Every developer has a utility horror story. The project that sat for 18 months waiting for water district capacity. The site that needed a $2 million sewer main extension that wasn't in the capital improvement plan. The infill project where the electric utility couldn't confirm service until three months before construction was supposed to start.
Utility connections sit at the intersection of city planning, infrastructure investment, and private development. Understanding how these systems work together — and where they break down — is essential for realistic project timelines and accurate feasibility analysis.
The Planning Framework: How Cities Think About Utilities
Municipal planning for utilities operates on a different timeline than development. While developers think in months, cities and utility providers think in decades.
The General Plan Utilities Element
Most jurisdictions maintain a utilities element within their general or comprehensive plan that addresses:
• Existing Infrastructure: Inventory of current water, sewer, electric, gas, and telecommunications systems
• Capacity Analysis: Assessment of current utilization and available capacity
• Growth Projections: Forecasted demand based on land use buildout
• Capital Improvement Plans: Planned infrastructure investments over 5-20 year horizons
• Service Area Boundaries: Geographic limits of utility service
This element is designed to ensure utility services can support community growth as anticipated in the land use plan. The key insight for developers: if your project requires infrastructure that isn't in the capital plan, you're either funding it yourself or waiting until it is.
Urban Growth Boundaries and Service Areas
Many jurisdictions use urban growth boundaries (UGBs) or urban service areas to define where infrastructure investment will occur:
• Inside the Boundary: Full urban services available or planned; development generally supported
• Outside the Boundary: Rural services only; significant infrastructure investment required for development
• Expansion Areas: Lands identified for future inclusion; infrastructure phasing tied to boundary amendments
Development outside established service areas typically requires the developer to fund infrastructure extensions — often at costs that fundamentally change project economics.
The Four Utilities: Different Systems, Different Challenges
Each utility system operates under different regulatory frameworks, ownership structures, and capacity constraints.
Water
Water service involves two distinct elements:
• Supply: Water rights, sources (surface water, groundwater, imported water), and treatment capacity
• Distribution: Transmission mains, pressure zones, storage tanks, and local distribution lines
Common Developer Challenges:
• Water rights limitations in Western states may cap new connections regardless of distribution capacity
• Pressure zone boundaries can require expensive booster pumps or pressure-reducing stations
• Fire flow requirements may necessitate main upsizing even when domestic supply is adequate
• Water districts operate independently from city planning departments — coordination is the developer's responsibility
Sewer
Sanitary sewer systems include:
• Collection: Local sewer lines, trunk lines, and interceptors
• Treatment: Wastewater treatment plant capacity and discharge permits
• Capacity Allocation: Systems for reserving treatment capacity for approved projects
Common Developer Challenges:
• Treatment plant capacity often the binding constraint — can require years to expand
• Infiltration and inflow (I&I) problems in aging systems may require rehabilitation before new connections
• Sewer capacity fees can be substantial — often $5,000-$15,000+ per residential unit
• Septic-to-sewer conversions in urbanizing areas create competing demands for limited capacity
Electric
Electric service involves:
• Generation: Power supply and grid interconnection
• Transmission: High-voltage lines connecting generation to substations
• Distribution: Substations, feeders, and local service lines
Common Developer Challenges:
• Substation capacity constraints — new substations require 3-5+ years to plan and build
• Feeder limitations may restrict service to large commercial or industrial projects
• Undergrounding requirements in many jurisdictions add significant cost
• EV charging infrastructure increasing demand faster than traditional load growth models predicted
Natural Gas
Gas service considerations:
• Transmission: High-pressure interstate and intrastate pipelines
• Distribution: Local distribution networks operated by utilities
• Availability: Not all areas have gas service; some jurisdictions restricting new gas connections
Common Developer Challenges:
• Gas ban ordinances in California and other states may prohibit new gas connections
• Distribution main extensions in rural areas can be cost-prohibitive
• All-electric building codes changing the calculus for gas infrastructure investment
The Will-Serve Letter: Your Utility Commitment
The will-serve letter (also called a service availability letter or commitment letter) is the utility's confirmation that it can and will provide service to a specific development.
What a Will-Serve Letter Confirms
• Service Availability: The utility has capacity to serve the proposed development
• Connection Point: Where the development will connect to existing infrastructure
• Conditions: Any infrastructure improvements, fees, or dedications required
• Timeline: When service will be available (often conditioned on developer actions)
When You Need It
• Entitlement Applications: Most jurisdictions require will-serve letters as part of discretionary approval applications
• Building Permits: Cannot issue permits without confirmed utility service
• Financing: Lenders typically require utility commitments before funding
• Due Diligence: Essential for accurate feasibility analysis before acquisition
The Gap Between Letter and Reality
Will-serve letters often include conditional language that creates uncertainty:
• "Subject to completion of [infrastructure improvement]"
• "Upon payment of applicable fees"
• "When capacity becomes available"
• "Subject to approval of [easements/dedications]"
Understanding exactly what conditions must be satisfied — and who is responsible for satisfying them — is critical for realistic project scheduling.
