Per- and polyfluoroalkyl substances — commonly called "forever chemicals" — have moved from the periphery of utility planning to the center of it. With enforceable federal Maximum Contaminant Levels now in effect for PFOA and PFOS at 4.0 parts per trillion, utilities face compliance costs that will reshape rate structures, capital improvement plans, and debt strategies for the next decade and beyond.
The numbers make the case. EPA estimates that 4,100 to 6,700 public water systems serving 83 to 105 million Americans will need to take remedial action. The American Water Works Association places the capital investment requirement at $37 to $48 billion over five years, with annualized costs of $2.7 to $3.5 billion — roughly double EPA's own estimate. On the wastewater side, Minnesota alone estimates $14 to $28 billion in PFAS cleanup costs over 20 years.
For utility finance directors and rate consultants, these numbers translate into rate case filings that are already reshaping the industry. Pennsylvania American Water filed for $199.2 million in rate increases driven largely by PFAS treatment. California Water Service requested a 30% base rate increase with an additional 25% PFAS surcharge on top. Connecticut Water launched a $241.7 million PFAS capital program funded through a statutory surcharge mechanism.
NewGen water practice leaders — consider adding a perspective here on what you're hearing from clients. Are they planning proactively or waiting? What's the most common question you get? How many current engagements include a PFAS component?
This article summarizes our key findings.
For the complete analysis with full data tables, state-by-state details, and comprehensive citations, see our full research report.
The Regulatory Landscape
The federal PFAS regulatory trajectory has unfolded over two decades, accelerating sharply since 2021. Understanding this timeline is essential for appreciating both the certainty of current obligations and the uncertainty that remains.
How EPA Health Advisories Plummeted
PFOA health advisory levels over time — note the logarithmic scale showing orders-of-magnitude reductions
PFOA and PFOS MCLs at 4.0 ppt are staying. The compliance deadline is moving to 2031. Treatment investment for these two compounds is unavoidable. The fate of the other four MCLs remains uncertain — but all six remain legally in effect today.
CERCLA Liability: The Passive Receiver Problem
The CERCLA hazardous substance designation creates a parallel financial risk. While EPA's enforcement discretion policy focuses on manufacturers, this is a policy — not a binding legal safe harbor. It does not prevent third-party lawsuits. EPA itself has stated that the most enduring solution for passive receivers is a statutory fix from Congress.
This is a critical area for client advisory. Consider adding guidance on how utilities should account for CERCLA liability exposure — whether to establish reserves, how to frame the risk in rate case filings, and what to disclose in bond offerings.
Understanding the Cost Picture
The National Cost Debate: EPA vs. Industry
The gap between EPA's and the water industry's cost estimates is substantial — and it matters for rate planning. Utilities that rely on EPA's lower estimates risk underfunding their compliance programs.
Annual Compliance Cost Estimates
EPA's estimates are roughly half of what industry groups project
Total Capital Investment Required
The gap between EPA and AWWA capital estimates exceeds $30 billion
GAO Report GAO-25-107897 (July 2025) noted that stakeholders have asserted EPA's analysis does not adequately represent actual costs. For rate planning, the AWWA/Black & Veatch estimates serve as a more realistic baseline. Presenting revenue requirements as a range helps governing boards and regulators understand the uncertainty.
Sources: EPA-815-R-24-001 (April 2024); AWWA WITAF 56 (2024); NACWA (July 2023); GAO-25-107897 (July 2025).
The Small System Affordability Crisis
The most critical cost issue is the dramatic disparity between large and small system compliance costs. PFAS compliance costs are highly regressive.
Per-Household Cost by System Size
Fixed compliance costs become crushing for small communities
Only 7% of very small water systems (under 500 people) use advanced filtration, compared to 28% of the largest utilities. If compliance gaps are addressed entirely through rate increases, an estimated 30.4 million households (21.5% of U.S. households) would exceed EPA's 2.5% affordability threshold.
This is a core value proposition. Consider adding examples of how NewGen has helped small systems structure affordable compliance through regional partnerships, phased implementation, creative rate structures, or grant stacking.
Treatment Technology Options and Costs
EPA identified four Best Available Technologies for PFAS removal. The choice drives both capital costs and long-term O&M — and therefore rate design.
