Thursday, November 15, 2007
Monarch customers say the
utility is giving new meaning to …
The High Water Mark
By Michael V. Hannigan
Monitor Staff Writer
ATHENS – Water and sewer customers of Monarch Utilities, Inc. filled the TVCC Student Union Building Ballroom Monday night to protest a system-wide rate increase.
Protestors – who came mainly from around Lake Palestine and Cedar Creek Lake, particularly the Pinnacle Club – spent nearly two-and-a-half hours peppering Texas Commission on Environmental Quality (TCEQ) officials with questions about state water rate law in general and fighting this particular increase specifically.
The informational meeting was arranged by State Sen. Robert Nichols and State Rep. Betty Brown on behalf of their constituents.
The rate increase became effective in September for Monarch’s nearly 22,500 customers in 24 counties. According to information distributed Monday night by the TCEQ, the average Monarch residential customer using 7,000 to 10,000 gallons of water per month is now paying $44.37 for water and $49.59 for sewer.
The sewer rate, however, is a stepped increase over three years. Next year, that same customer will be paying $61.69 for sewer and $73.78 the year after.
Protestors say the rates are ludicrous.
“This entire system is unfair to ratepayers and is causing a major hardship on the elderly, disabled and young families just getting started,” Orville R. Bevel, Jr., chairman of Texans Against Monarch’s Excessive Rates (TAMER), wrote in a letter presented to the TCEQ.
“Additionally, the exorbitant rates will drive property values down in subdivisions that are adjacent to lower water and sewer costs in other subdivisions. We can show you many subdivisions that are much lower in cost, have better maintenance and provide excellent quality water. Since Monarch (took over) … the cost for water has more than tripled for the average user in less than five years.”
The good news for protestors is that enough people have complained that the rate case will be referred to the State Office of Administrative Hearings (SOAH).
The bad news is customers will continue to pay the rate increase until further notice.
TCEQ attorney Brian MacLeod, the main spokesman for the agency Monday night, explained the administrative hearing process held in Austin:
1. SOAH referral
2. Preliminary hearing
5. Evidentiary hearing
6. Commissioners decide
MacLeod said enough protests have been filed – more than 3,000 as of Monday night – to ensure the SOAH referral, but warned the entire process could take 18 to 24 months.
For now, the new rate stays in place; something Monarch customers on hand Monday night were vocally upset about.
MacLeod had a simple answer for them: It is state law. According to current rules, water utilities can charge new rates 60 days after notification.
If after the administrative process the TCEQ sets lower rates, the water utility will have to issue refunds with interest, unless customers make the unlikely choice of agreeing to waive the refund.
The TCEQ has the option of setting interim rates, MacLeod said, but added the agency usually doesn’t unless the utility’s application is incomplete. In this case, despite repeated reports that Monarch did not notify everyone in the system, TCEQ has decided to go forward.
Protestors can ask the SOAH judge to set interim rates during the preliminary hearing, which is the next step in the process, he said.
Nobody knew when the preliminary hearing would be held, but many guessed after the first of the year.
That would work just fine for TAMER, Bevel said after the meeting.
The grassroots group intends to charter buses to pack the preliminary hearing with protestors. That will be harder to do before the holidays, he said.
He should know.
In 2000, Bevel and many others involved in TAMER fought a water rate increase. He knows the fight may be long and possibly expensive.
“Donations are how we are operating,” he said.
While MacLeod explained the process, TCEQ engineering specialist Brian Dickey explained what will be looked at by the agency.
“Rates are based on 12 months worth of operating costs,” Dickey said.
According to Dickey, the TCEQ will audit Monarch’s books and physical assets to determine how much it actually costs the utility to provide service to its customers. The TCEQ will be using Monarch’s 2006 figures, he said.
If the audit finds Monarch inflated any of its costs or figures, the TCEQ will make a correction.
Those figures will determine the rate, that and about a 12 percent profit margin, MacLeod said, a figure not set in stone but rather a guideline.
Several of the protestors said they wished they could get into a business with those guidelines.
Many of the questions directed at Dickey dealt with specific questions regarding Monarch, such as:
• Why has Monarch’s payroll increased so much while service has decreased?
• Why is the rate spread across the entire system penalizing some areas for the problems of others?
• Why can Monarch pass its mistakes on to the customers?
• What about bonds Monarch is trying to secure (almost $60 million worth, according to TAMER)?
• Why are Monarch’s fees so much higher than other utilities?
• Why did the TCEQ go forward with Monarch’s application when nearly 900 customers signed protest petitions saying they were not notified of the increase?
• Why did Monarch not notify several subdivisions that they were combining some of the utility’s systems?
Dickey admitted not having the answers to most of their questions yet, because the TCEQ administrative process is just getting underway.
Comparing Monarch’s rates to other water utilities probably wasn’t going to be relevant, he said.
“Because, the rate (according to state law) is going to be based on what this particular utility pays in costs,” he said.
E.H. “Bud” Henry, the former general manager of the East Cedar Creek Fresh Water Supply District, told Dickey the comparisons are relevant.
“Here is the reality,” he said. “The difference is staggering.”
One protestor who did not give his name said his research through the Texas Municipal League website showed Monarch’s rates were more than 100 percent higher than the state average for comparable areas.
Pointing to his experience in the water business on Cedar Creek Lake, Henry agreed.
One man in attendance who could have shed light on several of the questions was Monarch Vice President John McClellan. He declined to speak to the crowd, however.
After the meeting McClellan said, “Anything we say here is admissible in court, so basically we don’t do that.
“This is what you experience in any of these rate hearings. Cost is a big concern,” McClellan said.
While not addressing the specifics of the rate case, McClellan did say, “I always look at customer service, that’s always an issue. That’s always a problem. We try to address that the best we can.
“Monarch was a big challenge when Southwest Water bought them just because of the numbers and the counties and the number of people,” he added. “So it’s been a big challenge.”
While Monarch customers had the chance to vent, the truth is state law mandates the TCEQ’s steps. There isn’t a lot of wiggle room for somebody like MacLeod or Dickey to take independent action.
In opening the meeting, State Sen. Robert Nichols and State Rep. Betty Brown said changes in the law are definitely needed – particularly in regard to customers paying higher rates before a TCEQ ruling.
“We have already put in a request for an interim study between now and the next (legislative) session on the issue of not charging the new rate until after the hearing,” Nichols said.
“I’m hoping that the lieutenant governor will have that as an issue flagged, because we’re sure going to file legislation regardless,” he said.
Nichols must have known what was coming, because the first question from the audience was from Steve Garwacki of the Pinnacle Club, but the same question was on the lips of just about everyone present.
“Why is there not legislation proposed and enacted to preclude us from having to pay before the rate increase is approved?” he asked.
“You’ve (Nichols) addressed that in your comments, but I represent the Pinnacle Club, and we have a whole table and a half here so there are a lot of folks who ask the same question.
“One of the key things we would ask be done in Austin this year, with your help, is that be addressed,” he added. “So that instead of us having to pay these rates for a minimum of 18 months or longer, the utility companies have to prove – prior to us paying that – they need those rates.”
Nichols said he had filed three pieces of legislation during the last session – his first in the Legislature – regarding the way water utilities operate in the state.
“I was amazed how quickly bills like that (died) in committee,” he said.
Both Brown and Nichols vowed to support legislation to change the way water rate cases are currently handled.
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Monitor Photo/Pearl Cantrell
Monitor Photo/Pearl Cantrell