To better regulate rate increases by investor-owned utilities, legislators plan to propose several bills in the 2013 legislative session. Senator Robert Nichols, R–Jacksonville, whose district reaches into the Tomball and Magnolia area, is leading the charge as co-chair of a Senate subcommittee investigating rising water and sewer rates from investor-owned utilities.

"Out-of-control water and sewer rates are issues the state cannot afford to ignore," Nichols said.

During the 2011 legislative session, Nichols filed several bills related to investor-owned water utilities. Nichols and his co-chair, Kirk Watson, D–Austin, asked Gov. Rick Perry to add legislation related to water utility rates to the special legislative session in 2011, but the request was denied. The main goal of the bills authored by Nichols in 2011, and planned for proposal in 2013, is to move the regulation of investor-owned utilities from the Texas Commission on Environmental Quality back to the Public Utilities Commission.

"The TCEQ is an agency that's geared toward air and water quality, not rate making, and they have very little skill in this area," Nichols said.

In the unincorporated Magnolia area, more than 1,100 households are awaiting a decision from the TCEQ on a rate increase initiated by Monarch Utilities, a subsidiary of California-based SouthWest Water Company. In August 2011, Monarch notified customers that their rates would be going up by 62.3 percent for water and 33.6 percent for sewer. The rate increase notification coincided with SouthWest Water Company's application to merge eight to 12 utilities into Monarch.

In December, residents were given a temporary victory when they were able to go before the TCEQ and get them to put in interim rates while the case is reviewed. However, residents did not receive a refund for the increased rates they paid from August to December. The Monarch case is expected to go to trial in August 2012, said Orville Bevel, chair of Texans Against Monopolies' Excessive Rates, an advocacy group representing 22,000 rate payers across the state. There are 81 subdivisions in 23 counties who use Monarch Utilities.

"We feel that in the past TCEQ has never fought for the ratepayers, although they have been much more sympathetic over time and have worked with us more on this case than in the past," Bevel said. "The first reaction when we go to them is, 'We don't have enough people and enough money to review the case.'"

Up until 1985, the PUC reviewed all utility rate change requests before handing off water-rate making to the TCEQ.

Unlike the PUC, the TCEQ does not have a legal council to review cases, so ratepayers have to hire their own legal representation if they want to fight a rate increase.

"What happens in cases like this is people who live in the subdivisions affected have to individually write checks and do bake sales to raise money to pay their lawyers," Nichols said. "The utility has an unusual advantage in that no matter how much they spend in legal fees, consumers have to pay the legal bills on both sides because current law allows [a utility like] Monarch to stick legal fees back on water bills [if they win their case]."

Nichols said he plans to get the word out to residents from subdivisions under Monarch Utilities to testify during the 2013 legislative session.

"If we don't get the legislation, the problems will not go away," Bevel said. "There's nothing under current law to prevent a utility from continuing to increase their rates whenever they want to."