GAC
~$0.45 per 1,000 gal
Media: ~$2/lb, reactivatable
Bed life: 3–12 months
Largest footprint
Moderate Capital
Ion Exchange
~$0.26 per 1,000 gal
Media: $4–$12/lb, single-use
Bed life: 6–18 months
~25% of GAC footprint
Lower Capital
RO / Nanofiltration
Substantially higher cost
Membrane replacement cycle
Removes all PFAS incl. short-chain
15–25% waste stream
Highest Capital (3x+ GAC)
| Parameter | GAC | Ion Exchange | RO / NF |
|---|---|---|---|
| Capital Cost | Moderate | Lower | Highest |
| Cost per 1,000 Gal | ~$0.45 | ~$0.26 | Substantially higher |
| Media Life | 3–12 months | 6–18 months | 5–7 years (membranes) |
| Regeneration | Thermal reactivation | Generally single-use | N/A |
| Footprint | Largest | ~25% of GAC | Moderate |
| Energy | Low | Low | High |
| Short-Chain PFAS | Less effective | More effective | Removes all |
Sources: EPA Technologies and Costs Document, EPA-815-R-24-012 (April 2024); EPA WBS-Based Cost Models (January 2024).
NewGen engineers — consider adding guidance on technology selection factors beyond cost: source water quality, existing infrastructure, operator capability. What technology are most clients selecting, and why?
State Spotlight: What's Happening in Key Markets
At least 15 states have adopted enforceable PFAS standards or are in active rulemaking, creating a patchwork with significant implications for multi-state utilities.
Texas: Federal Rules Coming Whether TCEQ Acts or Not
Texas has adopted no state-level PFAS standards. However, military contamination is severe — Lackland AFB recorded PFAS at 170,000 times the MCL. Fort Worth terminated its biosolids contract after PFAS-contaminated biosolids were applied to farmland, and has filed a $420 million manufacturer lawsuit. The 2025 utility budget includes $1.1 million for PFAS legal counsel alone.
California: The Most Aggressive Regulatory Environment
California's State Water Resources Control Board has identified PFAS MCL development as its highest priority. Detections affect systems serving up to 25 million residents. Orange County Water District estimates $1.8 billion in compliance costs over 30 years. Cal Water's pending rate case illustrates separating PFAS costs from base rates — a potential 55%+ cumulative rate increase.
Maryland: Biosolids Moratorium and Military Contamination
Maryland enacted a 4 ppt industrial discharge limit — among the most aggressive wastewater-side standards nationally. Joint Base Andrews recorded 435,000 ppt. Approximately 75% of community water systems contain PFAS. Biosolids land application will be restricted starting October 2027. Baltimore City estimates unfunded mandates approaching $1 billion.
Illinois: Groundwater Standards and Chicago-Area Impacts
Illinois adopted groundwater standards matching federal MCLs. 47 systems were notified of exceedances. Illinois American Water's pending rate case requests $577 million including PFAS treatment, with a $14/month residential increase. Military contamination at Chanute AFB reached 644,000 ppt.
Colorado: The Wildfire–PFAS–Affordability Triple Pressure
Colorado faces military contamination among the worst nationally (Schriever SFB at 870,000 ppt), industrial discharge crises, and state MCLs with a 2029 deadline — two years ahead of the extended federal schedule. The wildfire–PFAS–affordability convergence is unique: the 2020 wildfire season burned 625,000+ acres directly affecting drinking water sources. Thornton is spending $80 million on GAC treatment. Metro Wastewater estimates over $700 million for PFAS cleanup.
Colorado is home market. Consider adding observations about the Widefield/Fountain corridor rate impacts, Thornton's rate structure, and whether Colorado Springs' approach offers a model. Which state environments are clients most concerned about?
Funding the Investment
The Bipartisan Infrastructure Law provided ~$10 billion in PFAS funding. Nearly $15 billion in manufacturer settlements provide additional relief. But a significant gap remains.
The Funding Gap: A Waterfall View
How available funding stacks up against estimated capital need (AWWA mid-range ~$42.5B)
Manufacturer Settlements
Nearly $15 billion in settlements: 3M ($10.3–12.5B over 13 years), DuPont/Chemours/Corteva ($1.185B), Tyco Fire Products ($750M), and BASF ($312.5M). Initial payments began in summer 2025. Settlement funds are allocated based on PFAS concentrations, flow rates, and treatment costs.
DuPont Phase 2: eligibility cutoff June 30, 2026; claims filing deadline July 31, 2026 • 3M Phase 2: July 31, 2026 • Special Needs Funds: August 1, 2026. Utilities that have not filed claims should do so immediately. These deadlines cannot be recovered if missed.
Critical Budget Risk
EPA's proposed FY2026 budget would slash State Revolving Fund spending by 90%. If enacted, this would dramatically reduce the primary funding mechanism for PFAS infrastructure. Utilities should not assume current SRF levels will continue.
