The Solution

The Solution

The PSB is a monopoly. The State of Texas regulates monopolies because the normal forces of competition that operate to regulate prices in a free enterprise society do no operate for a monopoly. Therefore the State stepped in to "establish a comprehensive regulatory system that is adequate to the task of regulating retail public utilities to assure rates, operations, and services that are just and reasonable to the consumers and to retail public utilities."¹

However, "for the purpose of regulating rates and services so that those rates may be fair, just, and reasonable and the services adequate and efficient, the governing body of each municipality has exclusive original jurisdiction over all water and sewer utility rates, operations, and services provided by a water and sewer utility within its corporate limits."²

Therefore the responsibility for regulating El Paso water and sewer services rest with the "governing body" of El Paso. However, City Manager Joyce Wilson has said "Under the state law, the management and control of the PSB is vested in the board of trustees and neither the Council nor I have any control over their actions."³

Therefore the PSB is left to regulate itself. They can pretty much do as they please and EL Paso citizens have no right of protest or appeal. There is no due process.

On May 13, 2005, the BRAC Commission announced their decision to expand Fort Bliss. Later that day the President/CEO of EPWU entered into the following agreement:

Because of the urgency expressed by the City of El Paso to proceed with construction, the United States agrees to this temporary right-of-entry. In return, the City of El Paso, agrees to execute, accept and be bound by an easement to be drafted by the Department of the Army following the right-of-entry, and to such terms and conditions which the Department of the Army my deem to be reasonable and proper to protect its interests.⁹

 

There are no other binding agreements between the PSB and Fort Bliss. Would you spend your own money in this fashion? Of course not. Then why do we allow the PSB to spend our money in this fashion? Because we have no choice. We will pay $100 Million for the facilities or he will turn off our water. The President/ CEO says that there is nothing unusual about doing business in this fashion.

The PSB admits that they have collected $200 Million to subsidize El Paso housing developments and they plan to collect another $340 Million in the next ten years. Then they will have to collect $630 Million to bring in water for these new developments. Would you vote to raise taxes $1.17 Billion to subsidize new homes? Of course not. Then why do we allow the PSB to spend our money in this fashion? Because we have no choice. We pay for the subsidy or the PSB turns off our water.

The PSB argues that "this is good for the economy and good for the people of El Paso" but their argument misses the point. The PSB is not responsible for economic development. They are responsible for delivering water to residents at cost. The PSB did not tell their customers that they would be forced to pay for subsidies totaling over $1.17 Billion. They didn't ask for their customers' opinion. Their customers have no voice in these decisions, no right of protest, no right of appeal and no due process.

Whereas regulated utilities can only raise prices to recover increased cost, the PSB has raised prices 94%⁴ without regard to cost and they already plan to raise prices another 128%⁵ in the future. In 2006 the PSB had a profit margin of 32%⁶ compared to 18%6 for Exxon Mobile. They deny making any profit at all but their audited financial statements show net income of 104 Million for themselves and $59 Million for the City of El Paso in ten years.⁷ Their President/CEO makes over $500,0008 a year compared to an average of $114,000 for top water executives across the nation.

Regulation of monopolies is normal and usual public policy everywhere except El Paso. The PSB is the only unregulated monopoly in El Paso. Yet the city council has further empowered the PSB by giving them responsibility for storm water protection. The city council has taken the easy way out, they punted their responsibility to the PSB. So when citizens complain about their bill, the City Manager says, "Under the state law, the management and control of the PSB is vested in the board of trustees and neither the Council nor I have any control over their actions."³

I would like to suggest a solution that may be acceptable to El Paso Citizens, the Mayor and City Council.

"The governing body of a municipality by ordinance may elect to have the commission (State of Texas) exercise exclusive original jurisdiction over the utility rates, operation, and services of utilities, within the incorporated limits of the Municipality." The City Council could simply pass an ordinance to turn regulation of PSB rates and operations over to the State of Texas. Thus the PSB monopoly would be regulated like any other monopoly and El Paso citizens would have the same protection that is enjoyed by every other citizen of this State.

Jimmy Janacek, CPA Retired

1) Texas Water Code 13.0001. (c)
2) Texas Water Code 13.042. (a), (b)
3) Letter from Joyce Wilson, January 27, 2009
4) El Paso Water Utilities water rates
5) EPWU "Pricing Effects of Water Demand", November 9, 2006 p 12
6) 2006 Income Statements of Exxon Mobil and EPWU
7) PSB EPWU Selected Financial Data from 2006 Annual Report
8) Calculation of Archuleta salary https://www.citizensmakethecall.com/ceo_employment_contract.htm
9) Immediate Right-Of-Entry No DACA 63-9-05-0535, Fort Bliss