Public Utilities and PFAS Compliance Costs
Investor-owned water utilities regulated by state public utility commissions (PUCs) must obtain regulatory approval to recover PFAS compliance costs through customer rates. PUC proceedings for PFAS rate recovery involve complex determinations about prudent investment, responsible party cost allocation, and equitable rate design—with significant implications for utility financial health and customer bills.
Prudency Review of PFAS Compliance Investments
PUCs evaluate whether utility capital investments are prudent—reasonable decisions by well-managed utilities facing the circumstances at the time. PFAS treatment investments responding to EPA MCLs are generally prudent by definition, but utilities that previously failed to respond to health advisory warnings may face prudency challenges for compliance costs incurred during the advisory period.
Responsible Party Recovery and Rate Impact Mitigation
PUCs increasingly consider whether utilities have pursued responsible party cost recovery before seeking full rate recovery from customers. Utilities that have obtained settlement funds from PFAS manufacturers or are pursuing litigation should demonstrate these efforts in rate proceedings, as regulators may limit rate recovery to costs not recoverable from responsible parties.
Affordable Rate Design in PFAS-Affected Communities
PFAS compliance rate increases disproportionately affect low-income customers who spend higher fractions of income on water service. PUC proceedings offer opportunities to incorporate lifeline rate structures, low-income assistance programs, and affordable access requirements that distribute PFAS compliance costs equitably across customer income levels