Everett's 143% Wholesale Water Hike Sparks a Rate War With Alderwood

A rate fight in Snohomish County, Washington is turning into something the water sector rarely litigates in public: a dispute not over what households pay, but over what one utility charges another. The City of Everett wants to raise the wholesale water rate it charges neighboring districts from $1.0033 per hundred cubic feet (CCF) in 2024 to $2.4403 in 2026 — a 143% increase. The Alderwood Water and Wastewater District, which buys that water and delivers it to roughly 300,000 people across Lynnwood, Edmonds, and Mountlake Terrace, is refusing to pay the new rate and has warned Everett it will go to court. The outcome will land on the bills of an estimated 75% of Snohomish County water customers — and it extends WaterVerge’s coverage of the national wave of 2026 water rate increases into a fight over who, exactly, gets stuck with the tab.

What Everett Is Charging For

Everett is the wholesale water supplier for much of Snohomish County. It draws from the Sultan River basin, treats the water, and sells it in bulk to districts and cities that run their own local distribution systems. Alderwood is its largest wholesale customer.

The stated reason for the increase is an $80 million capital project to replace an aging underground reservoir with two new concrete reservoirs — one holding 8 million gallons and one holding 15 million gallons. That is a legitimate, unglamorous piece of infrastructure work: buried storage reservoirs age out, and replacing them is exactly the kind of capital cost utilities across the country are absorbing in 2026.

The controversy is not that Everett is building it. The controversy is who pays, and how the bill is split.

The 80/20 Split at the Heart of the Fight

According to the wholesale customers contesting the increase, Everett unilaterally decided that wholesale customers like Alderwood should cover 80% of the project’s cost, leaving Everett’s own retail customers responsible for just 20%.

That allocation is what turned a routine capital project into a legal dispute. Alderwood’s position is that the split does not reflect who benefits from the reservoirs, and that Everett set the numbers without a negotiated cost-of-service agreement.

The financing structure compounds the grievance. Everett is paying for the project using long-term bonds repaid over 25 years — the standard way utilities spread the cost of a multi-decade asset across the generations of customers who will use it. But Everett is not bonding Alderwood’s portion. Instead, it is asking Alderwood to pay its 80% share up front through the wholesale rate. And by law, Alderwood cannot issue its own bonds to fund another agency’s infrastructure project — so it has no equivalent tool to spread the cost over time. The result is a large, front-loaded charge with no financing mechanism to soften it.

The Utility Tax Nobody Downstream Voted For

Layered on top is a tax. Earlier in 2026, the Everett City Council voted to replace a 6% charge with a 12% utility tax, effective in August, on its water utility revenue. That tax revenue does not flow back into the water system — it goes into Everett’s General Fund, the city’s general-purpose budget.

For Alderwood’s ratepayers, that is the sharpest point of the dispute: a portion of the wholesale rate they are being asked to pay is not a cost of producing or delivering water at all. It is a municipal tax on water sales, collected by Everett, spent on Everett city government, and ultimately paid by residents of Lynnwood, Edmonds, and Mountlake Terrace who have no vote in Everett elections.

Alderwood Digs In — and Lawyers Up

Alderwood has responded by continuing to pay the 2024 rate while the dispute is unresolved, effectively withholding the increase rather than paying under protest. Its attorney, Joe Bennett, warned the Everett Council of legal consequences if the city pursued the increase as structured.

That is an unusual posture. Wholesale water disputes are typically settled quietly through cost-of-service studies and renegotiated supply contracts, because both sides depend on the relationship — Alderwood needs Everett’s water, and Everett needs Alderwood’s revenue. A public threat of litigation signals that the districts believe the allocation is not just unfavorable but legally vulnerable.

What It Means for Households

The dollars are not abstract. In Lynnwood, the increase could raise the average homeowner’s bi-monthly utility bill by more than $16. Across the districts that buy Everett water, the pass-through could touch bills for roughly three-quarters of Snohomish County.

This is the mechanism most ratepayers never see. A household in Edmonds pays its bill to Alderwood; Alderwood pays a wholesale rate to Everett; and when that wholesale rate jumps 143%, the increase flows downhill to the household — arriving as a line-item increase from a district that had no say in Everett’s reservoir financing or its General Fund tax.

Why This Keeps Happening

The Everett–Alderwood fight is a specific instance of a national structural problem. Much of America’s water is delivered through layered wholesale-retail arrangements: a big utility treats and sells water in bulk, and smaller districts distribute it locally. When the wholesale supplier faces a large capital cost — a reservoir, a filtration mandate, a pipeline — it must decide how much to absorb and how much to push downstream.

The same dynamic is visible in the Pacific Northwest’s broader water stress this year, and it echoes the cost-allocation questions behind rate increases at California and Virginia American Water and Pittsburgh’s $25 million hike. Aging infrastructure is coming due everywhere at once. What Everett and Alderwood are actually litigating is the question every utility relationship will eventually face: when the bill arrives, whose customers pay it?

What Comes Next

The immediate flashpoints are the Everett Council’s follow-through on the 12% utility tax in August and whether Alderwood formalizes its legal challenge. If the districts sue, the case will likely turn on cost-of-service principles — whether Everett’s 80/20 allocation reflects the actual benefit each class of customer receives, and whether a General Fund utility tax can lawfully be embedded in a wholesale water rate charged to customers outside city limits.

A settlement is still the likeliest outcome; both sides have too much to lose from a prolonged fight over the water 300,000 people drink. But the terms of that settlement — and how much of the 143% survives it — will set a precedent for wholesale water pricing across the region.

What Residents Should Do

Read your rate notice, not just your bill. Districts are required to notice proposed increases. The number that matters is the multi-year path and its driver, not the first year’s dollar figure.
Ask your district where the increase originates. If you’re an Alderwood, Lynnwood, or Mountlake Terrace customer, a chunk of any 2026 increase originates with Everett’s wholesale rate — not your local utility’s own spending. Knowing that tells you where to direct questions and public comment.
Check for a low-income assistance program. Most Washington districts offer discounts, and enrollment is almost always far below eligibility.
A rate fight is not a water-quality warning. Nothing in this dispute suggests Everett’s water is unsafe — it funds replacement of aging storage. If you want to know what’s actually in your tap water, start with our guide to testing your tap water and read your utility’s Consumer Confidence Report.

How WaterVerge Tracks This

WaterVerge integrates EPA SDWIS compliance and monitoring data into city and utility pages, so residents can separate the two questions that rate fights blur together: is my water safe, and why is my bill going up. Search your city to see its violation and monitoring history.