Water bills are climbing across Palo Alto this summer, with costs rising whether your home is served by the city's own system or by San Jose Water Company.
Valley Water, the wholesale groundwater supplier for Santa Clara County, raised its North County groundwater charge 9.1% effective Wednesday, July 1. For the average household, that adds about $5.63 per month, according to a Valley Water announcement published Monday, July 27.
The distinction matters for Palo Alto residents: the city's municipal water system draws from the San Francisco Public Utilities Commission's Hetch Hetchy supply, not Valley Water groundwater. The Valley Water increase hits Palo Alto-area customers served by San Jose Water Company, not those on the city system.
But city water customers aren't spared. Palo Alto's Utilities Advisory Commission voted 5-2 in early March to recommend a separate 8% rate increase for the city's own system, also effective July 2026, adding roughly $10 per month to a typical bill. That followed a 10% hike the prior fiscal year.
"As long as they're charging us that, we have to pay it," Utilities Advisory Commission Chair Greg Scharff said in March, referring to rising wholesale costs from the SFPUC that the city passes directly to ratepayers, according to the Palo Alto Daily Post.
What's driving Valley Water's increase
Valley Water's board approved a $1.284 billion budget for fiscal year 2026-27 to address infrastructure the agency says dates to the 1950s and 1960s. The two largest capital projects: the Anderson Dam Seismic Retrofit and the Rinconada Water Treatment Plant Reliability Improvement.
Anderson Dam is Valley Water's largest reservoir in Santa Clara County, holding roughly 90,000 acre-feet. The seismic retrofit carries a price tag of $1.2 billion to $2 billion, with construction set to begin in 2027 and run through approximately 2033. The Federal Energy Regulatory Commission approved the project in spring 2026.
"Rebuilding Anderson Dam is Valley Water's top priority," Board Director John Varela said at a March 26 public meeting in Morgan Hill. "This project will ensure public safety, protect our regional water supply, and provide environmental benefits for generations to come."
Cost containment and assistance
Valley Water, a public agency with no shareholders, said it has paused hiring for 45 positions since February 2024, saving about $1 million monthly. The agency also suspended the Pacheco Dam project and is pursuing state and federal grants to offset ratepayer costs.
For lower-income households struggling with bills, Valley Water's board increased funding for its water rate assistance program from $1 million to $1.25 million annually over the next two fiscal years.
Regardless of which system serves your home, water is getting more expensive in Palo Alto. Residents served by San Jose Water Company will see the Valley Water increase on their bills. City water customers face the separate 8% hike driven by Hetch Hetchy costs.
