A look into the BPU docket, the governor's rate-pause order, the $63 billion merger and why your water bill keeps climbing every two years.
TRENTON, N.J. — Your water bill could jump in eight days unless regulators block or reduce the increase.
The Board of Public Utilities must decide by June 16 whether to let New Jersey American Water raise average residential water rates by $10.02 per month. That is an 11.95 percent increase for the typical household using 5,793 gallons monthly. The company serves 680,000 water customers and 70,000 wastewater accounts across 18 of 21 New Jersey counties. The hike would generate $146.4 million in new annual revenue. Wastewater customers would pay an additional $8.20 per month. BPU President Christine Guhl-Sadovy announced in February that the board had approved a consultant procurement to study alternative business models including performance-based ratemaking and reductions to utility returns on equity. That 180-day study will not finish before the suspension expires.
The potential hikes come as the NJ Weather and Climate Network reports that 21 of the past 24 months brought below-normal rainfall. The Department of Environmental Protection separately warned that dry weather would continue through early June. New Jersey has been under a drought warning since then-Governor Phil Murphy declared one in December 2025. The U.S. Drought Monitor lists the southern half of the state as under “Severe Drought” conditions, while the northern half is classified as “Moderate Drought.”
New Jersey American Water states in SEC filings that customer demand is generally greater during the warmer months. The BPU must decide by June 16. If approved, new rates would take effect in fall 2026: after the peak summer demand period, but while drought conditions may persist.
Every speaker at the May 27 virtual hearings opposed the increase. Administrative Law Judge Jacob S. Gertsman presided. Colin Hickey of the Bedminster Township Committee cited the state's broader affordability crisis and warned that low-income residents and affordable housing developments would absorb the worst impact. Additional testimony came from Kevin Barfield, executive director of the environmental justice group Camden for Clear Air and a recently appointed member of the Department of Environmental Protection's Environmental Justice Advisory Council. He told the hearing that the company brings in $214 million in annual revenue, while residents, as he put it, "scrape money together to pay their bills." He noted that hearing times at 4:30 and 5:30 p.m. made participation nearly impossible for working people.
Irvington resident Bernard Glee called the request "inhumane" amid community layoffs and said company leadership is "making millions" while asking working families for more. Rachel Davis of the Rumson-based nonprofit Waterspirit testified that "Water is a human right. No resident should have to experience a water shut off, especially during droughts." Municipal officials from Atlantic Highlands and Rumson contrasted New Jersey American Water's profit-driven model with municipally owned utilities that, as one official put it, "do not profit from services."
The increases accelerate with each filing and BPU orders document them. October 2020 brought a $2.52 monthly increase generating roughly $30 million in new annual revenue. September 2022 added $2.93 per month and roughly $45.5 million. September 2024 added $5.33 per month and roughly $79.5 million. The BPU approved each case; a settlement between the Division of Rate Counsel and the company reduced the proposed hike in 2024. January 2026 now seeks $10.02 per month and $146.4 million. At this pace the 2028 filing could seek $15 to $20 per month.
As explanation for the rate hikes the company cites $1.4 billion in infrastructure investments, including PFAS treatment upgrades and lead service line work driven by federal regulatory deadlines that took effect in 2024. Water utility construction costs nationally rose roughly 45 percent over the past five years, nearly double consumer price inflation, according to Bureau of Labor Statistics data analyzed by the University of North Carolina Environmental Finance Center. The BPU also has a history of reducing requests: the company's 2024 filing originally sought $161.7 million and a 16.89 percent increase before the board approved a settlement at roughly half that amount.
The infrastructure spending is real, but so are the returns. Parent company American Water Works reported adjusted earnings of $5.64 per share in 2025, up 8.9 percent year-over-year. The company affirmed 8 percent earnings growth guidance for 2026 and raised dividends 8.2 percent. Capital investment across regulated operations totaled $3.2 billion. Regulated revenues reached $4,723 million.
