SAN JOSE — In a dramatic sign of the increasing severity of California’s drought, Silicon Valley’s largest water company will impose mandatory water rationing on 1 million people next month, marking the first time in more than 20 years that South Bay residents will be given monthly water allotments and face fines if they exceed them.

The water rationing plan, unveiled late Monday by the San Jose Water Company, will make San Jose the largest city in California so far to embrace strict rationing as the drought drags into its fourth year.

Under the rules, every business and homeowner in San Jose Water Company’s service area will be given a month-by-month water allocation, based on the average amount used in 2013 by all the company’s customers.

Customers must reduce water use 30 percent from that two-year-old average.

The plan will take effect in mid-June if approved by the state Public Utilities Commission, as expected, and will affect the 80 percent of San Jose’s residents whose water is provided by San Jose Water, a privately held firm that was founded in 1866. The rules also apply to the company’s customers in Los Gatos, Saratoga, Monte Sereno, Campbell and parts of Cupertino.

“We’re going to need to save more,” said John Tang, a spokesman for San Jose Water Company. “We’re going to need to conserve more to make sure there is enough water in 2016 and possibly beyond, because we don’t know when this drought is going to end.”

Tang declined Monday to provide details about the size of the financial penalties.

The rules will mark the first time since the 1987-1992 drought that San Jose Water has gone to mandatory water rationing with fines for customers who use more than a set amount.

Tang said customers will be sent a letter later this month spelling out the details, and the company will then hold a public meeting in late May or early June, with the rules taking effect shortly after.

The other large private water company in San Jose, Great Oaks Water Company, which serves 100,000 people in South San Jose, the Santa Teresa and Almaden neighborhoods, also will be releasing a similar mandatory rationing program in the next few weeks calling for fixed water allocations with 30 percent reductions based on a 2013 baseline, said Tim Guster, vice president and general counsel for Great Oaks.

“This is the first time that urban water users are feeling the pain, so to speak,” Guster said, “but that’s because the request for voluntary conservation went unheeded.”

News of the tougher water rules was met with mixed reaction.

“Go look at some reservoirs. Go look at the snow pack. It’s prudent. You don’t want to start conserving when you are at the last drop,” said Gary Kremen, chairman of the Santa Clara Valley Water District, the region’s wholesale water provider.

But the coming rules sent a chill through Michelle Wallace, 38, who shares her San Jose townhouse with her three daughters, including two teenagers who enjoy long, hot showers.

“Not everyone is on board in the household, and it’s going to cost me quite a bit more I’m sure,” Wallace said. “I never really paid attention to the drought before, and now I’ll have to. When the bill does come and we’re over — because I know we’re going to be — I’m going to be very upset about it.”

Meanwhile, the state’s largest privately held water company, California Water Service Company, which serves 2 million people in 25 communities from Chico to Palos Verdes, also is rolling out a mandatory rationing program starting next month with penalties of up to $10 per unit of water — 748 gallons — for customers who use more than their rationed allocation.

“We’re responding to an emergency,” said Martin Kropelnicki, president and CEO of the company, which is based in San Jose.

“While it is different from an earthquake, there is still an emergency declaration from the governor,” he added. “What happens if we have another dry winter? We are really going to be in trouble. A little conservation goes a long way.”

All of the proposals are similar to water restrictions that the city of Santa Cruz put in place last year. The city’s strict rationing limits have drawn statewide attention and led to some of the lowest per-capita use in California. Santa Cruz residents scurried to learn how to read their water meters and carefully monitor their monthly water use to avoid going over their allocation and paying steep fees.

About 15 percent of California residents are served by private water companies, but most receive water from public agencies. In the Bay Area, almost no public agencies have announced plans yet to impose mandatory water rationing with monthly water budgets, as Santa Cruz has, although some cities may have to do so to meet the state’s mandatory conservation targets. The private water companies said Monday they have little choice, because they are required to meet mandatory conservation targets imposed earlier this month by the administration of Gov. Jerry Brown, or face fines of up to $10,000 a day. Both Great Oaks and San Jose Water Company must cut their water use 20 percent from 2013 levels, and Great Oaks last year reduced by 16 percent while San Jose Water reduced by 12 percent. The companies said Monday they are aiming for 30 percent to be in line with a target set by the city of San Jose and to conserve the area’s dwindling groundwater supply.

Kristin Strellis, of San Jose, is already instilling a water conservation mentality in her two school-age sons.

“We’re taking a 5-minute shower,” Scott, 6, said.

“Or less,” chimed in Owen, 8.

Strellis said she supports the water penalties, confident that her family will stay within its allotment. She ripped out her front lawn in October and replaced it with a drought-tolerant landscape. She made a trip Monday to Orchard Supply Hardware to pick up three more bags of mulch to spread around her backyard plants to deter evaporation.

“We want to show our kids we are doing all we can to help the drought,” she said.

Contact Paul Rogers at 408-920-5045. Follow him at Twitter.com/PaulRogersSJMN.