Water Rate Regulation Transfers to PUC

House Bill 1600 and Senate Bill 567, passed in 2013, move certain water rate regulation activities from the Texas Commission on Environmental Quality (TCEQ) to the Public Utility Commission (PUC).  The transferred jurisdiction generally relates to the rates and services of private water suppliers, known as “investor owned utilities (IOUs).”  The idea behind the transfer is that the PUC is better equipped – because of a history of dealing with electric rate cases – to handle the process.

Transferred to the PUC are: (1) the economic regulation of water and sewer service, including issuance and transfer of certificates of convenience and necessity (CCN), determination of rates, and administration of hearings and proceedings; (2) the obligations and contracts of the TCEQ directly related to implementing the transferred powers and duties; and (3) all property and records of the TCEQ related to the transferred powers and duties.  The transfer from the TCEQ to the PUC will become effective on September 1, 2014.  The two agencies have entered into a Memorandum of Understanding that provides the details of the coordination and execution of the transfer of the two programs. 

The transfer of water rate regulation to the PUC means the Office of the Public Utility Counsel (OPUC) will take a much more active role in water and wastewater ratemaking than cities are accustomed to.  OPUC taking an active role in rate appeals is probably good news for cities (and IOU customers within those cities) that are being served by IOUs. 

A newly-established IOU classification system based on connection count will also be implemented at the PUC, ending the TCEQ’ one-size-fits-all treatment for IOU rate setting.  Municipally owned utilities should also benefit from the specialized knowledge of OPUC when they are involved in water and sewer rate appeals.  

TML member cities may use the material herein for any purpose. No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the Texas Municipal League.

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