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LCRA includes private firm in divestiture efforts

Tuesday, November 22, 2011 by Michael Kanin

The board of directors of the Lower Colorado River Authority (LCRA) voted 13-0 Monday to formally include private Vancouver-based utility Corix Infrastructure Inc. in negotiations for the purchase of 18 water and wastewater systems it currently owns. The vote represented the third time the organization has tried to include Corix in its divestiture efforts.


The measure passed by the unanimous vote of the directors in attendance after a Wednesday vote on another potential Corix agreement had failed. One of the directors who voted against Corix on Wednesday — Kathleen Hartnett White –was absent Monday, as was director John Dickerson. Directors John Franklin and Lori Berger, who each voted no on Wednesday, voted in favor of the Corix resolution on Monday. Director Scott Spears, who missed Wednesday’s meeting, voted for the resolution this time around.


The move came as more details emerged about a memorandum of understanding between the LCRA and a coalition of central Texas municipalities that was seeking to acquire the bulk of the water and wastewater utilities still owned by the organization. After first limiting the scope of the coalition’s potential purchase, that document stipulates that any arrangement between the LCRA and the coalition can move forward only after the “filing of an agreed motion to abate all parties” in a rate case brought against the organization by three entities in the West Travis County Regional water and wastewater systems.


The West Travis system was the only entity that the board would allow the coalition to negotiate for. Board chair Tim Timmerman called the system “a substantial piece of our remaining utility business.”


Monday’s vote could mark the beginning of the end of the selection portion of what has already been a lengthy divestiture process for the LCRA and potential bidders. The organization first announced its intention to sell its water and wastewater utilities in November 2010, after claims that the operations and maintenance costs associated with them were unsustainable. After months of vetting, the board resolved in September to begin negotiations with Corix and another private firm, California Water Group, for the purchase of all of the utilities. 


The board then reversed itself in October, arguing that in the month between the September meeting and its October session, it had become apparent that a deal under the September resolution would not meet the four basic criteria laid out by the organization for its water and wastewater sales. That move set up Wednesday’s action.


Observers seemed surprised Wednesday when, after the board followed its authorization of negotiations with the coalition for the acquisition of the West Travis systems, it also tried to give the go-ahead for discussions with Corix for 18 smaller water and wastewater systems scattered throughout the LCRA’s service area. It became clear later that, in language detailing the procedures for negotiations, Corix would also serve as something of a back-up for the acquisition of the West Travis systems, should the deal with the coalition falter (see In Fact Daily, November 17, 2011).


Wednesday’s action to authorize negotiations with Corix failed when the board wasn’t able to muster the 12 votes necessary for passage. Franklin told In Fact Daily after Monday’s hearing why he changed his mind. He explained that the questions he’d had about the deal were “more of a financial nature” and that they’d been answered. He said that he felt good about the deal “after it’s come out and the way it’s structured now.”


Franklin said that the fact that the city of Lometa would have the right of first refusal when it comes to any sale also played a key role in his vote. On Monday, Lometa Mayor Cynthia Kirby pleaded with the board not to sell the utility that services her constituents to a private firm. “Our community is made up of many low-income families and individuals — many on fixed incomes,” she said. “These customers would be unable to survive the projected enormous increase in the base water rates that selling our system to Corix would eventually bring about.”


Berger addressed her colleagues. “I want everyone to understand my thought process in my vote today,” she said. “My first concern is for the LCRA and the customers of the LCRA … I trust the ability and the thought process and decision to sell these systems.”


The Texas Commission on Environmental Quality (TCEQ) has jurisdiction over water rate appeals concerning select city, county, district, water supply corporation, and investor-owned utility customers. The TCEQ considers the LCRA to be a district.


The rate case referenced in the memorandum of understanding between the LCRA and the coalition was brought to the TCEQ after residents collected signatures against a rate hike in 2007. According to TCEQ spokesperson Andrea Morrow, that agency sent the case to the State Office of Administrative Hearings, where Morrow says it still resides.


Morrow called the extended period of time involved in the rate case “unusual.”

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