PUC resets rates for thousands of Austin Water customers

More than 46,000 Austin Water customers are getting their rates lowered, based on an order that the Public Utility Commission of Texas handed down to the city of Austin on Thursday. In addition, the city will have to request approval from the commission before setting future rates for the customers involved.

The changes apply to a specific group of wholesale customers, whose four districts petitioned city of Austin water and wastewater rates that went into effect in 2013. These are the 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.

The commission made a few minor amendments – mostly grammatical – to the order that its staff presented, and added three findings of fact that do not change the outcome of the order.

David Anders, assistant director for Austin Water, told the Austin Monitor on Thursday that he is not yet certain whether the city will appeal the decision. “It’s definitely a possibility; it’s in our rights to do that,” he said. “At this point, we’ll have to assess what that actual order is, now that we have something there, and make that determination.”

Anders added that the city has a 20-day deadline to file a motion for a rehearing, which would be the next necessary step if it were to choose to appeal.

Based on Austin Water staff’s preliminary calculations, Anders explained, the order will cost the utility approximately $3 million in lost revenue in this year’s budget. This includes impacts on rates for the remainder of the fiscal year and refunds to the petitioners for the rates the city has collected in excess of the commission-ordered rates since it began raising rates in 2013.

That total figure, Anders added, will likely increase when the city takes into account the interest that the city must also refund relating to its rates.

The order throws a wrench into the current budget that City Council adopted in September, which sets rates for the petitioners at 2012 levels. The twist has to do with the fact that the commission agreed mostly – but not completely – with a proposal filed in July by the administrative law judges overseeing the case.

While the commission approved, in September, the part of the proposal stating that the city failed to prove that the rates it set were “just and reasonable,” it did not fully agree on where to reset those rates.

Under state law, municipal utilities are required to set their rates at the cost that the utilities incur to provide service to their customers.

Rather than reset the rates to the levels at which they stood in 2012, the commission sided mostly with its staff’s recommendations, which, according to Anders, are actually lower overall than the rates the customers paid in 2012, making the cost to the city higher than anticipated.

Anders said that Austin Water staff plans to request an amendment to the city’s current budget in the coming weeks to reflect the rate change and likely another amendment for the revenue loss, which would come out of the utility’s reserve funds.

The new rates, as ordered, will likely stay in effect until at least 2018, when Austin Water staff hopes, according to Anders, to have completed a new cost-of-service study on its rates and received permission from the commission to raise them.

“We will, going forward, have these rates in place until such time we can go back to the commission and provide sufficient documentation for us to change those rates,” Anders said. The anticipated rates, he said, “would be higher, but presumably something that (the commission) would approve from a standpoint of rate calculations and revenue requirements.”

Randy Wilburn, general counsel for the petitioners, released a statement in a press release on Thursday. “The Public Utility Commission was clear today that the City of Austin’s practice of taxing utility customers through excessive water and wastewater rates is not allowed,” he wrote.

Wilburn estimated that the order will return a collective $6 million to the petitioners, twice as much as the city’s estimate.

New estimates will likely arise as both parties have more time to go over the order.