Billing Rates

August 10, 2009


Public Service Board
El Paso Water Utilities
1154 Hawkins
El Paso, Texas 79925

Members of the Board

El Paso Water Utilities sends over 150,000 residential water bills to El Paso Citizens every month. These bills charge citizens at various rates up to $4.87 per CCF for water usage. Is it fair to ask how EPWU determines these rates?

I requested a copy of your American Water Works Association rate model⁵ under the Freedom of Information Act. Your Chief Financial Officer replied¹ that the utility adopted an AWWA rate model in 1991 but that "The PSB approves changes to rates in order to meet financial requirements of the Utility." ²

"Financial requirements of the utility" include subsidies to Fort Bliss. If Fort Bliss pays less than their fair share of costs, citizens must pay more than their fair share of costs to make up the difference. Your web site states that 20% of the monthly bill is used to subsidize growth.³

Your rate consultant says that rates are based on the" excess use approach."⁴ At your July 22, 2009 open meeting, Mr. Archuleta said the rates were based on "cost of service"⁵ and that he would arrange a meeting with your rate consultant so that I could review the calculations.

I met with your rate consultant on August 7, 2009 in the EPWU offices to review the residential rates that you implemented on March 1, 2008. He was unable to produce a calculation of the rates, but he is still trying. He did produce a calculation of the $.16 per CCF rate that you are charging to Fort Bliss.⁶

You must provide an explanation and justification for charging a maximum rate to citizens ($4.87 CCF) that is 30 times greater than the rate you charge to Fort Bliss ($.16 CCF). You have no fiduciary duty to Fort Bliss. However, you do have a fiduciary duty to Bond Holders and El Paso Citizens.

You cannot shut off a citizen's water if he refuses or is unable to pay for a subsidy to Fort Bliss. However, you have promised⁸ Bond Holders that you will shut off a citizen's water if he is delinquent for 30 days. You seem to be in a position where you will violate your citizen's rights if you shut off their water, but you will violate a loan covenant⁸ if you don't.

You can easily do your duty to citizens and Bond Holders by asking the Texas Environmental Quality Commission⁷ to review your rates and give their opinion as to whether the rates are fair to El Paso Citizens and Bond Holders. I will abide by their decision.

Sincerely,


Jimmy W. Janacek

1. Letter from Robert D. Andron dated July 20, 2009
2. PSB Bond covenants require that rates must produce net revenues equal to 150% of annual debt service. See City Ordinance 9598 Section 10.03 (c), Rate covenant
3. http://www.epwu.org/whatsnew/216090615.html
4. http://www.redoakconsulting.com/index.php?view=article&catid=48&id=194%3ARatcheting+Down+Water+Consumption+in+a+Desert+Community&option=com_content&Itemid=64
5. In the book Water Rates, Fees, and The Legal Environment, The American Water Works Association says that "fair and equitable rates," also called "cost-of-service-based rates" cause "each customer to pay his or her cost share of the service without being subsidized by other customers or subsidizing other customers. Developing fair and equitable rates means to avoid .... subsidization." "Rate designs are developed to promote equity among customers by charging each customer in such a way that a customer is neither subsidized by nor subsidizes other customers." "Equitable rates refer to cost of service based rates where no customer class subsidizes or is subsidized by other classes."
6. Memorandum from Red Oak Consulting to Marcela Navarrete dated June 29, 2007
7.Sec. 13.042 Texas WATER CODE
8.City Ordinance 9538 Section 10.03 (e) (iv)