2012 Utility Update
TCEQ Water Utilities Program
Todd Galiga
Environmental Law Division
Office of Legal Services
Updates From Last Year
SB 573 CCN Release Process – One
Glorious Year Later
SER – Streamlined Expedited Release
29 petitions filed since 9/1/11
Updates From Last Year
SER Petitions:
18 were granted
8 were withdrawn or returned
3 pending
Updates From Last Year
SER Petitions:
23 petitions filed in first four months
after effective date of statute
6 filed since 1/1/12
Updates From Last Year
SER Petitions:
Main issue – whether petitioner is
receiving water or sewer service from
the CCN holder.
Updates From Last Year
SER Petitions:
Texas Water Code § 13.002(21) - "Service" means
any act performed, anything furnished or
supplied, and any facilities or lines committed or
used by a retail public utility in the performance
of its duties under this chapter to its patrons,
employees, other retail public utilities, and the
public, as well as the interchange of facilities
between two or more retail public utilities.
Updates From Last Year
SER Petitions:
4 lawsuits over the new process
Aqua WSC – Federal Court
Aqua WSC – State Court
Tri –Community WSC – State Court
Crystal WSC – State Court
Updates From Last Year
SER Petitions:
Aqua WSC Federal Court Lawsuit
ACC filed petition to release 98 acre tract
located in city limits of Elgin from CCN of Aqua
WSC
Aqua filed suit in federal court while the petition
was pending at TCEQ
Updates From Last Year
SER Petitions:
Aqua WSC federal lawsuit alleges that:
Texas Water Code § 13.254(a-6) unconstitutionally
attempts to preempt 7 U.S.C. § 1926 in violation of the
Supremacy Clause of the Constitution
The actions of TCEQ constitute an attempt to deprive
Aqua WSC of its federal rights under 7 U.S.C. § 1926(b)
Updates From Last Year
SER Petitions:
Aqua WSC Federal Court lawsuit
7 U.S.C. § 1926(b) – The service provided or
made available through any such association
shall not be curtailed or limited by inclusion of
the area served by such association within the
boundaries of any municipal corporation or other
public body ….
Updates From Last Year
SER Petitions:
Aqua WSC federal lawsuit
Aqua, ACC, and Elgin reached settlement
over who will serve the 98 acres
Lawsuit continues over the 1926(b) issue
Updates From Last Year
SER Petitions:
Aqua WSC state court lawsuit
No injunction requested in federal court
case, so TCEQ grated petition within
60 day deadline
Updates From Last Year
SER Petitions:
Aqua WSC state court lawsuit
Similar claims of preemption and
unconstitutionality as in federal case
Updates From Last Year
SER Petitions:
Tri-Community WSC state court lawsuit
Landowner applied for release of property
CCN holder did not file a response
TCEQ approved petition on 11/9/11
Updates From Last Year
SER Petitions:
Tri-Community WSC state court lawsuit
After approval, CCN holder claimed
that landowner was receiving service
on part of released property
Updates From Last Year
SER Petitions:
Tri-Community WSC state court lawsuit
All parties agreed that CCN was providing
service, and the judge issued Agreed Order
reversing the ED’s approval and remanding the
matter back to TCEQ
Landowners filed new petition with revised map
Updates From Last Year
SER Petitions:
Crystal WSC state court lawsuit
WSC alleges that TCEQ erred in
approving petition because it was
providing service to the property as
defined by TWC §13.002(21)
Updates From Last Year
Repeal of Fees for rate, CCN, and
STM applications by TCEQ Sunset
Bill.
No fees for these applications
Updates From Last Year
Changes to requirements for
obtaining a CCN within a city’s
corporate limits or ETJ:
No applications filed that invoked new
requirements
Updates From Last Year
Rulemaking Updates:
6 rule projects required for utility related
legislative implementation:
SB 313 and SB 660 - New requirements
for creating GCDs and for appeals of
DFCs. Adopted by Commission on
7/25/12
Updates From Last Year
Rulemaking updates:
SB 2694, SB 1361, and HB 3002 – deletes the
application fees for Rate, CCN, and STM applications,
raises the audit exemption amount for districts from
100,000 to 250,000, gives cities and districts an extra 30
days to provide notice of a rate increase, allows for emailing of notices in certain situations. Proposed on
