Prior to 2022, sewer rates were not increased for more than 10 years, which resulted in declining reserves and deferred infrastructure investment. In 2022, the City adopted a rate update that funded only about half of the identified system needs in order to limit immediate customer impacts.  That update also introduced Equivalent Dwelling Units (EDUs) to more equitably allocate costs among customer classes based on wastewater flow and discharge strength (such as biochemical oxygen demand and suspended solids). While this improved fairness and legal defensibility, it did not generate sufficient revenue to meet long-term system needs. Continued cost escalation, reserve drawdowns, and regulatory requirements now make further action necessary.

Major cost drivers include:

If rates are not increased, the City faces growing risks, including:

The sewer fund reserve is projected at approximately $4.4 million, which is less than half of one year of operating costs. Industry best practices generally recommend maintaining reserves equal to about one year of operating expenses to ensure system stability and emergency response capability.  The current reserve level leaves the system financially vulnerable. In addition, long-term underfunding has limited infrastructure investment and resulted in deferred maintenance.

Customer bill impacts will depend on customer class (strength of effluent) and usage (amount of effluent discharged to the City system).

 

On June 16, 2026, the City Council approved Option 4b: a cash-funded approach with moderate increases in Year 1 and Year 2, followed by smaller increases in subsequent years.

 

The approved rate schedule and average customer bill impacts are included in the staff report for the June 16, 2026 City Council Meeting Item 5.1 Sewer Enterprise Study attachments.

 

Average customer bill impacts are based on the usage shown in the “Monthly Usage” column. Actual customer impacts will vary depending on individual account usage.

Most sewer system costs are fixed and unavoidable, including staffing, energy, chemicals, regulatory compliance, and infrastructure maintenance. The system operates 24 hours a day, year-round, and many costs are driven by state and federal requirements. Significant cost reductions would jeopardize service reliability and regulatory compliance and are not a sustainable alternative to addressing long-term funding needs.

Even with the proposed increases, Chico’s residential sewer rates remain generally comparable to nearby jurisdictions. However, comparisons are limited because sewer systems differ in age, condition, regulatory requirements, existing debt obligations and past investment decisions. 

Any sewer rate increase must comply with California Proposition 218, which requires the following:

Rates must be proportional to the cost of service provided and may not exceed the actual cost of operating and maintaining the system.

Yes. Sewer rates are reviewed periodically as part of the City’s financial planning and budget process. Future adjustments will be based on updated cost-of-service analyses, regulatory requirements, and system conditions. Any future rate changes would follow the same public and legal process, including notice and public hearings.

No. This rate update does not include funding to extend sewer service to parcels that are not currently connected.

 

The proposed rates are dedicated to maintaining, repairing, and upgrading the existing sewer system to meet regulatory requirements and ensure reliable service for current customers.

 

If sewer service is extended to new or unserved parcels in the future, those improvements are typically funded by the property owners or developers who benefit from the extension, not by existing ratepayers.