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Investor-Owned Utilities

Investor-Owned Utilities (IOUs) are private enterprises acting as public utilities. Examples may range from a family that owns a well on their property that provides retail water service to customers or large companies that provide retail water or sewer service to customers in multiple counties across Texas.

PUC Jurisdiction Statement

PUC has original jurisdiction over rates and service policies of Investor-Owned Water and Sewer Utilities (IOUs) outside the corporate limits of a city.

Inside the corporate limits of a city, the city has original jurisdiction to set the IOU's rates, unless the city has surrendered its jurisdiction to the PUC.

If an IOU applies to a city to increase its retail rates charged to customers located inside a city's corporate limits, then the IOU can appeal the city's decision to the PUC.

About Rates

There are four different rate filing packages for IOUs in Texas. The utility's classification (Class A, B, C or D) determines which application form the utility must use to apply for a rate increase with the PUC.

Rate Application and Notice Forms

IOU Classifications

To determine the classification of an IOU, the number of retail water connections or taps is used. If the utility provides only retail sewer service, then the number of sewer connections or taps is used to determine the classification of the utility.

Investor-Owned Utilities
Class A 10,000 - greater
Class B 2,300 - 9,999
Class C 500 - 2,299
Class D 0 - 499

IOU Requirements

Certificate of Convenience and Necessity (CCN)

Chapter 13 of the Texas Water Code requires:

  • A water utility providing retail water service to the potential for 15 or more customers for compensation to obtain a water CCN.
  • A sewer utility providing retail sewer service to one or more customers for compensation to obtain a sewer CCN.

Rate Setting

Prior to changing rates, an IOU must submit a rate application for review, approval, and/or modification by the PUC.

The challenge for IOUs is to design rates that cover their regular expenses and that allow for the opportunity to earn a reasonable rate of return on their investment without undercharging or overcharging customers.

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Annual Report

Each IOU is required to file an annual report no later than June 1 for the previous year ending December 31. The annual report is used to monitor utility earnings and should reflect a 12-month period ending December 31. One report should be completed for each individual CCN. IOUs should file the report based on the utility's classification from Class A to Class D.





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