Improving water management in California requires a transition from imported to local water resources used efficiently. To assess this transitional capacity of water retailers in metropolitan Los Angeles County, we focused on a key water management metric: the water distribution efficiency. We traced the evolution of water loss reduction policy and practices globally with emphasis on California. California Senate Bills 1420 and 555 mandate annual water auditing and reporting for urban water suppliers. We surveyed and evaluated ten water retailers' approaches to monitor and reduce losses. Four of ten sampled water retailers monitored real losses, averaging 3–4% of total water supplied. Only three of ten sampled water retailers employed leak detection technology. Of the six sampled retailers with annual pipe replacement strategies, four retailers followed inadequate rehabilitation schedules. Most of the sampled retailers monitor water losses in percent, which misrepresents the actual volume. While a necessary step, California water loss legislation relies on the American Water Works Association Water Audit software. Verifying reported data for randomly selected retailers can ensure high data quality. Small retailers are exempt from mandatory water loss monitoring, and they need state support and resource pooling to improve their water distribution efficiency.