And people are pushing back.
Local officials say they need the money to upgrade outdated water-treatment facilities, sewer lines and water mains. In some cases, improvements are required just to comply with the law.
No matter how justified they say the rate hikes are, however, some elected officials have found it hard to follow through in the face of public protests.
"You have this balance you have to find," said Doug Brown, vice chairman of Sacramento's Utilities Rate Advisory Commission. "There is aging infrastructure, but with the economy, it's a very difficult time for people to be paying more."
Sacramento is among the cities hiking rates. Utility officials have proposed raising monthly bills by $19 over the next three years. The Utilities Rate Advisory Commission has delayed taking action on the proposed new rates until later this week.
Brown has proposed rate increases slightly lower than those utilities officials want.
The added revenue from the increases would help the city issue nearly $350 million in bonds for several public works projects, including a $152 million rehabilitation of an 80-year-old water-treatment plant north of downtown and $57 million for water meter installation.
"Clearly there's a need; Sacramento is a very old town," Brown said. "When it comes to our underground infrastructure, it's only a matter of time."
But he also understands the pressure on ratepayers to fund improvements.
"It's everything piling on top of one another," he said.
Elsewhere in the region, similar plans have angered residents. Bowing to irate customers, the Carmichael Water District last week scaled back rate increases scheduled for future years. Ratepayers will still see their bills go up 18 percent this year to compensate for reduced water consumption in the district.
Voters in Foresthill last year rejected a rate hike their water district had proposed. But in that case, water officials fought back: the Foresthill Public Utility District board declared the public vote invalid and will go back to voters in June with a rate increase.
The need to replace aging pipes and treatment facilities is one big factor driving rate hikes across the region. But it isn't the only one.
Tim Quinn, executive director of the Association of California Water Agencies, said the cost of energy – required in large quantities to pump, treat and deliver water – is another factor. So are stricter environmental regulations, which often require expensive new treatment methods.
"There is not a place in California that will not experience significant increases in water rates, because we're living under a more expensive set of rules than we did in the past," Quinn said.
Another factor is the growing strain on the state's water resources, which is driving some agencies to secure new supplies, often at great expense.
Davis and Woodland are among those on the hunt. Both cities rely on groundwater, and their wells are being depleted after decades of use. The water they deliver to residents violates numerous state and federal quality standards.
Last year, the two cities joined forces to buy water rights from the Sacramento River. They obtained state approval for a new water-intake facility and treatment plant.
The Davis City Council in September approved a 14 percent rate increase to begin paying for the $325 million facility. But earlier this month, following ratepayer outcry, the council reversed course. It repealed the increase and instead decided to let voters weigh in via a November ballot measure.
One of the big challenges ahead for the Sacramento region is upgrading the sewage-treatment plant that serves 1.4 million people from Folsom to West Sacramento.
A renewed state permit for the system, issued in 2010 to the Sacramento Regional County Sanitation District, imposes strict new standards on the treated sewage discharged into the Sacramento River. The goal is to protect fish from ammonia and reduce threats to human health such as E. coli in the waste stream.
The district has appealed the permit and calls some of the terms excessive and unnecessary. But it has also begun raising rates to pay for compliance. Last year, the monthly sewage-treatment rate paid by every home in the region increased from $20 to $22. Similar increases are planned in each of the next two years.
And that's just to begin planning upgrades to the treatment plant. The district estimates the monthly rate may have to triple – to $60 a month – to fund a project that could ultimately cost between $1 billion and $2 billion.
"We haven't done the pilot studies and design work, so it's very difficult to even get an idea what the total costs are going be yet," said Joe Maestretti, the district's finance chief.
The district could face fines from state and federal agencies if it doesn't comply, along with lawsuits by outside groups.
As the nation's Clean Water Act watchdog, the U.S. Environmental Protection Agency is well aware of the tough times facing Sacramento and other California cities and counties as they try to comply with federal water-quality requirements. So when problems occur, it emphasizes strict compliance schedules rather than steep fines.
Jared Blumenfeld, the agency's regional administrator, said the federal government's ability to help pay for system upgrades is limited. The EPA's so-called State Revolving Fund can only help cover about 10 percent of a statewide water system repair bill estimated at $70 billion.
"The picture across California is not a positive one," Blumenfeld said. "The older the infrastructure, the more vulnerable we are to increased sewage spills, more contaminated drinking water, and ultimately the cost will just get greater and greater. It's already happening now."