The Administration & Regulatory Affairs Department (ARA) recommends that Council adopt an ordinance relating to the retail water rates of Nitsch & Son Utility Company, Inc., approving a settlement agreement and adopting rates that reflect rate adjustments consistent with the settlement agreement.
Nitsch is an investor owned water/wastewater utility (IOU) with exclusive authority to provide water and sewer services to customers within its certificated service areas as granted under Certificate of Convenience (CCN) No. 11124 (water) and No. 20446 (sewer). CCNs are issued by the Public Utility Commission of Texas (PUC) and are granted for an indefinite period of time. The City of Houston exercises original jurisdiction over Nitsch’s rates under the provisions of the Texas Water Code for customers within city limits.
On June 20, 2016, Nitsch filed an application with the City of Houston to increase its water and sewer rates for customers located in Bellmar Terrace, Assumption Heights, Little York, Cortlandt Meadows and Lazy Meadows subdivisions (Council District H). Nitsch requested a combined 27.7% increase in its revenue requirements for water and sewer service. This equates to a 39.65% (5/8 x 3/4” meter) increase to average residential customer’s monthly bill, assuming an average consumption of 6,000 gallons per month, and a 41.20% for customers with a 1” meter (based on 6,000 gallons usage). The specific rate impact to Houston customers will vary by service, meter size and gallons used.
On July 13, 2016, City Council approved an ordinance suspending the effective date of the new rates for 90 days to October 23, 2016 from July 25, 2016. During the suspension period, the City engaged a rate consultant to review the rate request and to assist with preparation of a final recommendation. During the suspension period, the City conducted a public meeting for in-city Nitsch customers. Participants providing comment on the subject of the new rates and customer service concerns, expressed support for the Nitsch requested rate increase and general satisfaction with the quality of service in the service area (one of two non-utility participants).
Believing resolution of the Nitsch rate proceeding by settlement agreement to be in the best interest of the ratepayers, the City entered into negotiations with the Company. During the negotiations, the City and the Company agreed to extend the suspension period for the new rates to November 13, 2016 to allow additional time to reach an agreement. ARA and the Legal Department participated in several discussions with the Company before reaching an agreement. The settlement represents a substantial reduction to the Company’s original $173,620 revenue request to $94,061. This equates to a $15.72 or 24.49% increase in the monthly bill for the average residential customer with a 5/8” x 3/4" meter (assuming 6,000 gallons used) instead of the requested $25.44 increase. The attached table shows the effects on residential customer bills, based on monthly consumption with a comparison to current rates. The effective date of the settlement rates is November 10, 2016.
ARA believes that a negotiated settlement is in the best interest of the ratepayers, and the City and Company. For this reason, ARA recommends that Council adopt an ordinance relating to the retail water rates of Nitsch & Son Utility Company, Inc., approving a settlement agreement and adopting rates that reflect rate adjustments consistent with the settlement agreement.
Departmental Approval Authority:
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Tina Paez, Director Other Authorization
Administration & Regulatory
Affairs Department