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Confederation of water utilities presses rate case against Austin

Tuesday, February 18, 2014 by Mark Richardson

A group of local water districts continues to press their case against the City of Austin, claiming that the city’s wholesale water rates are unrelated to the cost of providing service. Both the Citizens for Fair Rates and the Austin Water Utility say they are in talks over a possible settlement of the case, but it is not known where the parties are in their negotiations.


The group, Citizens for Fair Rates, filed a claim last year with the Texas Commission on Environmental Quality, asserting that Austin’s wholesale water rates for Municipal Utility Districts and Water Districts are unfair. They claim that the city is charging almost twice what the state allows for cost-of-service charges.


Members of the group – the North Austin MUD #1, Northtown MUD, Travis County

WCID #10, and Wells Branch MUD – claim that their proximity to Austin makes them dependent on the city for wholesale water, with no viable alternatives.


The matter was referred to the State Office of Administrative Hearings in March 2013, where a preliminary hearing was held in July 2013.


The action stems from the city’s implementation of a new rate structure in February 2013. A spokeswoman for Citizens for Fair Rates said the new charges affect more than 46,000 residents and add an additional $30-$50 per resident, allowing the City of Austin to profit off water sales and to “balance the city budget on the backs of the out-of-city customers.”


“Wholesale customers are paying an unfair share of general fund expenses,” said Kalinda Howe, vice president of 3 Point Partners, which represents the utilities. “In addition to charging for the cost of service, they are using the funds to pay for things like the city’s Public Improvement District, the Balcones Canyonlands Preserve and operations and maintenance for Water Treatment Plant 4, which isn’t even completed yet.”


According to Citizens for Fair Rates, the city is currently transferring 29 percent of AWU’s revenues to the general fund, while the national average is only 5.2 percent.


AWU officials say that many of the items cited are not revenue to the general fund, but part of the cost of doing business for the utility. They also dispute the 5.2 percent number cited by their opponents as the amount other utilities charge.


Two state representatives, Paul Workman (R-Austin) and Tony Dale (R-Cedar Park), recently wrote a letter to Mayor Lee Leffingwell and City Council members, encouraging them work with the utilities to find a settlement.


“We understand that our constituents have been engaged in settlement discussion with the city and Austin Water Utility staff,” they wrote. “As these parties move toward a settlement, we ask you to encourage the Austin Water Utility to work toward a solution that is amenable to all parties.”


Workman and Dale also strongly suggested that the city pay the utilities’ legal costs in the case, saying that to not do so would be “an act of bad faith.”


City officials have been tight-lipped about the case and a possible settlement. Calls to a number of city officials were generally referred to either the Legal Department or the Water Utility.


Earlier this week, Dave Anders, assistant director of the Austin Water Utility issued a brief statement: “Austin Water officials are engaged in mutually-agreed confidential negotiations aimed at reaching a settlement with wholesale customers

regarding the pending rate challenge. Negotiations have been taking place since December 2013.”


Howe said that the city has some incentives to reach a settlement sooner rather than later. She said that if the hearings process is completed and the decision goes against the city, it could cause major problems.


“If the city loses the hearing, they would have to go before a state agency – either the TCEQ or the PUC (Public Utility Commission) – every time they made a change to their rates,” she said. “That could make developing an annual budget a real problem.”


Without a settlement, Howe said the case is expected to continue through 2014.

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