PUC Commissioners Establish A Bright Line Rule on Streamlined Expedited Release

by Maris Chambers

In the aftermath of Winter Storm Uri, personnel and policies at the Public Utility Commission of Texas (“PUC”) have been in a state of flux. One area of policy developing under the stewardship of the new Commissioners concerns landowner petitions for decertification from water and/or wastewater certificates of convenience and necessity (each, a “CCN”). In particular, Commissioners Lake and McAdams recently established a bright line rule governing the determination of whether a water or sewer service provider has committed or dedicated facilities to a tract of land such that the tract of land will be considered to be receiving service for purposes of streamlined expedited release pursuant to Texas Water Code (“TWC”) § 13.2541(b) and 16 Administrative Code (“TAC”) § 24.245(h).

Commissioners Lake and McAdams made the above-referenced policy clarification during PUC’s open meeting on May 21, 2021, while discussing the recommended approval of a petition for streamlined expedited release filed by Carnegie Development, LLC (“Carnegie”) in Docket No. 51352 (the “Petition”). The Petition requested the release of approximately 195 acres of land (the “Land”) from the water CCN service area held by Crest Water Company (“Crest”) in Johnson County, Texas. While it was under review by PUC Staff, Crest intervened in the Docket and filed a motion to dismiss the Petition, arguing that the Land was ineligible for expedited release because of a prior Commission decision finding that (1) Carnegie had “requested service from Crest to serve the very same 195-acre tract,” and (2) “Crest had the financial, managerial and technical ability to serve the [Land].” Petition of Carnegie Development, LLC to Amend James A. Dyche d/b/a Crest Water Company Certificate of Convenience and Necessity in Johnson County by Streamlined Expedited Release, Docket No. 51352, James A. Dyche d/b/a Crest Water Company’s Motion to Intervene and Motion to Dismiss (Sept. 30, 2020) (referring to the Application of Crest Water Company to Amend a Certificate of Convenience and Necessity in Johnson County, Docket No. 48405 (Mar. 25, 2019), which amended Crest’s water CCN to include the 195-acre tract owned by Carnegie).

Nevertheless, PUC Staff recommended that the Commissioners approve the Petition as it met the applicable requirements of TWC § 13.2541(b) and 16 TAC § 24.245(h). Commission Staff’s Recommendation on Final Disposition at 2 – 3 (Nov. 12, 2020). (Recommendation). Those provisions entitle the owner of certain qualifying tracts of land to petition PUC for expedited release of all or a portion of that land from the current CCN holder’s certificated service area if, among other things, the tract of land is not receiving service of the type that the current CCN holder is authorized to provide under the applicable CCN. TWC § 13.2541(b); 16 TAC § 24.245(h). As such, landowners exercising this option must demonstrate that the land sought to be released from the applicable CCN is not currently receiving water and/or sewer service, as applicable. Id. While the term “receiving service” is not defined by statute, using its plain meaning, courts have interpreted “receiving service” to mean taking possession or delivery of, or knowingly accepting services. Johnson Cty., Special Util. Dist. v Pub. Util. Comm’n., No. 03-17-00160-CV, 2018 WL 2170259, at *8 (Tex. App.—Austin May 11, 2018, pet. denied) (mem. op.) (interpreting the predecessor of TWC § 13.2541(b), TWC § 13.254(a-5)).

PUC Staff’s recommendation to the Commissioners acknowledged that Crest had previously sought and received a CCN amendment to add the Land to its certificated service area, but explained that, in response to discovery, Crest was unable to produce evidence of (1) the existence of any contracts or bills for retail water service provided to the Land; (2) the presence of existing facilities located on or within the Land, or that could be used to serve the Land; or (3) the initiation of any steps to design, construct, or install facilities to provide the requested service to the Land. Recommendation at 2. Therefore, PUC Staff concluded that there was no evidence demonstrating that the Land was receiving service, but only that Carnegie had requested it. Id.

At their open meeting on May 21, 2021, the Commissioners adopted PUC Staff’s recommendation and the associated proposed order. Public Utility Commission of Texas Open Meeting Broadcast (May 21, 2021), Admin Monitor, http://www.adminmonitor.com/tx/puct/open_meeting/20210521/. In doing so, the Commissioners also provided clarification on their interpretation of the meaning of “receiving service.” Chairman Lake first explained that the burden of demonstrating entitlement to streamlined expedited release is on the petitioner, and opined that Carnegie had “done [its] job.” Id. Commissioner McAdams then expressed an intent to establish a “bright line [rule]” for determining whether a CCN holder had sufficient “facilities committed to providing service” to warrant a determination that a tract of land was “receiving service” for purposes of satisfying the requirements of TWC § 13.2541 and 16 TAC § 24.245(h). Id. He opined that “the act of moving paperwork” alone would not be sufficient, explaining his intent to avoid locking service requestors into captive markets when “no tangible commitments have been made on the part of the [CCN holder].” Id. Chairman Lake agreed, stating that a tract of land should not be considered to be “receiving service” unless the CCN holder is capable of providing reliable service in a timely manner. Id. The Commissioners’ discussion and approval of the Petition serves as a bellwether for future CCN release policy developments at PUC, and we will continue to monitor those developments as the Commissioners settle into their new roles.

Maris Chambers is in the Firm’s Districts, Water, Compliance and Enforcement, and Energy and Utility Practice Groups. If you would like additional information or have questions, please contact Maris at 512.322.5804 or mchambers@lglawfirm.com.