The city of Kyle and Monarch Utilities reached a settlement agreement July 15 that stabilizes rate increases for the utility company's 900 customers in Kyle.

The city had been trying to rid itself of Monarch since November 2011 when the water service provider proposed a 62.3 percent systemwide rate hike. The city and Monarch later settled the matter, and the utility company agreed to reduce the rate increase to 14 percent.

But Mayor Todd Webster said the agreement reached in July allows the city and Monarch to coexist—as long as both sides hold up their ends of the deal."We struck a very fair arrangement with them," Webster said. "We've made peace with them, and they've agreed to limit what their future rate increases will be."

Water rates from August 2014 through December 2016 have been agreed upon. A minimum monthly charge of $42.35 for a five-eighths-inch meter went into effect Aug. 1. On Jan. 1, 2016, the minimum monthly charge for a meter that size will be $44.89.

Per the terms of the deal, Monarch has agreed to tie its future rate increases in 2017 and beyond to the consumer price index, which is defined by the U.S. Bureau of Labor Statistics. The index measures the changes in prices of goods paid by typical consumers.

An "unforeseen circumstance" could require Monarch to change the agreed-upon rates, according to the agreement. The rate stabilization agreement expires five years after the 2017 rates go into effect.

The agreement terminates if the city of Kyle initiates condemnation proceedings to acquire Monarch property or lobbies the state Legislature to change the way utility companies acquire assets.

In a separate development, the city of Kyle filed notice to the Texas Commission on Environmental Quality that it will be taking over water and wastewater services in an undeveloped area of land north of Kyle Crossing and east of I-35 formerly in Monarch's service area.

Monarch, which serves the Kyle neighborhoods of Indian Paintbrush and Amberwood, was decertified from the 107 acres owned by developer RRHPI in November 2012.

On Aug. 19, Kyle City Council unanimously approved submitting notification to the TCEQ that the city of Kyle will provide water services to the area, which does not currently have customers.

But the decertification does not affect Monarch's business strategy in Kyle, Gary Rose, director of operations for Southwest Water, Monarch's parent company, said in an email.

"We have a long-term agreement with the city that we intend to stand by, and our plan is to continue serving our customers and giving back to the community through sponsorships and outreach," Rose said.

Rose declined to elaborate further on the decertification.

RRHPI, an Austin-based developer, is planning a commercial development on the property, which is between The Home Depot and Loop 4, Webster said.

"They are working closely with the city with respect to what their plans are in that area," he said.

Webster said he could not comment further on the development because of a confidentiality agreement. RRHPI did not respond to a request for comment.

RRHPI is not the only company in the midst of developing property on the north side of the city limits, which Webster said is "exploding" with new development.

Monarch will be compensated for any utility infrastructure that may be present on the property. The city will also seek reimbursement from RRHPI for the costs of extending water services to the decertified area.

Webster made it clear that the process to decertify Monarch from the property was initiated before the settlement between the city and Monarch was reached. He said the city will not participate in trying to shrink the utility company's service area.

"We won't be doing that with landowners going forward," he said. "As long as we adhere to the agreement, they should hold to their side, and there will be predictability that helps us both residentially and commercially."