For decades, electricity has dominated America’s utility-bill politics.
Power prices rise, regulators hold hearings, utilities defend grid investments, and attorneys general and governors hear from angry consumers. Water, by contrast, has often remained in the background: essential, local, fragmented, and historically inexpensive enough to escape sustained national attention. That era is ending. Across the United States, household water and wastewater bills are rising rapidly, and in many markets the pace of increase is beginning to outstrip the growth in electric rates—especially for customers served by investor-owned water utilities.
The trend is not simply a matter of inflation; it reflects a deeper shift in the economics of essential infrastructure. Water utilities are replacing century-old pipes, upgrading treatment plants, complying with stricter drinking-water standards, acquiring smaller distressed systems, and seeking timely recovery of capital investment through rates and surcharges. Electric utilities are also spending heavily nationally, particularly on grid modernization, wildfire mitigation, transmission, renewable integration, and new demand. But electricity has countervailing forces—energy efficiency, competitive procurement, falling renewable costs, demand-side management, and larger customer bases over which costs can be spread—that water utilities often lack.
The result is a policy problem with legal, economic, and consumer-protection components. Water bills are still generally smaller than electric bills in absolute dollar terms, but they are rising from a smaller base, hitting low-income households hard, and testing whether traditional public utility commission rate regulation can preserve affordability while financing necessary infrastructure.
Why Water Rates Are Accelerating
The first driver of increasing water rates is the age and physical condition of water infrastructure. Water systems are capital-intensive networks in which much of the asset base is buried, old, and invisible—until it fails. In North Carolina, investor-owned water utilities such as Carolina Water Service have described average asset ages exceeding 38 years and pressing needs for replacement. National water infrastructure replacement costs have been estimated at $385 billion, and the scale of the challenge is visible across North Carolina’s hundreds of small and mid-sized water systems.
The second driver is scale. Electric utilities such as Duke Energy Carolinas and Duke Energy Progress serve millions of customers across large service territories. Water systems are more fragmented. A small water system may need a treatment plant, pumping facilities, storage, and distribution mains even if it serves only a few hundred customers, meaning that a single capital project can produce outsized per-customer rate impacts.
The third driver is water quality and supply regulation. Utilities must comply with federal and state drinking-water standards, emerging contaminant rules such as new PFAS limits, lead-and-copper rule revisions, and drought planning mandates. The Cape Fear Public Utility Authority, for example, has spent $43 million to install granulated activated carbon filters to target PFAS compounds.
The fourth driver is consolidation. Investor-owned water companies have been acquiring small municipal, private, and distressed systems. North Carolina law expressly facilitates this through N.C. Gen. Stat. § 62-133.1A, which allows a water or wastewater utility to establish rate base using the fair value—rather than original cost—of utility property acquired from a municipality, county, or authority, and the mechanism can result in rate-base values higher than the original book cost of aging systems. While acquisitions can bring much-needed capital and compliance capacity to distressed systems, the investments also increase rate base and produce higher customer bills.
The fifth driver is changes to how utilities recover their costs. North Carolina’s investor-owned water and sewer utilities may utilize Water System Improvement Charges (“WSIC”) and Sewer System Improvement Charges (“SSIC”) that allow the recovery of eligible infrastructure costs incurred between general rate cases, subject to a statutory cap of 7.5 percent of revenues. Additionally, North Carolina adopted a Water and Sewer Investment Plan (“WSIP”) mechanism in N.C. Gen. Stat. § 62-133.1B, which allows three-year rate plans with annual adjustments capped at 5 percent of the utility’s North Carolina retail jurisdictional gross revenues. These mechanisms reduce regulatory lag and help utilities finance investments in deteriorating infrastructure, but they shift the rhythm of rate regulation. Instead of a full general rate case every few years, customers may see more frequent increases layered onto bills.
How North Carolina Regulates Utilities
North Carolina’s water landscape is divided between investor-owned utilities regulated by the North Carolina Utilities Commission (“Utilities Commission”) and municipally operated systems governed by local elected bodies. The distinction matters for rate-setting, financing, and affordability.