2/08/12. Adoption set for 8/08/12.
Updates From Last Year
Rulemaking updates:
HB 805 – added Fort Bend County to the
counties in which “affected utilities” are
required to file Emergency Preparedness
Plans. Proposed at the 5/30/12 agenda. Set
for adoption on 10/17/12.
Updates From Last Year
Rulemaking updates:
SB 181 and SB 660 – requires TCEQ and TWDB to
develop a uniform methodology for calculating water use
for developing water conservation plans and preparing
reports. Also requires the development of a data
collection and reporting system for cities and water
systems with over 3300 connections. Proposed on
6/27/12. Adoption set for 11/14/12.
Updates From Last Year
Rulemaking updates:
HB 3372, HB 3391, and SB 1073 – requires
TCEQ and DSHS to develop rules regarding
rainwater harvesting systems connected to
public drinking water systems. Proposal set for
8/22/12 agenda. Adoption set for January 2013.
Updates From Last Year
Rulemaking updates:
SB’s 18, 512, 573, 914, 1234, SJR 28, HB’s 679,
and 1901 - Limits on eminent domain authority,
qualifications for board of a FWSD.
SB 573 – SERs, obtaining a CCN within a city’s
corporate limits or ETJ, opting out of a city’s
CCN at the time of application, revoking a CCN,
changes to the old expedited release process
under 13.254(a-1). Proposal set for 10/17/12.
Adoption set for March of 2013.
Utility Cases Overview
36 Current Utility Cases at SOAH:
14 rate cases
22 CCN cases
Utility Cases Overview
Total number of Rate and CCN
preliminary hearings at SOAH:
FY ‘12 - 38 (through 7/31/12)
FY ‘11 - 41
FY ‘10 - 50
FY ‘09 - 81
Current Cases
Karnes City Petition:
Karnes City filed application in 1993 under TWC §
13.255 to decertify 60 acres within the CCN of the El
Oso WSC
Parties reached a settlement and the city asked that the
application be dismissed with prejudice in 1994
2008 – City again files application under 13.255 to
decertify the same 60 acre tract
Current Cases
Karnes City case continued:
El Oso challenged jurisdiction based
on 1994 dismissal with prejudice
After briefing and oral argument, ALJ
issues PFD sustaining the WSC’s
challenge to jurisdiction
Current Cases
Karnes City case continued:
Commissioners found that TCEQ had
jurisdiction based on “materially
changed circumstances” and
remanded the case back to SOAH for
hearing
Current Cases
Karnes City case continued:
WSC obtained federal loan and filed
motion to dismiss SOAH case based
on federal debt protection under 7
U.S.C. § 1926(b)
Current Cases
Karnes City case continued:
WSC also filed suit in federal court
seeking injunctive and declaratory
relief, liquidated damages based on
breach of 1994 settlement agreement,
and attorney’s fees
Current Cases
Karnes City case continued:
Parties agreed to abate the SOAH
proceeding while the federal case
progressed
City and WSC filed Motions for
Summary Judgment
Current Cases
Karnes City case continued:
Federal Magistrate granted the
WSC’s Motion for Partial Summary
Judgment, finding that:
• El Oso qualified for debt protection
• City had encroached on WSC’s CCN
• Timing of federal debt didn’t matter
Current Cases
Karnes City case continued:
Federal Magistrate found

City’s argument that it would assume
a pro-rata share of the federal debt
was unpersuasive

“skimming the cream” –would
adversely affect remaining customers
Current Cases
Karnes City case continued:
City is enjoined from encroaching on
WSC’s service area as long as federal
debt protection is in place
WSC also awarded $50K for liquidated
damages and attorney’s fees
Current Cases
Karnes City case continued:
City withdrew application without
prejudice
ALJ dismissed the case
Current Cases
Canyon Lake Water Supply case
Rate increase filed by Canyon Lake
Water Supply Company in 2010
Former Water Supply Corporation
purchased by an IOU
Current Cases
Evidentiary Hearing held March 2012
Main issues:
Original cost of assets purchased by
the IOU
 How to handle contributed capital
 Rate of return

Current Cases
Canyon Lake case
Main issues continued:
Trending vs. booked costs
 Negative acquisition adjustment
 Rate case expenses

Other Hot Issues
83rd Legislative Session

Transfer of rate and CCN programs back
to PUC

Changes to rate making process
Questions?
Todd.Galiga@tceq.texas.gov
(512) 239-3578