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Challenges Ahead for Rural Water Companies in Texas

As an attorney, I have represented rural water companies in Texas for years. I have prepared their corporate documents, assisted with government grant and loan applications, and negotiated non-standard and subdivision service contracts, among other things. I have also served as an officer and as a director on the board of a rural water company. Based on my experiences, I believe that many of Texas rural water utilities are struggling, and in some cases, may be headed for a crisis.

Rural water companies (also called community water systems) are, along with rural electric co-operatives, the backbone of American rural life. The U.S. Congressional Budget Office estimates that nationally, as of 1999, roughly 54,000 publicly or privately owned community drinking water systems provided drinking water to some 250 million people. Here in Texas, water companies are regulated by the Texas Commission on Environmental Quality (the “TCEQ”), and through the TCEQ, the Environmental Protection Agency, under the authority of the federal Safe Drinking Water Act. The problem begins with the fact that many of the rural water companies in Texas are so small. In many cases, the board of directors consists of a small group of farmers or ranchers or local residents, who are almost always great people, but who do not always have the tools or the background to deal with the increasingly complex technological and regulatory requirements imposed on all water companies, regardless of size.Here in Texas, rural water companies get tremendous technical and legal assistance from our state association, the nonprofit Texas Rural Water Association (“TRWA”). Notwithstanding this help, the diseconomies of scale and the increasing cost and complexity of complying with all the state and federal regulations are taking their toll on rural water companies.

The answer, I believe, is going to be in smaller companies banding together to create county-wide or even regional co-operatives. Initially, these co-operatives could use their buying power to save their members money on chemicals and other supplies. Ultimately, the co-operatives would jointly invest in treatment plants and other infrastructure needed to produce water.

This approach is not without controversy. Many of the small water companies in Texas prize their independence and local control above all else. They will find, however, that their independence comes with an increasingly higher price tag, as the cost of producing potable water and the cost of compliance with ever increasing numbers of federal and state regulations continues to grow. They will reach a point, in the not-too-distant-future, where the fees they must charge to break even exceeds what their communities can afford to pay for water. That time is not far off.