The city has proposed a number of water treatment and

D.
in B it sounds like it is the cost of proposal and not the project that has raised the water bill.

agree with D.

the key here is the second part of the sentence "are beginning"

BECAUSE the cost willl.......the ___ are beginning

For (B):

The city proposed projects at a cost raising bills so hight that ...
Sounds like the proposing itself is at a cost, and it is already raising the bills.

I was breaking my head over this question. It is not as easy as it sounds.

I believe I have a convincing answer.

A. the cost of which raises water bills high enough so that

enough so that is redundant

B. at a cost raising water bills so high that

- looks OK, but the participle phrase raising water bills could modify the noun cost or the subject projects. It is not very clear here. However the restrictive clause using that would avoid the ambiguity.

C. at a cost which raises water bills high enough so

This has an idiomatic error. Usage is so + that

D. whose cost will raise water bills so high that

Whose clearly refers to the projects here. It also has the corect idiomatic usage

E. whose cost will raise water bills high enough so that

This has the redundancy problem.