Commercial businesses in Austin are overpaying for their water by nearly $4.4 million this year, while homes and apartments are underpaying to the tune of $2.1 million, according to preliminary numbers in an Austin Water cost of service review.
Those customers are paying what they’re being charged. But the rates don’t align with what it costs Austin Water to provide service to them.
The draft comparison of service costs to water fee revenue, put out last week by a utility-hired consulting firm, shows the degree to which commercial businesses and other large entities are subsidizing other water customers. Samsung alone is paying $568,414 in water fees above the cost of its service, the review found. The University of Texas is overpaying by about $76,025.
The draft proposes evening out those discrepancies — but not until 2019, to the chagrin of large businesses. The utility is freezing its 2017 rates through next year, Austin Water Financial Manager Joseph Gonzales said.
When the City Council ultimately adopts water rates based on the cost of service review, it will likely mean higher bills for homeowners and renters. It could also mean a second court challenge from nearby cities and utility districts that buy water from Austin wholesale to provide to their own residents and believe the city’s service costs are inflated.
The water system’s costs of providing service total about $299 million this year, including more than $177 million for homes and apartments, $82 million for businesses and $13 million for wholesale customers, according to the review. Those costs include funding for watershed management, a reserve fund and assistance to low-income customers — things not everyone defines as “cost of service.”
Travis County Water District 10 and three municipal utility districts took the fight over what’s considered a cost of service to the state, winning a decision from state administrative law judges in 2015, and the Texas Public Utility Commission last year that Austin couldn’t include certain fees in the costs of service to wholesale water customers.
Now the wholesale customers are underpaying by about $4.2 million this year, according to the city’s review. Gonzales said the updated cost of service study will help the city change that back.
“We anticipate the cost of service study, as well as additional information, would provide us with a better basis to justify some of the costs that the PUC excluded,” he said.
In that case, those utility districts would probably challenge the city again.
“No kidding,” said Clif Drummond, board president for Water District 10, which covers about 3,000 homes west of Rollingwood. “They’re trying to roll us over and you know what? We have the law on our side.”
He said the various surcharges included in city service costs were just bogus “words to say ‘we’re balancing our budget on the backs of customers not in the city of Austin.’” Austin believes Water District 10 should be paying 70 percent more than the $2.5 million the state determined it could collect from the district.
Numbers could still change on the water cost review. It is expected to be finalized and presented to City Council members over the summer. What kinds of fee increases residents could see after next year is undetermined, but Gonzales said Austin Water plans to increase what it collects for low-income resident assistance programs.
In the meantime, big commercial businesses could push back against the proposed rate freeze that would keep them overpaying through 2018, but wouldn’t say their next moves Friday.
“We are pleased with the transparency of the process and the public input, and we are looking forward to the independent hearing examiner process,” said Trey Salinas, who represents NXP, Cypress Semiconductor and Samsung in the rate case.
Austin Energy went through a similar battle last year, after corporations, including Samsung and NXP, argued the rates were higher than what other utilities charged. The companies accused the city of using utility revenue to bolster the overall city budget. The dispute ended in a settlement that cut revenue to Austin Energy by about $42.5 million, a loss the utility absorbed. Both residential and commercial energy users ended up with lower rates.
Gonzales said that likely won’t happen in this case.
“The key difference in terms of Austin Energy versus Austin Water is, because of drought and reduced consumption by customers for a few years … we’re still trying to secure our financial security,” he said. “I’m not sure we have the same flexibility with regards to our rates.”