Depending how lawsuits pan out, the San Jacinto River Authority may increase its rates next fiscal year by up to 14.5% from fiscal year 2019-20.
The SJRA has been paying legal fees associated with a lawsuit against private utility provider Quadvest and the cities of Conroe and Magnolia over water rates, an antitrust case filed against the SJRA by Quadvest, and a water line leak case.
The current groundwater pumpage fee is $2.73 per 1,000 gallons, and the current surface water fee is $3.15 per 1,000 gallons. At its April 20 meeting, SJRA Deputy General Manager Ron Kelling presented four scenarios on possible rate increases based on outcomes of the legal proceedings. The rates will be set on May 26 and approved, along with the FY 2020-21 budget, on June 22.
In 2016, Conroe and Magnolia refused to pay increased surface water rates by the SJRA. According to the SJRA, the city of Conroe would owe the SJRA a total of $5.66 million—including short pay and late fees—by Aug. 31, while Magnolia would owe $237,387.
Mayor Pro Tem Duke Coon, who serves as Conroe’s representative on the SJRA’s Groundwater Reduction Plan Review Committee, attended the meeting but did not comment on the rate case. City officials have previously said the SJRA rate increases are unduly high and place an unfair burden on residents.
In Scenario A as outlined by Kelling, Conroe and Magnolia pay all their past dues from FY 2019-20 and begin to pay the full SJRA rate; the rate case is dropped; the anti-trust case is dismissed; and the water line case is dropped. In this scenario, rates would increase by 0.4%, or about 1 cent.
“If you could close your eyes and think of a world where there are no lawsuits ... that scenario is basically ... you could operate as a normal utility without all this other stuff going on,” Kelling said.
Scenario B is the same as Scenario A, except the Quadvest rate case—sans Conroe and Magnolia— is seen through trial, and the antitrust case goes through discovery. In a nutshell, the Quadvest antitrust lawsuit alleges the SJRA created a monopoly on water supplies in Montgomery County through its GRP by purchasing all available surface water resources in the region.
“Both of those [cases] are going to be expensive,” Kelling said. “The best estimate I could squeeze out of our attorneys for now is that the Quadvest ... rate case to go through trial is going to cost $700,000. Just for the Quadvest antitrust case to go through discovery, $700,000 also.”
In Scenario B, rates would increase by 3.7%.
Scenario C is the “status quo,” Kelling said.
In this situation, none of the lawsuits are dropped or settled, and Conroe and Magnolia continue paying 2016 rates. In Scenario C, rates would increase by 14.5%.
A fourth scenario was also presented that involved reducing production of the surface water facility and would lead to an 11.5% increase in rates.
“Let those numbers sink in,” Kelling said. “We need ... all of our participants to chew on these numbers and chew on these scenarios.”
In response to the meeting, Conroe City Attorney Marcus Winberry told Community Impact Newspaper
"The council expects to continue paying the SJRA surface water and pumping fees at the frozen levels and will continue to hold the difference for future payment when the rate dispute is settled. The city is unlikely to release any portion of the disputed amount without a comprehensive settlement."