Amid heavy winter rains, recovering reservoirs and improving groundwater, the San Jose Water Company — which provides drinking water to 1 million people in San Jose and neighboring communities — has dropped its drought surcharges.

The private company announced the change Wednesday, making it the last large water provider in the Bay Area to suspend fines and penalties for excessive water use.

The company put the surcharge in place in June 2015 after Gov. Jerry Brown ordered California water providers to reduce use by 25 percent. As a result, water bills of homeowners with large lawns in communities like Saratoga spiked, sparking controversy, but while the surcharges were in place, the company’s customers cut water use 29 percent in 2016, compared to the baseline year of 2013.

“It wasn’t a rate increase, but a penalty program to encourage conservation,” said John Tang, a spokesman for San Jose Water. “In light of the improved water outlook, we think it is the right time to remove the surcharges.”

The company’s decision follows a vote Tuesday by the Santa Clara Valley Water District — the wholesale water provider for 13 cities and private water companies in Santa Clara County including San Jose Water — to adjust its call for water conservation given the heavy rains, snow and flooding that California has experienced this winter after five years of severe drought.

On Tuesday, the water district kept in place its request for the public to keep water use at 20 percent below 2013 levels. That included a request to limit lawn watering to three days a week, but it said it no longer expects retail providers like San Jose Water to impose drought surcharges and other financial penalties to reach that goal.

San Jose Water provides 80 percent of San Jose’s residents with drinking water, along with Los Gatos, Saratoga, Monte Sereno, Campbell and parts of Cupertino.

Its surcharges were approved in 2015 by the state Public Utilities Commission. The rules originally set a goal of 30 percent water savings each month compared with 2013 use, which was later reduced to 20 percent last summer after improved winter rains.

Rather than allowing each customer to cut 30 percent from their own consumption, the company averaged residential use from all its customers in 2013 and cut 30 percent from that. As a result, San Jose Water gave every single-family residence the same monthly allotment of water — 9 units or 6,732 gallons a month last February, March and April, for example — with surcharges of up to $7.12 a unit for exceeding their limit.

Company officials said they believed the system was the fairest way to conserve water because it required the biggest cutbacks from people with large yards who had been using the most water, while not penalizing people who had been conserving all along and were already under the target.

However, more than 1,000 people appealed to the PUC, saying their water bills had shot up hundreds of dollars a month, even though they cut use. A state consumer agency, the Office of Ratepayer Advocates, also appealed, calling the rules “discriminatory, unfair and unreasonable” because they applied only to single-family homes and not to businesses, apartments or condominiums.

Last February, the PUC board voted 5-0 to reject the appeals.

“There was concern that if they really went further with commercial and industrial cutbacks, at some point you hit job growth,” PUC Commissioner Catherine Sandoval said at the time.

In 2015, San Jose Water lost $19.8 million due to reduced water sales. It made $12.1 million in drought surcharges, according to PUC records. To make up the $7.7 million difference, the company was granted a 12-month, 2.57 percent rate increase by the PUC. The financial totals from 2016 are not yet in.

Also this week, Great Oaks Water, a private company that provides water to 100,000 people in South San Jose, Santa Teresa and Almaden neighborhoods, dropped its drought surcharges. Great Oaks computed them differently than San Jose Water, requiring everyone to cut water use 30 percent from 2013 levels — later lowered to 20 percent last summer — and to pay $4.66 a unit or double its basic rate for excess usage. The company’s customers reduced water use by 29 percent in 2016, the same as San Jose Water’s.

Tim Guster, Great Oaks vice president, said just like at San Jose Water, some of his customers complained the system wasn’t fair, but they said it penalized people who had conserved.

“There were two different methods, and both saved the same rate,” he said. “I don’t know what the lesson is, other than you can’t please everybody, but I was impressed and grateful by how well people across Santa Clara County really pulled through.”