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I have a water pressure reducing valve at the main water supply to my house. When I put a pressure gauge on the water heater with no faucets running, I read 130 psi. When I turn on the bathroom faucet, the pressure reading drops to between 20 and 130 psi, depending on how the reducer valve screw is adjusted. However no matter what the setting, the pressure reading always climbs back to 130 psi within a minute after all water flow is turned off.

Is my PRV working correctly? Should the static pressure with nothing running be adjustable by the PRV, or is it only for limiting the pressure while water flow is active?

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Yes, that sounds defective.

A pressure regulator (which is what a PRV is) should stop flow when the pressure exceeds the setting. This sounds like you may have a small leak, which could be from debris trapped in the valve, a scratched valve seat or something like that.

Before spending money on it, determine if the PRV is your responsibility or the water company's responsibility. If it's theirs, they may just come swap it out for you.

Your described behavior (particularly the speed of it) would seem to be a leaky PRV. A slightly different case arises when there is a PRV (which also acts like a one-way or check valve) and a hot water heater, with no expansion tank - then the water pressure can rise when cold water is heated and no valves are open.

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