The Utilities Commission regulates investor-owned electric, natural gas, water, and wastewater utilities under Chapter 62 of the North Carolina General Statutes. The state’s regulatory compact requires utilities to provide adequate service at reasonable rates in exchange for monopoly franchised service territories; the Utilities Commission’s obligation is to be fair and reasonable to both utilities and their customers. The Public Staff, established under N.C. Gen. Stat. § 62-15, represents the using and consuming public and intervenes on customers’ behalf in all proceedings affecting rates or service. The Attorney General of North Carolina will also often participate on behalf of consumers.
Investor-owned water utilities—principally Aqua North Carolina and Carolina Water Service—are regulated under Chapter 62 and must file rate cases with the Utilities Commission for any rate change. They have the opportunity to earn a return on equity authorized by the Utilities Commission. Their rates reflect not only operating costs but also depreciation, taxes, and profit for shareholders. The WSIP mechanism and fair-value acquisition statute give investor-owned utilities tools to grow rate base rapidly through infrastructure investment and system acquisitions.
Municipal utilities, by contrast, set rates through their own governing boards without Utilities Commission oversight. They typically finance capital through tax-exempt municipal bonds and State Revolving Fund loans at below-market interest rates, do not pay federal income taxes, and do not earn a shareholder return—structural advantages that tend to produce lower customer bills.
However, municipal systems are not immune from rate pressure. Many face the same aging-infrastructure challenges, and some small municipal or nonprofit systems lack the technical and financial capacity to comply with new regulations and may look to sell their systems to investor-owned utilities that have better access to the capital necessary to fund improvements. Session Law 2026-32, North Carolina’s Water/Wastewater Affordability and Capacity Act, addresses this by requiring local government service providers to hold a public hearing and make a public-interest determination before selling a water or sewer system to a private company. The legislation recognizes that while acquisition by an investor-owned utility may resolve operational deficiencies, it can also transfer customers into a higher-rate regulatory structure.
Affordability and the Low-Income Household Problem
The affordability implications of all utility rate increases are acute. Water service is essential for health, sanitation, housing stability, and basic dignity. Unlike electricity, where federal energy assistance programs such as the Low Income Home Energy Assistance Program (“LIHEAP”) are long-established, water assistance has historically been less comprehensive and more fragmented.
Rising bills interact with shutoff policies, arrearages, and housing insecurity. A water bill that rises by $10 or $20 per month may be manageable for middle-income households but destabilizing for those already facing rent, food, medical, and energy burdens.
If water rates are rising as fast as, or faster than, electric rates, then water affordability may require the same level of regulatory attention given to energy affordability: income-based discounts, arrearage-management plans, shutoff protections, conservation assistance, and better data collection on household water burden.
The Road Ahead: Necessary Investment, Harder Questions
The rate trajectory for investor-owned water utilities is unlikely to reverse soon. Aging infrastructure, regulatory requirements for PFAS and other contaminants, lead pipe replacement, drought resilience, cybersecurity, and consolidation will continue to require capital. Investors will expect utilities to seek recovery, and regulators will face the difficult task of distinguishing necessary modernization from excessive capital bias.
Electric rates are also likely to keep rising, but the electric sector has more policy tools to bend the cost curve. Water and wastewater regulators simply do not have a comparable toolkit. State-funded programs, such as the Department of Environmental Quality Division of Water Infrastructure’s State Water Infrastructure Authority certainly help, but demand for financial assistance outpaces the availability of funding.
Ultimately, pipes must be replaced, water must remain safe, and systems must be resilient. But the old assumption that water bills are too small to generate major affordability concerns is obsolete. In North Carolina and nationally, investor-owned water rates are becoming a frontline test of utility regulation: whether commissions can finance invisible but essential infrastructure without allowing the cost of water service to become unaffordable for the households that depend on it most.
