A vacant parcel came up this summer on Spindrift Road, the kind of lot that reads like a straightforward opportunity: just over a third of an acre, ocean glimpses through the pines, close enough to Highway 1 to feel connected but tucked back enough to feel private. Then the listing got specific. There was no water meter on the property. There hadn't been one for years, because of a moratorium that predates most of the neighbors. Buyers were offered two paths: wait and hope for a future meter, or drill a private well like the house next door reportedly did.
That disclosure is not a fluke of one unlucky parcel. It is a preview of how Carmel Highlands actually works, and it is the piece of due diligence that gets skipped most often by buyers who assume "Peninsula water rules" are one uniform thing. They are not. Within the same stretch of coastline, a home can be on the standard Cal-Am system, on a small private water company nobody outside the neighborhood has heard of, or on no public water system at all. Which one you land on decides whether a remodel is routine or a multi-year exercise in creative engineering, and that difference rarely shows up as a line item in a listing summary.
Three Water Systems, One Zip Code
Most of the Monterey Peninsula, including Carmel-by-the-Sea, Pacific Grove, Monterey, and the bulk of Carmel Highlands, draws water through California American Water, the private utility that has served the area since 1966. Roughly 85 percent of the Peninsula's population sits on that Cal-Am mainline, and the Monterey Peninsula Water Management District is the regional body that regulates it. So far, that sounds uniform.
It isn't, because a defined pocket of south Carmel Highlands answers to a different system entirely. The Carmel Riviera Mutual Water Company operates independently of Cal-Am and serves roughly 177 properties in that part of the neighborhood, a fact documented by researchers at CSU Monterey Bay's Central Coast Wetlands and Watersheds mapping project. And scattered through the Highlands are legacy parcels like that Spindrift Road lot, properties that never received a Cal-Am meter before the moratorium locked new connections in place, leaving well water and septic as the only realistic path to building at all.
| Water system | Who it covers | What it means for a project |
|---|---|---|
| California American Water | Most of Carmel Highlands, same system as Carmel-by-the-Sea and Pacific Grove | Standard MPWMD water credit review applies; existing fixture count is the baseline |
| Carmel Riviera Mutual Water Company | Roughly 177 parcels in south Carmel Highlands | Governed by a separate private company, not Cal-Am; connection and expansion rules run through that entity |
| No public meter | A smaller number of legacy or undeveloped Highlands lots | Private well and septic, subject to county well-capacity and setback review, may take years longer to resolve |
A lot's address alone will not tell you which row applies. That takes a call to the water district and, in the case of the mutual company parcels, a conversation with an entity most Peninsula buyers have never contacted before.
Why the Moratorium Froze Some Lots and Not Others
The root cause traces back to the Carmel River. Cal-Am's supply has long depended on surface water and wells drawing from that river system, and by the late 2000s the pumping had done enough damage that the State Water Resources Control Board issued a cease-and-desist order in October 2009. An administrative law judge with the California Public Utilities Commission later backed a freeze on new water connections until Cal-Am secured a replacement source, a decision covered at the time by Monterey County Weekly, which quoted a Cal-Am spokesperson noting the community had effectively lived under a moratorium for years before it was made official.
That freeze did not erase existing use. It fixed it. Every parcel that already had a Cal-Am connection and a documented water credit kept it, calculated by MPWMD's fixture count method where something as small as a bathroom sink and a toilet each carry a specific credit value. Parcels that had not yet connected, or that sat vacant when the restrictions tightened, were the ones left outside the allocation, which is exactly the position that Spindrift Road lot is in today. The moratorium was never about total scarcity across every address equally. It was about who happened to be metered before the door closed.
