to calculate their annual "urban water use objectives." These suppliers collectively deliver water to the vast majority of Californians. See Fact Sheet: "Making Conservation a California Way of Life," State Board (Aug. 15, 2023).

Under the regulation, suppliers are to apply new statewide efficiency standards to their unique service area characteristics such as population, climate, and landscapes. The result is supplier-specific budgets for residential outdoor water use and commercial, industrial and institutional landscapes. These two budgets, along with budgets for the existing residential indoor water use standards and real water loss standards, as well as variances for certain types of water uses and recycled water bonus incentives, form a supplier's urban water use objective. Suppliers are not required to meet any one budget, except for real water loss, but must meet their overall urban water use objective. The State Board adopted this supplier-specific approach to give added flexibility and to avoid uniform cuts across the state. Overtime, efficiency standards for each category of water use become more strict, reducing suppliers' overall urban water use objective.

The State Board has a range of enforcement tools in its arsenal, including civil penalties of up to $10,000 per day for suppliers who violate the regulation's reporting requirements. Additionally, SB 606 further authorizes the State Board to issue information orders, compelling suppliers to disclose relevant information on water use. However, the State Board's most powerful tool is the conservation order, which it may issue to suppliers who fail to meet their urban water use objectives. These orders may impose education and outreach requirements, referrals to the Department of Water Resources for technical assistance, and other mandatory actions to increase water-use efficiency. Under no circumstances may a conservation order curtail the exercise of a water right.

In January 2024, the Legislative Analyst's Office issued a report criticizing the initial draft regulation for: being overly complicated; having differing impacts to individual suppliers; being potentially costly and challenging to implement; disproportionately impacting lower-income Californians; and having modest water savings. The report indicated that it was unclear if the regulations' benefits would outweigh the costs.

After four public comment periods in which the State Board received significant negative feedback, it unanimously adopted revised regulations on July 3, 2024. Some water supplier groups expressed concerns regarding cost implications to their agencies and customers. On the other hand, environmental organizations believe the regulations are insufficient to ensure conservation. See, e.g., H. Smith, "California Adopts Sweeping Statewide Water Conservation Framework," L.A. Times (July 3, 2024).   

While the version adopted on July 3, 2024, bolstered alternative compliance pathways, added a variance for irrigating existing trees, and extended the ramp-down for some efficiency standards, the regulations are expected to have a massive impact on the water suppliers across California. State Board staff estimates a reduction in water use by 1.7 million acre-feet over the next 15 years at a cost of $4.7 billion in aggregate, with $1 billion due to lost revenue.

Following the July 3, 2024, hearing, State Board staff made further edits to the regulations based on directions from the Board at the hearing and made certain clarifications. The comment period of these latest revisions expired on Aug. 12, 2024. At this time, no further State Board hearing has been set regarding the revisions. Unless there are substantive revisions, another hearing may not be required.

The regulation is set to go into effect on Jan. 1, 2025, with suppliers required to meet their urban water use objectives during the 2026-27 state fiscal year, which runs from July 1 through June 30. As these mandates are unfunded, many suppliers may face the difficult choice of passing the cost of compliance to their customers through rate hikes. Only time will tell whether the regulation will successfully lead to water resilience without imposing financial precarity on water suppliers and their customers.

The views expressed here are solely those of the authors and do not necessarily reflect the views of Best Best & Krieger LLP or any institution.