Infrastructure Phasing and Cost Allocation
When existing infrastructure is insufficient, someone has to pay for improvements. How those costs are allocated determines project feasibility.
Developer-Funded Improvements
• On-Site Infrastructure: Lines within the development are almost always developer-funded
• Connection Costs: Extending service from existing mains to the property line
• Off-Site Improvements: Main extensions, upsizing, or facility improvements required to serve the project
• Fair Share Contributions: Proportionate share of regional improvements benefiting multiple developments
Reimbursement Mechanisms
Some jurisdictions have mechanisms to reimburse developers who build oversized infrastructure:
• Latecomer Agreements: Future developers connecting to infrastructure pay their proportionate share to the original builder
• Reimbursement Districts: Formal mechanisms for collecting contributions from benefiting properties
• Credit Against Fees: Infrastructure construction credited against connection or capacity fees
The availability and structure of reimbursement programs varies significantly by jurisdiction. Understanding local mechanisms is essential for accurate cost projections.
Capacity Fees and Impact Fees
Most utilities charge fees for new connections:
• Connection Fees: Cost of physical connection to the system
• Capacity Fees: Buy-in to existing system capacity (also called system development charges)
• Impact Fees: Contribution to future infrastructure expansion
These fees can be substantial — often $20,000-$50,000+ per residential unit when water, sewer, and other utilities are combined.
Coordination Challenges: Where Things Break Down
Utility delays typically stem from coordination failures between multiple entities.
Multiple Providers, No Single Point of Contact
A typical development might require coordination with:
• Municipal planning department
• Water district (often independent of city)
• Sewer district (may be different from water district)
• Investor-owned electric utility
• Gas utility
• Telecommunications providers
• Fire department (for fire flow requirements)
Each entity has its own application process, review timeline, and approval requirements. No one is responsible for coordinating among them — that burden falls on the developer.
Timing Mismatches
• Planning vs. Utility Calendars: City planning approvals and utility capital programs operate on different schedules
• Design vs. Construction: Utility design approval may take longer than building permit review
• Inspection Sequences: Underground utilities must be inspected before backfill, before other construction can proceed
Capacity Constraints
• Moratoriums: Some districts impose connection moratoriums when capacity is exhausted
• Allocation Systems: First-come-first-served or priority systems for limited capacity
• Regional Constraints: Treatment plant or water supply limitations affecting entire service areas
Strategic Considerations for Developers
Due Diligence: Before You Buy
• Identify All Providers: Map every utility that will serve the site
• Request Pre-Application Meetings: Meet with each utility before closing to understand capacity, costs, and timeline
• Review Capital Plans: Check whether needed infrastructure is already planned and funded
• Verify Service Area: Confirm the site is within established service boundaries
• Estimate Total Costs: Get fee schedules and preliminary cost estimates for all required improvements
Entitlement Strategy
• Early Will-Serve Requests: Submit will-serve requests as early as possible — don't wait for planning approval
• Coordinate Conditions: Ensure planning conditions align with utility requirements
• Phase Strategically: If capacity is limited, consider phasing to match available infrastructure
• Build Relationships: Regular communication with utility staff prevents surprises
Risk Mitigation
• Contingencies: Build utility confirmation into purchase agreements
• Timeline Buffers: Add contingency time for utility coordination in project schedules
• Cost Escalation: Include escalation provisions in pro formas for utility fees
• Alternative Providers: Where multiple providers exist, evaluate alternatives
Emerging Trends
Electrification and Grid Constraints
Building electrification policies and EV adoption are straining distribution infrastructure:
• Substation capacity becoming a development constraint in growing areas
• Utility planning models struggling to keep pace with load growth
• On-site generation and storage emerging as solutions to grid limitations
Water Scarcity
Western states face increasing water supply challenges:
• Water rights becoming the binding constraint on development
• Water banking and transfer programs creating new complexity
• Recycled water systems reducing potable demand but requiring parallel infrastructure
Digital Infrastructure
Telecommunications increasingly treated as essential utility:
• Fiber-to-the-premises becoming standard expectation
• 5G small cell deployment requiring coordination with other utilities
• Smart city infrastructure adding new coordination requirements
The Bottom Line
Utility coordination is where city planning meets physical infrastructure — and where many development timelines go to die. The disconnect between planning approvals and utility capacity is one of the most common sources of project delays.
For developers, the lesson is clear: utility due diligence cannot wait until after entitlements are secured. Understanding infrastructure capacity, identifying required improvements, and building realistic utility timelines into project schedules is essential for accurate feasibility analysis and successful project delivery.
The developers who consistently deliver on schedule are the ones who treat utility coordination as a critical path activity from day one — not an afterthought to be handled once planning approvals are in hand.
For more on infrastructure considerations in development, see our coverage of Running Utilities to Data Centers: The Real Property Perspective and Rights Analysis in Energy: Surface, Subsurface, and the New Renewables Layer.