On the February 19 earnings call, American Water Works Chief Financial Officer David Bowler confirmed the $146 million revenue target and said new rates would take effect in fall 2026 if approved. Bowler told analysts: "We are always open to settlements if we can reach a constructive settlement, but it's going to be on terms that are constructive for us and beneficial and provide a fair return." He also said: "Our bills are less than 1 percent of median household income, which we view as very affordable." He did not specify the burden on households below median income or address cumulative impacts from simultaneous electric, gas and water increases.
The filing landed January 16. Eleven weeks earlier, American Water Works announced an all-stock merger with Essential Utilities valued at approximately $63 billion in combined enterprise value. Shareholders approved the deal February 10. The merger, which would combine operations in 17 states including New Jersey, has cleared regulatory review in Kentucky and Ohio but has not yet received New Jersey BPU approval. The companies expect to close in the first quarter of 2027.
The company says it needs the money for $1.4 billion in infrastructure investments through December 2026. That includes replacement of aging water mains, lead service line work and treatment upgrades for PFAS and other contaminants. General system resiliency projects are also in the plan. Mark McDonough, president of New Jersey American Water, said in the January filing: "This rate case is really aimed at the investments we're already making to stay ahead of problems."
Lead line replacement already carries a separate funding stream. The company confirmed in a January 20, 2026 press release: "Replacement of lead service lines is funded through New Jersey American Water's Lead Service Line Replacement Charge, a separate surcharge approved by the New Jersey Board of Public Utilities that currently appears as a line item on customer water bills." That surcharge remains active. The general rate increase also includes lead line costs in its $1.4 billion capital plan. The public docket does not explain how the two funding mechanisms relate, or whether ratepayers are being asked to pay for the same lead line work through both the dedicated surcharge and the general rate increase.
The growth strategy extends beyond rate cases. The company completed 18 acquisitions across seven states in 2025, adding roughly 104,000 customer connections for $582 million in total deal value. Its 2025 annual report states: "An important element of our growth strategy is the acquisition and optimization of water and wastewater systems to broaden our current, and move into new, service areas."
In October 2025 the company acquired the South Orange Village water system for $19.7 million after residents approved the sale in a November 2024 referendum by 62 percent. The Village Council authorized the transaction in February 2025 and the BPU approved the municipal consent that September. NJAW had operated the system under contract since 2016. Lead line replacement work in the acquired system began January 20, 2026.
Other towns do not always get the choice that South Orange residents did. New Jersey's Water Infrastructure Protection Act, N.J.S.A. 58:30-1 et seq., allows the Board of Public Utilities to include the purchase price of acquired water and wastewater systems in the rate base when a municipality has certified an "emergent condition" under N.J.S.A. 58:30-5. The board retains discretion to evaluate whether the full purchase price should be recovered from ratepayers and has previously limited acquisition premiums to depreciated book value. That means ratepayers can face charges for the premium the company paid to acquire municipal infrastructure, but the BPU is not required to approve the full amount. The company applied this framework in June 2023 when it acquired the Egg Harbor City water and wastewater systems for $21.8 million.
A 2022 peer-reviewed analysis in Water Policy found that American Water and Essential Utilities "have successfully advocated for regulatory and legislative changes that facilitate acquisitions and price increases, including 'fair value' legislation."
New Jersey American Water is not the only utility seeking more. Veolia Water New Jersey seeks $274 million in a case suspended until September. Aqua New Jersey wants $7.87 million in a case suspended until July. If all three win approval, the combined annual cost shift would exceed $400 million. The increases would take effect this fall, when the state will likely remain under a drought warning and continue to face an affordability crisis.
National research on privatization costs is dated and consistent. A 2016 analysis by the advocacy organization Food & Water Watch of the 500 largest U.S. water systems found private utilities charged an average of 59 percent more than public systems. The New Jersey gap reached 79 percent. Industry groups have disputed these methodologies, arguing that private systems often serve more complex infrastructure. Neither the BPU nor the EPA publishes a current public-private cost comparison specific to New Jersey.
