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Water and sewer utilities require funds to provide services to their customers. Capital improvements are funded through various sources, including surcharges from customers in certain situations. Daily operations are funded by charging customers a rate. Typically, water utilities charge a base rate and gallonage charge. The base rate covers fixed costs and the gallonage charge covers the utility's variable expenses.



IOU Rate Case Types


An IOU that purchases water or sewage treatment may include a provision in its tariff to pass through to its customers changes in such costs. The provision must be approved by the PUCT in a rate proceeding and must specify how the change in the cost is calculated and how it affects customer billings. The utility must submit documentation supporting the increase in charges.


An IOU may collect a surcharge over a specified time period to recover the actual increase in costs for sampling, inspection fees, and other governmental requirements that are beyond the utility's control but only after the utility has been authorized in writing by the regulatory authority with jurisdiction over its rates and services.


IOUs located outside the corporate limits of a city are required to complete and file a rate filing package with the PUCT to seek approval to change their retail water or sewer rates and service policies.

IOUs may file once per calendar year unless the IOU is experiencing financial hardship or to increase the rate of a newly acquired system.

There are several versions of the rate application and notice forms available. The application and notice form that corresponds to your utility's classification as either a Class A, Class B, Class C or Class D utility, should be used. The complexity and supporting documentation required also vary depending on the utility's classification.


A Class D utility (fewer than 500 active taps or connections) may adjust its base rate and gallonage charge up to five percent using the Class D application form. The utility may not increase rates more than once per calendar year and not more than four times between comprehensive rate proceedings.

f the utility is making its fifth consecutive request for an annual rate adjustment, or if the utility needs a rate increase that is more than five percent, then it will need to file the more detailed application package and notice forms used by Class C utilities.


  • Introduction of New Customer Classes;
  • Cash Needs Method;
  • Phased and multi-step rate changes; and
  • System Improvement Charges (SIC).





A tariff is an IOU's schedule that contains all rates, tolls, and charges stated separately by type or kind of service and by customer class. The tariff also states the IOU's service policies, rules and regulations stated separately by type or kind of service and by customer class.

The PUCT has model water and sewer tariff forms for use by IOUs in Texas. These forms should be used when an IOU applies to change its rates or to obtain or amend a CCN.


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