Texas Rural Water Rate Hikes Draw Scrutiny

Some Texans in rural areas face huge rate increases from private water providers, and they are hoping the Legislature will do something about it.

At a hearing Wednesday in Austin, lawmakers on the Senate Natural Resources Committee heard testimony from regulators, water companies and ratepayer groups about proposed changes to address the problem. David Burghard, a Hays County resident, told the committee that his water rates rose more than 200 percent in February.

“I do have a concern that the rates — prices — will have no limits,” he said.

In big cities, local water utilities generally operate water infrastructure and billing. But in rural areas, where few customers exist, private companies have taken over, and tales of double- or even triple-digit rate hikes abound. Ratepayers say that they are hamstrung in efforts to fight the increases because the water companies, which have monopoly status, have far more money. Also, the companies’ cost of litigating rate-increase complaints ultimately gets charged to ratepayers.

“In a lot of respects, I feel like David fighting Goliath in this process,” said Larry Westfall, a Kerr County resident who helps locals fight large rate hikes.

As part of the “Sunset” process for reviewing the Public Utility Commission, lawmakers are weighing whether to shift oversight of water rates from the Texas Commission on Environmental Quality to the Public Utility Commission. The PUC already oversees electric rate increases requested by utilities like Oncor or Centerpoint. If water responsibilities shifted over to the PUC (as the Sunset report released this month recommended), the Office of Public Utility Counsel, a state entity, would be available to help ratepayers put forward their water-rate arguments.

Water company representatives, while acknowledging that changes to the system are needed, said that they had poured millions of dollars into upgrading water infrastructure. They warned lawmakers that costs to ratepayers could rise even more if oversight shifted to the PUC. That’s because the TCEQ’s rate-case procedures are more concise than those at the PUC, which is geared toward handling the electric utilities (which are far larger than water companies).

Charles Profilet, managing director for Texas Utilities of the SouthWest Water Company, which serves more than 100,000 Texans, said that his company — which generally supports the switch to the PUC, with a few caveats — would have to hire accountants to prepare for the PUC proceedings.

Bob Laughman, president of the water provider Aqua Texas, noted that at the TCEQ, more than 90 percent of rate-case disputes got settled. The PUC process is “going to be very, very expensive,” he said, adding, “Ultimately the customer is going to get hit with that cost.” He noted that the water infrastructure in many rural areas had been built more than half a century ago, so it needed upgrades.

The four senators in attendance — Robert Nichols, R-Jacksonville; Kirk Watson; D-Austin, Bob Deuell; R-Greenville; and Juan "Chuy" Hinojosa, D-McAllen — seemed eager to make improvements. “This is a huge issue,” said Nichols, who said that some of his constituents had experienced rate increases in the high double-digits.

Said Watson: “The system is completely fouled up in my opinion.”

Deuell seemed eager to find ways to streamline the cumbersome rate-setting process.

Ratepayer advocates argued that the water companies should be forced to pay for their rate-setting costs out of their profits, rather than automatically assigning it to ratepayers.

“Companies should make reasonable profits,” said Geoff Miller, a representative of the Coalition for Equitable Water Rates, which is protesting a 71 percent rate increase in the Canyon Lake area. “We have no problem with that.” What he objected to, he added, was “windfall profits.”

Meanwhile, the charges continue. Alan Hooks, the mayor of Blue Mound, said that his bill last month was $180 for 10,000 gallons of water, whereas eight years ago, when the private company Monarch (a SouthWest subsidiary) took over the water supplies for the town, it was $58. Hundreds of people turned out for a recent call to fight against the rising costs, he said.

“Once you get a rate increase, it never goes away,” Hooks said.

Editor's Note: This story has been corrected to reflect that State Sen. Robert Nichols is R-Jacksonville, not R-Lubbock.

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