Consider developing a standard funding gap analysis framework that layers all available sources (BIL grants, DWSRF loans, WIFIA, settlement proceeds, state programs) and identifies the residual rate-funded amount. This becomes a key deliverable in any PFAS-era rate study.
Rate Design Strategies for PFAS Compliance
Under AWWA M1 methodology, PFAS treatment costs are predominantly fixed — infrastructure operates regardless of demand — which supports recovery through base/fixed charges rather than volumetric rates. Three primary recovery mechanisms are emerging.
PFAS Surcharges
Separate bill line items; more frequent adjustment
CT Water: 0.53% WQTA, $241.7M program
Ridgewood: $37.07/qtr (50% increase)
Recovers only 64% of PFAS revenue requirement
Base Rate Integration
Traditional rate case incorporation
PA American: $88.1M approved (10.74%)
2025 filing: $1.2B, $14/mo impact
Slower to adjust but integrated into COS framework
Settlement Credit Riders
Pass-through of manufacturer proceeds
PA American: $18M to ~690K customers
~$26/customer one-time credit
Show as explicit offset in revenue requirements
Cost Allocation and Industrial Pretreatment
Most utilities treat PFAS costs as system-wide expenses allocated proportionally across classes. Where industrial customers are identified as PFAS sources, extra-strength surcharges analogous to BOD/TSS surcharges under WEF MOP 27 methodology can be applied. The Water Systems PFAS Liability Protection Act (2025, bipartisan) would ensure manufacturers, not ratepayers, bear cleanup costs — but until it passes, the allocation question remains live.
This is a core differentiator. Consider adding recommendations on which approach works best: municipal vs. investor-owned, small vs. large, regulated vs. self-regulated. What has NewGen recommended, and what has worked?
Financial Planning Under Uncertainty
Scenario Modeling
At minimum, utilities should model three scenarios:
- Base case: PFOA/PFOS MCLs at 4.0 ppt with 2031 compliance; four additional MCLs rescinded.
- Moderate case: All six MCLs retained; compliance deadline 2029 or 2031.
- Aggressive case: All six MCLs retained plus state standards exceeding federal requirements.
Debt Financing and Credit Implications
At least 70% of water utilities rely on municipal bonds. After the April 2024 rules, PFAS exposure became a proxy for long-term environmental liability used by bond markets and rating agencies. Moody's treats PFAS risk as a material credit consideration, particularly for small municipal utilities.
Reserve Fund Planning
The settlement payment timing mismatch — payments over 13+ years while utilities need upfront capital — argues for bridge financing. Insurance coverage for PFAS is increasingly limited as carriers add PFAS-specific exclusions.
Consider adding guidance on reserve fund sizing, bridge financing structures, and how to present PFAS contingencies in rate case filings and bond offering documents.
Action Items for Utility Leaders
Utilities should be taking the following steps now — not waiting for regulatory certainty.
Immediate Actions (2026)
- File settlement claims before June–August 2026 deadlines.
- Complete PFAS monitoring — federal deadline is mid-2027; some states require earlier.
- Assess source water PFAS levels at all entry points.
- Begin treatment technology evaluation including pilot studies.
- Engage rate consultants to model revenue requirements under multiple scenarios.
- Apply for all available grant funding: BIL DWSRF, EC-SDC, state programs, WIFIA loans.
- Review insurance policies for PFAS coverage and exclusions.
Near-Term Actions (2026–2028)
- Incorporate PFAS into the CIP with phasing aligned to compliance deadlines.
- Design and procure treatment systems — allow 18–24 months.
- File rate cases or surcharge applications with settlement offsets.
- Establish pretreatment monitoring for industrial users.
- Develop biosolids contingency plans in states with emerging restrictions.
- Communicate proactively with customers and governing boards.
When to Engage Rate Consultants
Sooner than most utilities think. The lead time for rate cases, bond issuances, and grant applications means utilities starting in 2027 or 2028 may face compressed timelines and suboptimal outcomes. Engage when you have initial monitoring data, when you begin technology evaluation, and ideally 18–24 months before your next rate case.
Add NewGen's specific call to action — contact information, relevant practice leaders, a description of what a NewGen PFAS financial assessment looks like, and how to get started.
At NewGen Strategies & Solutions, helping utilities navigate complex compliance and rate design challenges is what we do every day. If you're facing PFAS compliance costs and need a defensible rate case, we'd love to hear from you.
This paper is for informational purposes only and does not constitute legal advice. Regulatory developments are ongoing; verify current status with primary sources before relying on this information.