Texas Water Miracle

A Dream of Presidential Showers
A Dream of Presidential Showers

The Rick Perry Texas Miracle in action: privatization of public resources, for profit of the few. Who gets screwed? Just consumers.

A growing number of suburban Texans are getting their water from large, private corporations owned by investors seeking to profit off the sale of an essential resource. State figures show private companies are seeking more price increases every year, and many are substantial. The Texas Commission on Environmental Quality, which regulates water and sewer rates for nonmunicipal customers, doesn’t keep numbers, but “their rate increases tend to be 40 and 60 percent,” said Doug Holcomb, who oversees the agency’s water utilities division.

For years, small private companies have played a crucial role in Texas, providing water and sewer service in new developments outside of cities. Analysts say private companies will continue to fill an essential need in the future, when public money is projected to be insufficient to make the billions of dollars in costly upgrades needed in water and sewer systems.

Increasingly, however, the companies are neither small nor local. Over the past decade, multistate water utilities have expanded aggressively in Texas, drawn by the state’s booming population and welcoming regulatory environment. A September report prepared by utility analysts for Robert W. Baird & Co., a financial management company, identified Texas water regulators as the most generous in the country for private water companies. Today, three out-of-state corporations own about 500 Texas water systems that serve more than 250,000 residents.

For residents living outside cities served by private utility companies, the state environmental commission is charged with setting “just and reasonable” water rates based on a company’s cost of doing business plus a guaranteed profit. In exchange, the companies enjoy a monopoly on their service area.

Yet critics say the agency is unprepared to handle the recent influx of corporations that have exploited a regulatory system more accustomed to handling rural mom-and-pop operations. Meanwhile, Texas laws provide fewer consumer protections to residents facing water rate increases than electricity and gas ratepayers.

“We are in the midst of a transformation in this state, and the state is ill-prepared to move into that transition,” said Sen. Kirk Watson, D-Austin, who co-chairs a legislative subcommittee to investigate the rates charged by investor-owned water utilities. “It feels like it’s happening at warp speed.”

Industry officials say their rates reflect the true cost of rehabilitating and expanding older water systems, and that without their deep pockets, such systems would languish. The “larger Investor-Owned Utilities have invested in small, rural water and sewer systems that have gone decades without meaningful improvements in their infrastructure and often do not meet minimum environmental standards set by the state,” SouthWest Water spokeswoman Janice Hayes said in an email, adding that the companies have poured millions of dollars into new equipment and upgrades.

But in some places, the rate increase s following those improvements have been so high as to inhibit economic growth. Just south of Austin, SouthWest Water seven years ago purchased rights to provide water on the eastern edge of Kyle. Today, officials say, its rates are about double those of the city.

As a result, the company’s service area is one of the few desirable commercial locations — just off Interstate 35 — where fast-growing Kyle has remained underdeveloped, said Diana Blank, the city’s director of economic development. “We’ve lost projects because of that,” she said. Prospective employers “will look at the map and say, ‘Who serves the area for water?'”

SouthWest’s latest rate request, which would increase rates for some suburbanites to more than three times what Austin residents pay, has caught the attention of lawmakers. A half-dozen legislators said they will introduce changes to the law during the next session to provide more consumer protections.

“This may be the poster child for the kinds of reforms we need,” Watson said. “Some utilities will stretch the law as far as they can stretch it.”

 

(click here to continue reading Statesman.com : Growth of large private water companies brings higher water rates, little recourse for consumers.)

Regulation? I thought the mantra was that regulation was anathema in Texas? You mean to say, “let the free market figure it out!”, right?

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