TThe Public Utility Commission of Texas (PUCT) will decide on February 20 whether Aqua Texas’s proposed rates should take effect with or without refund protections while the rate case continues. This issue has become one of the most important procedural fights in the case, because it determines whether customers can be made whole if Aqua’s proposed rates are later found to be too high.
Why This Matters
Under current law, Aqua’s proposed rates will automatically take effect on March 9, 2026, unless the Commission orders interim rates. Interim rates preserve the Commission’s ability to order refunds, if the proposed rate was set too high. Alternatively, if the rate was too low, the Commission could also require surcharges. That determination would be made once final rates are set — possibly after 2 years more of rate case proceedings!
If interim rates are not approved:
- Aqua’s proposed rates take effect automatically
- Customers cannot receive refunds even if the Commission later lowers the rates
- Months of over‑collections would be permanent — a windfall profit for Aqua Texas
Intervenors, the Office of Public Utility Counsel (OPUC), and Commission Staff all argue that this would be unfair to customers. Staff notes that Aqua’s current rates are more than 20 years old and that the proposed increases could cause “severe rate shock” for many customers, with increases as high as 108% for some systems.
A Larger Problem: No Refunds = No Incentive for Utilities to Be Reasonable in Rate Cases
If the Commission allows proposed rates to take effect without refund protections, it creates a dangerous precedent for all water and sewer utilities in Texas. Without the possibility of refunds, a utility can propose inflated or aggressive rates, knowing that even if the Commission later rejects those rates, the utility keeps every dollar collected during the case. This eliminates any economic incentive for utilities to propose reasonable, defensible rates. Staff and OPUC warn that this outcome would undermine the fairness of the ratemaking process and shift all financial risk onto customers.
What Aqua Texas Argues
Aqua Texas opposes interim rates beyond March 9. They argue:
- The law does not allow interim rates past the 150‑day suspension period unless the utility agrees
- Once the suspension period ends, the proposed rates become the “legal rates” and are not subject to refund
- Past SOAH orders have taken this same position
What Staff, OPUC, and Intervenors Argue
Staff, OPUC, and Intervenors argue the opposite:
- The statute explicitly allows interim rates “until a final determination is made”
- Refund protection is essential for fairness
- The ALJ misinterpreted the law and ignored evidence of customer hardship
- The Commission has used interim rates in many past cases to protect customers
What Happens on February 20
The Commission will hear oral argument on Staff’s appeal of SOAH Order No. 5. This is the moment when Commissioners decide:
Should Aqua’s proposed rates take effect without refund protection—or should interim rates be put in place to protect customers until the final order?
Fair Water Texas will be present, and customers are encouraged to attend and offer public comment.
What Aqua Texas Argues:
Aqua Texas opposes “interim rates” beyond March 9. They argue:
- The law does not allow interim rates past the 150‑day suspension period unless the utility agrees
- Once the suspension period ends, the proposed rates become the “legal rates” and are not subject to refund
- Past SOAH orders have taken this same position
What PUC Staff and the Office of Public Utility Counsel Argue:
Staff, OPUC, and Intervenors argue the opposite:
- The statute explicitly allows interim rates “until a final determination is made” — Final determination means the end of the rate case process, possibly in 2027 or even 2028.
- Refund protection is essential for fairness.
- The ALJ misinterpreted the law and ignored evidence of customer hardship
- The Commission has used interim rates in many past cases to protect customers
What the Texas Association of Water Companies Argues:
- TAWC — the statewide trade association for private water companies — filed comments supporting Aqua Texas and urging the Commission to deny Staff’s appeal.
- They argue that Texas Water Code § 13.187(e) is “unambiguous” that if the Commission does not issue a final order before the suspension period ends, “the proposed rate shall be considered approved” and not subject to refund.
- TAWC claims SOAH correctly ruled that imposing interim rates after the suspension period would “circumvent the statutory deadline” set by the Legislature.
- They cite prior Commission orders stating that once the suspension period expires, proposed rates are “not subject to refund or surcharge,” even if later modified.
- TAWC argues that allowing interim rates subject to refund would encourage opponents to “stretch a proceeding out” and undermine what they call “regulatory certainty” for utilities.
- Their bottom line: the Commission should continue past practice, treat Aqua’s proposed rates as automatically approved when the suspension period ends, and reject any refund protections for customers.
STATEMENT FROM FAIR WATER TEXAS
“Fair Water Texas supports the position of the PUC Staff because it is the only position that protects customers from being overcharged. Staff is simply asking the Commission to preserve the basic consumer safeguard that has always existed in Texas: if proposed rates are later found to be unjust or unreasonable, customers should get their money back. Aqua Texas and the Texas Association of Water Companies are urging the Commission to eliminate that protection and allow utilities to keep any overcharges permanently. That outcome would reward delay, punish customers, and set a dangerous precedent for every future water rate case in Texas. We stand with Staff in urging the Commission to keep refund protections in place.
“Anything short of Staff’s position creates a massive moral hazard. If Aqua Texas can charge higher rates during a two‑year case and keep every dollar even if those rates are later ruled excessive, then the company — and every other investor‑owned utility watching this case — is effectively handed an opportunity for free money in the future. That outcome would reward utilities for proposing the highest rates possible, knowing that delays only benefit them and customers can never be made whole. The Commission should not create a system where over‑collection becomes a risk‑free revenue stream.”