The One Exception Most Buyers Have Never Heard Of
Here is the detail that separates a well-briefed buyer from a surprised one. MPWMD Ordinance 98 carved out a narrow exception: a single-family home constructed before May 16, 2001 with only one bathroom can add a second bathroom without a standard water credit review against the district's allocation. The district's own second bathroom protocol page spells out the limits, including that the added bathroom cannot be used to create an accessory dwelling unit and cannot be designated the primary bath. The rule has been revisited more than once since it was written, most recently in August 2024, when the district adopted an ordinance clarifying the second bathroom addition protocol, and the district's full ordinance record shows the pace of change hasn't slowed since. Two more amendments followed in early 2026, including one in April touching several existing rules and another in February formally repealing the old water supply charge ordinance that had been in place since 2012.
For a design-forward remodel in the Highlands, that Ordinance 98 pathway can be the difference between a project that proceeds this year and one that stalls indefinitely waiting on a credit that may never appear. It only helps if the home qualifies on age and existing bathroom count, and it only matters if someone checks for it before falling in love with a floor plan that assumes unlimited flexibility.
What This Means When You're Weighing the Highlands Against Carmel Proper
Carmel Highlands inventory has historically sat available longer than comparable listings inside Carmel-by-the-Sea, and buyers often read that gap as simple demand softness, a quieter, more laid-back stretch of coast that draws a smaller pool of shoppers. Some of that is true. But part of the price and time-on-market difference is the market quietly pricing in water uncertainty that a Carmel-by-the-Sea buyer never has to think about, because every parcel there sits on the same Cal-Am system with no mutual company wildcard and no unmetered legacy lots in the mix.
That uncertainty is not evenly distributed across the neighborhood either. The gated enclave of Otter Cove, just south of the Malpaso Creek Bridge, and the neighboring Yankee Point community are largely built out on established Cal-Am connections that predate the moratorium, which is part of why those addresses command a premium even within the Highlands. The uncertainty concentrates instead in older, undeveloped, or long-vacant parcels scattered through the rest of the neighborhood, exactly the kind of property a design-minded buyer might target for its potential rather than its finished state.
Before You Write an Offer
- Ask the listing agent directly whether the parcel is on Cal-Am, on Carmel Riviera Mutual Water Company, or unmetered. Not every agent volunteers this without being asked.
- Call MPWMD's Permits Office with the parcel number and request the documented fixture count and any unused water credits on file.
- If the answer comes back as Carmel Riviera Mutual Water Company, contact that company separately. Its connection rules and capacity do not run through the same channel as a standard Cal-Am inquiry.
- If the parcel has no meter, ask what specifically the seller has already investigated: a well feasibility study, a septic plan, or simply a hopeful note about future meter programs.
- If a second bathroom is the goal, check the home's construction date and existing bathroom count against Ordinance 98 before assuming a full water credit review is required.
Water credits themselves are worth understanding on their own terms. They stay fixed to the parcel once documented and cannot be sold or transferred to a different property, so a seller cannot promise to bring extra credits from elsewhere and a buyer cannot count on borrowing from a neighbor. What you see on file for that specific parcel is what you get.
A Few Questions Worth Settling Early
Does a water credit review apply the same way to a remodel as a brand new build? No. A remodel that reconfigures existing square footage without adding new fixtures is generally evaluated differently than new construction or an addition that increases overall demand, so the same water credit conversation can have a very different outcome depending on what the project actually adds.
If a lot has no meter, is drilling a private well a guaranteed fix? Not automatically. It depends on county well capacity rules, setback requirements, and site-specific hydrology. Some Highlands owners have gone this route successfully, but it is a path to investigate before closing, not a fallback to assume afterward.
Is Carmel Riviera Mutual Water Company affiliated with Cal-Am? No. It is a separately governed private water company serving a defined pocket of south Carmel Highlands, and its own board, not MPWMD's standard Cal-Am process, oversees connections within its service area.
The Highlands rewards buyers who ask the unglamorous questions before the glamorous ones. Knowing which water system sits under a lot is not a footnote to the purchase. On several streets in this neighborhood, it is the purchase.
If you're weighing a Carmel Highlands property against options elsewhere on the Peninsula, or you already have a lot in mind and want a clear read on what it can actually support, Cheryl Heyermann and the team at Bramin Atler bring both the local water district contacts and the construction background to walk through it properly before you write an offer. Let's Connect.
