By Peggy Heinkel-Wolfe / Staff Writer

Published: 16 November 2011 08:23 AM

OAK POINT - The Oak Point City Council unanimously rejected a request from Monarch Utilities on Monday night to raise the water rates here after a consultant told them the company has not provided enough information to justify a 60 percent rate hike.

About half of the 30 residents attending the public hearing Monday also ticked off scores of complaints about the company, including frequent main breaks, odd billing problems, poor customer service, and sand in the water lines that damaged plumbing fixtures and appliances.

"The only thing left for me to do is to request you reject this rate increase in its entirety and take your chances with the state," said Leonard Limmer, one of many affected residents from the Crescent Oaks subdivision served by Monarch.

The company sent two representatives to the meeting. They took notes, but made no comments and left immediately after the meeting adjourned. At one point during the hearing, one representative began to answer a question asked by a resident, but stopped after being nudged by his fellow employee.

Mayor Jim Wohltez told the crowd the representatives would not be answering any questions.

The City Council has preliminary jurisdiction over the rate increase, but the utility can appeal to the Texas Commission on Environmental Quality.

Wohletz assured the crowd that the city was prepared to see the matter through. Oak Point would partner with other cities to protest any appeal of the increase to state regulators, he said.

Monarch Utilities is a private, investor-owned utility that bought Midway Water Utilities, the original system serving Crescent Oaks, in 2004. Crescent Oaks is one of Oak Point's older subdivisions, with an average home value of about $78,000.

Monarch has bought a number of smaller water utilities throughout the state in recent years. The company has asked state regulators to be able to charge the same rate for all of its utilities statewide.

The two-step increase would take a 5,000 gallon-per-month water bill in Crescent Oaks from $56.55 per month to $94.82.

Current water rates are already higher than any other water utility in the area, according to Dan Jackson. Jackson, a consultant with Plano-based Economists.com, was hired by the city to conduct an analysis of Monarch's rate request.

Jackson told the council that Midway, in its current rate structure, runs about a 10 percent profit each year. That profit comes even after Monarch takes its management fee, which was high in relation to the market, Jackson said.

The gap means customers in Oak Point could be subsidizing the rates of customers elsewhere in Monarch's system. From east to west, Texas is widely diverse in both its availability of water and in the cost to deliver it, Jackson said.

Jackson also told the council that he received no other information to justify the burden of the rates. Because water is a basic human need, Monarch is obliged to show when "a burdensome rate increase is necessary to meet their financial obligations," he said.

From what information the company provided, there was no such justification, Jackson said.

Residents asked the city council not only to reject the rate increase but also to help them find another water supplier.

Former mayor and current ratepayer Dave Klewicki said the city was prepared to purchase Midway at the time he and others were voted out of office.

"The original [Midway] owner, Ralph Tinsley, had passed away and his daughter did not want to continue to run the company," Klewicki wrote in an e-mail following Monday night's public hearing.

The new council decided that the city did not want to pursue the purchase.

Residents reminded the council that Monarch had asked for and received a rate increase three years ago, promising improvements in the system. The company got the rate increase through a deal brokered with another former city administration, but the residents say they have not seen many improvements.

"I looked at my meter and it doesn't look any smarter now than before," Limmer said.

Although some council members and some residents said this rate fight was separate from the old state law that allowed this new twist in utility ownership, Klewicki urged others to get involved.

In addition to the rate increases, Monarch's parent company, SouthWest Water Co., has applied to TCEQ to merge all of its smaller utilities into one consolidated company. SouthWest merged with J.P. Morgan Asset Management and Water Asset Management LLC in September 2010 and is now a private, investorowned utility with systems in Texas, Alabama, California, Colorado, Georgia, Mississippi and Oklahoma.

"This is an unnatural situation," Klewicki said. "We need to work with the Legislature to change the law."

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her email address is pheinkelwolfe@dentonrc.com