City to ask for rehearing in water rate case

The battle over water rates for more than 46,000 Austin Water customers is not over, it appears.

Austin Water Assistant Director David Anders told the Austin Monitor on Tuesday that the city intends to adhere to an order – issued earlier this month by the Public Utility Commission of Texas – to reset rates for a group of wholesale utility customers. However, he said, it also plans to request a rehearing before the commission.

While the city has not yet filed a motion for rehearing, Anders said that it plans to do so before the deadline in early November. If the commission denies the motion, the city will decide whether to file an appeal at a district court.

The order, which the commission approved on Oct. 8 and finalized on Oct. 14, directs the city to set new, lower rates for a group of customers that appealed the water and wastewater rates that went into effect in 2013. It also directs the city to refund any amount it collected over the ordered rates since the 2013 rates went into effect.

The petitioners are the North Austin Municipal Utility District No. 1, Northtown MUD, Travis County Water Control and Improvement District No. 10, and Wells Branch MUD.

Randy Wilburn, general counsel for the petitioners, provided the Monitor with a written response on Tuesday to news of the city’s plans to file a motion for rehearing. “The City’s filing is not unexpected, but it’s a shame for the taxpayers of Austin,” he wrote. “If the City Staff feels it’s fiscally prudent to fight well-settled law, we will continue to work for fair rates for our customers.”

Wilburn estimated on Oct. 8 that the case would ultimately save a total of $6 million for the customers involved.

The commission and the administrative law judges who handled the case argued that the city did not set the contested rates at levels that were “just and reasonable” based on cost-of-service – the cost that the utility incurs in providing water and related services to its customers.

In June 2014, the administrative law judges who previously handled the case ordered the city to set interim water rates for the petitioners at 2012 levels, and the city complied. In July, the judges recommended to the commission that it set both water and wastewater rates for the petitioners at 2012 levels and order the city to refund any rates it collected above that level since the 2013 rates went into effect.

The commission, however, ultimately decided to set the new and retroactive rates even lower than what the petitioners paid in 2012.

Anders said that the decision likely sets the city back more than $3 million over what it had already returned to the petitioners through interim rates and what it planned to return to them this fiscal year by setting their water and wastewater rates at 2012 levels. City staff, he added, is still calculating the total impact of the decision and will likely have a more accurate figure next week.

Barring a successful rehearing or appeal, the total amount that the city will ultimately have returned to the petitioners, Anders said, is likely to be around $5 or $6 million – which would roughly align with Wilburn’s estimate.

Though he said he had not been fully briefed on the subject yet, Anders provided some of the reasons he believes the city intends to file the motion, including a disagreement about whether the petitioners should have had to prove that there was significant public interest in the appeal before the hearing and whether it was appropriate for the judges to set interim rates in 2014.

In addition, he said, the city may contest some aspects of the final order itself. “We will take a look at some of those kinds of issues that are legal issues that might have arisen from that,” Anders said. “That’s what I’m not as clear on just yet. Our attorneys are drafting that, but there could be procedural errors that we might have.”

In his written remarks, Wilburn said, “We hope that the Austin City Council has participated in this decision (to file a motion for rehearing), but the fact remains, the PUC Commissioners were very clear, the law is very clear.”

Austin Water spokesman Jason Hill told the Monitor on Tuesday that he believes the decision to file the motion has been made by city management and legal staff and does not require approval from Council.