A January 28 article by the Natural Resources Defense Council and the National Consumer Law Center cited EPA data showing 12 to 19 million American households face unaffordable water bills. Water bills have been rising at more than twice the rate of inflation for decades.
The BPU can approve the full request, approve a reduced amount, reject it outright or extend the suspension. Historically the board has approved these requests, often through negotiated settlements with the Division of Rate Counsel that reduce the requested increases. If approved, new rates would take effect this fall, when the state will likely remain under drought conditions. Ratepayers would pay more per gallon while conservation remains urgent. Meanwhile, the lead line surcharge stays. The company has filed every two years since 2020. And the $63 billion merger moves toward closing.
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Sources
• New Jersey Board of Public Utilities, Order Suspending Increases, Docket WR26010010 (Feb 18, 2026)
• New Jersey-American Water Company, Verified Petition, OAL Docket PUC 03132-2026 S (Jan 16, 2026)
• New Jersey-American Water Company, "Begins Lead Service Line Replacement Work in South Orange Village" (Jan 20, 2026)
• American Water Works, 2025 Annual Report on Form 10-K (2026)
• American Water Works, Q4 2025 Earnings Call Transcript (Feb 19, 2026)
• American Water Works, SEC Form S-4, Registration No. 333-292182 (2025)
• BPU President Christine Guhl-Sadovy, Statement on Utility Business Model Study (Feb 19, 2026)
• Emily Schopfer, Two River Times, "Public Questions NJAW Proposed Rate Hike" (June 5, 2026)
• Larry Levine and Olivia Wein, Natural Resources Defense Council and National Consumer Law Center, "Broadening the Frame to Water" (Jan 28, 2026)
• Food & Water Watch, "Water Privatization Is a Bad Deal for NJ" (Sep 25, 2024)
• New Jersey Board of Public Utilities, Order WR24010056, Initial Decision Settlement (Sep 4, 2024)
• New Jersey Board of Public Utilities, Order WR24010056, Original Petition and Stipulation (Jan 19, 2024)
• New Jersey Department of Environmental Protection, Weekly Drinking Water Update (May 27, 2026)
• New Jersey Weather and Climate Network, Drought Status Report (2026)
• New Jersey Department of Environmental Protection, "Murphy Administration Issues Statewide Drought Warning, Urges Public And Businesses To Reduce Water Use" (Dec 5, 2025)
• U.S. Drought Monitor, "New Jersey Drought Conditions" (Jun 2, 2026)
• Collingswood Democrats, "Kevin Barfield" (profile page)
• U.S. Environmental Protection Agency, CERCLA Hazardous Substances Designation for PFOA and PFOS, Final Rule (Jul 8, 2024)
• University of North Carolina Environmental Finance Center, "Accounting for Inflation in Water and Wastewater Capital Planning" (Nov 25, 2025)
• New Jersey Board of Public Utilities, "AWW Essential Merger Designation of Commissioner" (Mar 18, 2026)
• American Water Works and Essential Utilities, Joint Merger Announcement (Oct 27, 2025)
• PRNewswire, "American Water and Essential Utilities Proposed Merger Progresses with Approval from the Public Utilities Commission of Ohio" (May 14, 2026)
• New Jersey Legislature, Water Infrastructure Protection Act, N.J.S.A. 58:30-1 et seq. (P.L.2015, c.18)
• Nicolas Fernandes, NJ.com, "Water company buys N.J. village's water system for $19M" (Mar 7, 2025)
• Village Green NJ, "NJ American Water: South Orange Customers Will See $50M Investment in Next Decade" (Nov 7, 2025)
• NJBIZ, "NJ American Water completes $19.7M South Orange system deal" (Oct 9, 2025)
• Egg Harbor City, "What's happening in Egg Harbor City" (municipal newsletter, 2023)
• Water Policy (IWA Publishing), "Water pricing and affordability in the US: public vs. private ownership" (Mar 1, 2022)
Note: The May 27, 2026 hearing transcript for OAL Docket PUC 03132-2026 S was not available in the BPU public document portal at the time of publication. Hearing testimony is sourced to the Two River Times reporting.