At a public meeting on January 31, 2025, the Public Utility Commission of Texas denied Aqua Texas’ application to increase its system improvement charges (SIC) in order to recover approximately $86 million through increased rates on its water and sewer customers of about $8.8 million annually. The Commission’s decision follows a contested case hearing conducted by the State Office of Administrative Hearings (SOAH), in which several parties intervened to protest the SIC application, including the Watershed Association, Woodcreek Property Owners Association, and Trinity Edwards Springs Protection Association, all of whom were represented by our firm in the matter.

The Commission’s ruling found that Aqua Texas failed to meet its burden of proof in numerous ways, including by: failing to include a sufficient description of the eligible plant for which cost recovery is sought; failing to include a sufficient description of the project or projects included in the request; failing to include a sufficient explanation of how each project has improved or will improve service; and failing to well organize its listed assets for which it seeks recovery by project in its application; and failing to link its supporting documentation to the schedules it claimed provided the information regarding its listed assets. In short, it was simply not possible to determine which costs were eligible for recovery through the SIC.

The Commission further found that because the deficiencies in Aqua Texas’s application prevent any kind of reliable adjustment of the SIC, given that it is not possible to determine which costs could be eligible for cost recovery, Aqua Texas’s application should be outright denied.

This means that Aqua Texas must refund or credit against future bills of affected customers all SIC amounts collected since imposing the rates on an interim basis starting in August or September 2024 bills. The refund or credit must also include interest. Aqua Texas must file documentation with the Commission identifying the amount to refund and credit by May 7, 2025.

Additionally, Aqua Texas must file a comprehensive rate case by September 26, 2025, providing testimony and supporting documentation that explains in detail and fully supports its capitalization policy and demonstrates compliance with applicable Texas Water Code and Commission rule requirements.

We are thrilled with this outcome for our clients and all affected ratepayers! SIC rate-making is still relatively new in Texas, and this amounts to an important precedent in favor of transparency and accountability from investor-owned utilities who want to do business in our state. Read more about this landmark decision on the Watershed Association’s website. A copy of the Commission’s Final Order is available below.