Austin involved in two battles over water rates

The Austin Water Utility is engaged in two different battles over water rates. One fight is with wholesale water and wastewater customers who have challenged rates adopted by City Council in 2013. According to AWU Assistant Director David Anders, this case, which is pending before administrative law judges on its way to the Public Utility Commission of Texas, has cost the city $1 million in lost revenue in addition to legal fees.

The customers challenging the city’s rates are North Austin Municipal Utility District No. 1, Northtown Municipal Utility District, Travis County Water Control and Improvement District No. 10, and Wells Branch Municipal Utility District. Anders noted that those customers had asked the judges to roll back their rates to 2012 prices.

The city contends that the judges did not have legal authority to do so, and the utility will be seeking reimbursement from the different utility districts if the city wins the case or if it reaches a settlement with those districts.

According to a memo sent to the mayor and Council by AWU Director Greg Meszaros, the parties engaged in settlement discussions in summer 2014, but they could not reach an agreement. The administrative judges conducted a hearing in February, and the city is awaiting a proposed decision, which Meszaros said is expected in mid-July.

The proposal will then go to the Public Utility Commission for a final decision, which could be as early as mid-August, Meszaros said.

“Once a proposal for decision is issued by the Administrative Law Judges, Austin Water will consult with the Law Department and outside counsel to analyze what the effect would be if the proposed decision were to become a final binding PUC decision and what, if any, settlement options are advised,” Meszaros wrote. He added that Council would receive a full briefing on its options as soon as possible following release of the proposed decision.

Anders noted that the city has also filed suit in district court over several issues relating to whether the judges have the legal authority to order the city to roll back its rates on an interim basis.

The city’s outside counsel, Gwen Webb and Stephen Webb, argued strenuously in their post-hearing brief that the Public Utility Commission and, before that, the Texas Commission on Environmental Quality have failed to develop or implement rules and regulations to give guidance to those regulating the water utilities.

The second challenge is from some retail customers in the River Place Municipal Utility District. Anders said that the utility took over the system of that MUD last October, but that the area will not be annexed until December 2017. Therefore the customers are outside the city for now. Otherwise, they would not be able to appeal the rates.

Meszaros’ memo states that the parties met on May 27 for initial settlement talks. The city is currently analyzing requests from the MUD residents and expects to have more settlement discussions with them. He anticipated that there would be a conversation about the MUD with Council during an executive session later this summer.

Meszaros wrote, “As a result of the issues raised during the wholesale rate challenge, Austin Water has determined that it will conduct a new cost of service rate study for wholesale and retail rates applicable to the outside city customers, and that if recommended by the study, Austin Water will pursue updates to our cost of service allocation within its rate structure.” That would take approximately 12 to 18 months.

The wholesale rate study will likely cost between $100,000 and $200,000, he said. In addition, after that is done, the utility will likely start a retail customer cost of service rate study, which would take an additional 12 to 18 months. Anders said the total cost of both studies would likely be in the range of $400,000.