Phoenix, Arizona Sets Stage 2 Drought Plan for January With Surcharge on High Water Use

Phoenix officials say the city expects to enter Stage 2 of its Drought Management Plan in January, a step that asks for voluntary water cuts and adds a temporary surcharge for the highest users. The city announced the plan in a Nov. 10 news release and outlined it at a City Council policy session the same day.

What changes in January

Phoenix has stayed under a Stage 1 Water Alert since June 2022. Stage 2 is a Water Warning, the next level in the city plan, and it takes effect when standard supplies run short, requiring added water resources or cutbacks in demand. City officials say water service will not be interrupted and that customers can continue to expect safe, reliable service.

The plan has three parts. The city will draw more on backup supplies, develop new water sources and drive down consumption. On the demand side, the city asks businesses and residents for a voluntary 5 percent cut in water use and directs city departments to trim their own usage by 10 percent. It also urges households to fix leaks, water outdoors to match the weather and swap unused grass for desert adapted landscaping.

The surcharge

Under the plan, customers would pay $2.10 for each unit of water used above a monthly threshold set for their class, with one unit equal to 748 gallons. The residential threshold is 20 units, or 14,960 gallons a month. The commercial threshold is 300 units and the industrial threshold is 15,000 units. Only water used past the limit carries the added fee, and the charge takes effect only under a declared Stage 2 drought.

Based on current usage, the city estimates the surcharge would affect 16 percent of residential monthly bills, 7 percent of commercial bills and 1 percent of industrial bills, and it says most customers are not expected to incur it. Early modeling projects the surcharge would generate roughly $40 million to support conservation efforts and secure more water supplies. A Stage 2 declaration also widens free water efficiency consultations for residents, businesses and homeowner associations and boosts financial incentives for conservation.

Why the city is acting now

Under new federal operating guidelines, annual Colorado River deliveries to Lower Basin states will drop by 1.25 million acre feet in 2027 and 2028. A proposed sharing agreement assigns 760,000 acre feet of those cuts to Arizona. The river provides about 40 percent of Phoenix drinking water, and the city faces a potential 30 percent drop in those deliveries. Recent rainfall boosted storage in the Salt and Verde River system, but the city says it will not offset the Colorado River cuts.

Mayor Kate Gallego said the city has spent decades preparing for this point. "We have spent decades preparing for the challenges we are facing today, and those investments have put us in a good position," Gallego said. "But the cuts from the federal government require us to take further action." Vice Mayor Kesha Hodge Washington called conservation a shared responsibility and said customers need access to information, tools and assistance that can help them conserve. The Phoenix Water Services Department delivers drinking water and wastewater services to about 1.7 million residents.