Texas Administrative Code
Title 16 - ECONOMIC REGULATION
Part 2 - PUBLIC UTILITY COMMISSION OF TEXAS
Chapter 24 - SUBSTANTIVE RULES APPLICABLE TO WATER AND SEWER SERVICE PROVIDERS
Subchapter H - CERTIFICATES OF CONVENIENCE AND NECESSITY
Section 24.240 - Water and Sewer Utility Rates After Acquisition
Universal Citation: 16 TX Admin Code § 24.240
Current through Reg. 50, No. 13; March 28, 2025
(a) Applicability. This section applies to a person who files an application with the commission under Texas Water Code (TWC) §13.301(a) and a request for authorized acquisition rates under TWC §13.3011. For purposes of this section, the term "transaction" is used to align with its usage in the procedural provisions of § 24.239 of this title (relating to Sale, Transfer, Merger, Consolidation, Acquisition, Lease, or Rental).
(b) Definitions. In this section, the following definitions apply unless the context indicates otherwise.
(1) Authorized acquisition
rates--Initial rates that are in force and shown in a tariff filed with a
regulatory authority for the transferee for another water or sewer system owned
by the transferee on the date an application is filed for the acquisition of a
water or sewer system under §
24.239 of this title.
(2) Existing rates--Rates a transferor
charged its customers under a tariff filed with a regulatory authority prior to
the water system or sewer system being acquired.
(3) Initial rates--Rates charged by a
transferee to the customers of an acquired water or sewer system upon approval
of the transaction by the commission. An initial rate may be an existing rate,
an authorized acquisition rate, or a rate authorized by other applicable
law.
(c) Initial Rates.
(1) A transferee must use existing rates as
initial rates unless the commission authorizes, under this section or other
applicable law, the use of different initial rates.
(2) A transferee may request commission
approval to charge authorized acquisition rates to the customers of the water
or sewer system for which the transferee seeks approval to acquire as part of
an application filed in accordance with §
24.239 of this title.
(3) If the transferee has in-force tariffs
filed with multiple regulatory authorities, there is a rebuttable presumption
that authorized acquisition rates should be based upon an in-force tariff that
was approved by the same regulatory authority that has original jurisdiction
over the rates charged to the acquired customers.
(4) Phased-in rates. If the in-force tariff
contains rates that are phased in over time, the provisions of this paragraph
apply.
(A) Unless determined otherwise by the
commission, the schedule in the tariff for the effective period of each phase
will be applied to the customers of the acquired water or sewer system. To
moderate the effects of a rate increase on customers, the commission may
approve authorized acquisition rates that start customers of the acquired water
or sewer system on an earlier phase than is in place for the customers to which
the tariff already applies or establish a different schedule for the effective
period of each phase.
(B) The
transferee's application must include financial projections, rate schedules,
and billing comparisons, consistent with the requirements of subsection (d) of
this section, for each phase in the in-force tariff.
(C) The commission's review of whether the
authorized acquisition rates are just and reasonable under subsection (f) of
this section will include an evaluation of whether the final phase of the
requested rates are just and reasonable.
(5) Public interest determination. In
determining whether to approve an acquisition under §
24.239 of this title, the
commission will consider whether approving the transferee's request to charge
authorized acquisition rates under this section would change whether the
proposed transaction would serve the public interest under §
24.239(h)(5) of
this title.
