By Andy Sevilla, printed March 19, 2014
Kyle city leaders continue their battle with Monarch Utilities, denying the investor-owned firm from raising its rates again.
A similar scenario played out in 2012 when Monarch, a subsidiary of the Houston-based SouthWest Water Company, requested a 62 percent hike of its water charges for the roughly 900 customers it serves in northeast Kyle.
Following a months-long legal fight, the company agreed to a 14 percent increase but said it would come back for another rate hike request in two years.
Monarch filed an application with the city on Sept. 5 asking for a 14.4 percent rate increase in 2014. Council unanimously decided against that request on March 4.
“We’ve been here so many times,” council member Diane Hervol, who lives in Amberwood – a neighborhood serviced by Monarch – said at the meeting. “I think since I’ve been on council … almost every year, we have to do an ordinance. I appreciate the council’s support in continuing the fight on behalf of our northeastern part of Kyle.”
In council’s denial, they said the utility failed to show why city ratepayers should “pay such a large portion” of the costs to the company’s parent in comparison to customers in other states, according to the approved city ordinance.
The legislation also said Monarch made little effort to show the costs of its parent company as reasonable and necessary, and that it is exorbitant for customers to pay an 11.25 percent return on investment for “a monopoly which has a guaranteed set of customers.”
Monarch serves Kyle homes under a state-issued Certificate of Convenience and Necessity (CCN), which guarantees the company a monopoly over its customers, primarily in the Amberwood and Indian Paintbrush subdivisions.
Kyle officials even went the route of exploring dual certification – running its own water lines to the Monarch-serviced areas. That effort gained no traction in the Texas Legislature.
“The city is committed to seeing that rates be reasonable, and to eliminate costs which are unreasonable and unnecessary,” Jim Boyle, the attorney representing Kyle in the rate proceedings said in a telephone interview Tuesday.
Monarch customers pay $74.40 for 5,000 gallons of water, about twice the cost for the same water Kyle city customers pay, according to city officials. Kyle’s water/wastewater utility rates increased three times in as many years, yet the overall cost is still lower than Monarch’s.
Gary Rose, director of operations in the Kyle area for SouthWest Water Company, said in an email Monarch will appeal the Kyle council’s decision to the Texas Commission on Environmental Quality (TCEQ) for further review.
TCEQ will then set a preliminary hearing and a procedural schedule to hear the merits of the case.
During a public hearing March 4, several Monarch customers implored the council to deny the requested increase.
“The rates are ridiculous, the service is unbelievably poor, I think anybody that lives out there, quite frankly, probably is considering somewhere else (to live),” said Amberwood resident Gary Rush. “It’s a very nice place to live, but the water rates just continue to go up, and go up, and go up.”
Rose, however, maintains that the increase is necessary to keep the product and service gratifying.
“We must make investment in water a priority for the sake of the economy, our health and our communities,” he said. “No matter the conditions, Monarch Utilities remains committed to providing our customers with clean, safe and reliable water and sewer services.”
Boyle said that under Monarch’s proposal the utility plans to increase rates by 14.86 percent this year, but the total amount they put at issue is 44 percent. He said Monarch is making an effort to prove up the additional 30 percent, and request rate increases later to address their self-identified remaining need.
“Our challenge is to get in there so that we deal with all of this at one time,” Boyle said.
Hervol hopes to see an end to the battle.
“I think that hopefully one day, maybe one day soon, we can put this to rest,” Hervol said.
