Thousands of Sonoma County residents face a staggering 40 percent increase in their water rates - a hike that has raised eyebrows at a state agency that monitors and investigates utility prices.

The Division of Ratepayer Advocates, an independent arm of the California Public Utilities Commission, this week filed a formal protest against a request by California American Water Co. to raise prices for more than 600,000 customers across the state.

In its July 1 rate-increase application, the investor-owned utility says the adjustments are needed to pay for new, tiered water rate systems, interest and infrastructure. But state regulators insist the company must justify the "massive" price jump at a time when many consumers face financial hardships.

"Asking for rate increases as high as 40 percent in this difficult economy is cause for serious concern," said Joe Como, acting head of the ratepayer division. He said the agency will "aggressively investigate Cal-Am's rationale for these huge hikes in order to protect consumers."

Analysis by the ratepayer division found that California American is seeking to raise rates in eight districts, by less than 10 percent in some cases to almost 100 percent in others. Cumulatively, the rate increases amount to a nearly 40 percent rise statewide between now and 2012, analysts said.

For about 2,400 households in Sonoma County, rates would increase about 37 percent over the next two years. The average bill would go from just under $51 per month to nearly $70 per month.

The rate increases would affect California American-served households in Los Angeles, Monterey, Sacramento, San Diego, Sonoma and Ventura counties.

But officials at the company, a subsidiary of American Water of Voorhees, N.J., disagreed with the division's study. They say the statewide rate increase would be closer to 35 percent.

An increase of that size simply reflects the costs to deliver a precious commodity to more people, the company said.

In the firm's Larkfield division, which serves 7,000 people in Sonoma County, California American hopes to dig a $2.2 million well. The project is designed to offset government-mandated reductions in water pumped from the Russian River, a major source of drinking water in the North Bay. Currently, about 40 percentof the district's water comes from the river and the remainder comes from four wells, according to Evan Jacobs, spokesman for California American.

"Our customers have done a fantastic job conserving, but we need a new source of water to meet our projected demand," he said.

The ratepayer division is expected to release its final report on the rate-increase application in January. From there, the company can counter with its own analysis. If no consensus is reached, the rate increase could go before an administrative law judge before heading to the full commission for a vote.