(d) Application. In addition to other applicable requirements, a request for authorized acquisition rates in a §24.239 proceeding must include the following:
(1) a rate schedule showing the
existing rates and the requested authorized acquisition rates;
(2) financial projections including a
comparison of expected revenues under the acquired water or sewer system's
existing rates and the requested authorized acquisition rates;
(3) a billing comparison for usage of 5,000
and 10,000 gallons at existing rates and the requested authorized acquisition
rates;
(4) documentation from the
most recent base rate case in which the rates that the transferee is requesting
to use as authorized acquisition rates were approved; this documentation must
be sufficient to allow the commission to evaluate what was included in the
revenue requirement for the requested rates and, if available online, may
consist solely of a web address where the documentation can be located and the
applicable docket number or any other information required to locate the
documentation;
(5) a disclosure of
whether the transferor and transferee are or have been affiliates in the
five-year period before the proposed acquisition, and the nature of each
applicable affiliate relationship;
(6) additional explanation, including any
applicable documentation, supporting the request to charge authorized
acquisition rates, including:
(A) that the
requested authorized acquisition rates would be just and reasonable rates for
the customers of the acquired system and for the transferee;
(B) how approving the requested rates would
change how the commission should evaluate whether the proposed transaction
would serve the public interest, according to any applicable criteria listed in
§
24.239(h)(5) of
this title;
(C) if the transferee
has multiple eligible in-force tariffs or rate schedules, a list of eligible
tariffs or rate schedules and an explanation for the tariff or rate schedules
the transferee proposes to use for authorized acquisition rates;
(D) if the transferor and transferee are
affiliates or have been affiliates in the five-year period before the proposed
acquisition, the application must also include an explanation for why the
transferee is requesting to charge authorized acquisition rates instead of
using other available ratemaking proceedings.
(e) Notice requirements. Unless the commission waives notice in accordance with other applicable law, a transferee requesting approval to charge authorized acquisition rates under this section must, as part of the notice provided under § 24.239 of this title, also provide notice of the information outlined in this subsection. Commission staff must incorporate this information into the notice provided to the transferee for distribution after the application is determined to be administratively complete.
(1) How intervention differs from
protesting a rate increase.
(2) A
rate schedule showing the existing rates and the authorized acquisition
rates.
(3) A billing comparison for
usage of 5,000 and 10,000 gallons at existing rates and authorized acquisition
rates.
(f) Commission review. The commission will, with or without a public hearing, investigate the request for authorized acquisition rates to determine whether the requested rates are just and reasonable for the acquired customers and the transferee. That a regulatory authority has determined that the requested rates are just and reasonable for a water or sewer system to which the rates already apply is not, in itself, sufficient to conclude that the requested rates are just and reasonable for the acquired water or sewer system.
(1) Public hearing. As part of its
determination on whether to require a public hearing on the proposed
transaction under §
24.239(h) of
this title, the commission will also consider whether a hearing is required to
determine if the requested authorized acquisition rates are just and
reasonable.
(A) If the commission requires a
public hearing under this section or §
24.239(h) of
this title, the request to charge authorized acquisition rates will not be
approved unless the commission determines that the requested rates are just and
reasonable.
(B) If the commission
does not require a public hearing under this section or §
24.239(h) of
this title, and the transferee has complied with the notice provisions of this
section, the request to charge authorized acquisition rates will be approved in
the commission's order approving the transaction. This subparagraph does not
apply if the commission does not approve the transaction.
(2) Scope of rate review. The commission will
determine whether the requested rates are just and reasonable based on the
relevant facts and circumstances, subject to the limitations of subparagraph
(A) of this paragraph.
(A) The transferee is
not required to support its request for authorized acquisition rates by
initiating a rate proceeding, establishing the cost of service for the acquired
water or sewer system, or establishing substantial similarity between the
acquired water or sewer system and the water or sewer system to which the
requested rates already apply. The transferee is also not required to defend
the reasonableness of the requested rates, or any individual component of those
rates, with respect to any water or sewer system to which the rates already
apply.
(B) The commission may
consider whether any charges or significant components of the requested
authorized acquisition rates (e.g., local or system-specific charges, pass
throughs, etc.) would be unjust or unreasonable if applied to the acquired
water or sewer system. The commission may also consider evidence of whether the
customers of the acquired water or sewer system are currently receiving
continuous and adequate service. The commission may also consider evidence of
whether the requested rates are generally consistent with the rates charged to
similar water or sewer systems. The commission's review is not limited to the
factors enumerated in this subparagraph.
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