North Texas Municipal Water District
Frequently Asked Questions About the North Texas Municipal Water District
Posted December 2016
- What is the North Texas Municipal Water District (NTMWD)?
The North Texas Municipal Water District formed approximately 65 years ago in response to concerns of diminishing groundwater in the region. Ten original member cities, including the City of McKinney, formed the district to provide potable water to its citizens in lieu of each city constructing and operating its own water and wastewater treatment plants.
- Who are the member cities of the NTMWD?
The original 10 member cities are Farmersville, Forney, Garland, McKinney, Mesquite, Princeton, Plano, Rockwall, Royse City and Wylie. Subsequently, Richardson, Allen and Frisco joined the district as member cities.
- What are contract cities?
Contract cities receive water and/or wastewater services from the NTMWD. These cities are not bound by the written agreement governing member cities, and contract cities have a separate agreement with the NTWMD.
- What are the differences between a contract city and member city?
The primary difference between contract cities and member cities is their rate structure. Contract cities pay five cents more per 1,000 gallons of treated water than member cities and are not subject to an annual minimum usage charge.
- What is Take or Pay?
Take or Pay is the commonly used phrase for a contract provision in the member cities’ contract requiring a member city to pay annually for the amount of water which is the greater of: a) its highest historic annual usage or b) its current annual usage. The intent of this contract provision is to ensure a guaranteed revenue stream to the district to provide financial stability. In effect, once a city establishes its highest historic annual usage, it continues to pay at that rate irrespective of lower usage in subsequent years. In other words, if the city does not “take” or use the water, it must still “pay” for that amount of water represented by its highest historic annual usage.
- What is the Public Utilities Commission?
The Public Utility Commission (PUC) of Texas is a state agency that regulates the state's electric, telecommunication and water and sewer utilities, implements respective legislation, and offers customer assistance in resolving consumer complaints.
- Why are Plano, Garland, Richardson and Mesquite concerned with the current agreement between the member cities and the NTMWD?
Four member cities have filed a petition with the PUC to review the current rate structure contained in the member city agreement with NTMWD. These cities assert these rates are “against the public interest and inconsistent with conservation.” These cities further allege they are paying for substantial amounts of water they are not using but must continue to purchase under the current Take or Pay provision in the member city agreement.
- Why isn’t McKinney joining these cities to fight water rates as well?
It is important to point out the four cities are not fighting residential / commercial customer water rates. Rather, they are appealing to the PUC to determine whether the current Take or Pay provision in the member city agreement is a fair way to spread the costs of operating NTMWD’s regional water system. Effectively, the Take or Pay methodology requires cities to pay for their highest year of water consumption, regardless of whether they use it in subsequent years. The water rates charged to the cities are a function of capital investment needed to grow the regional water system to meet the demands due to rapid growth in our region, as well as for system maintenance, repair and replacement of equipment, pumping and water treatment. As a member city of the NTMWD, McKinney keeps a close eye on the water rates charged to it by NTMWD and the underlying costs associated with them.
- Then what is the real issue?
The purpose of the Take or Pay methodology, adopted many years ago, is ostensibly to spread the capital costs among all cities, regardless of where a given city is in its growth cycle. For growing cities, the capital costs – much of which may be attributed to their growth – are spread among all the members. For mature cities, the benefit of capital improvement has less perceived value. Moreover, Plano, Garland, Richardson and Mesquite contend their new water conservation efforts have permanently changed their usage and the current methodology is no longer well-suited to their usage patterns.
- What can the PUC do about the agreement between the member cities and the NTMWD?
With the filing made by the four cities, the PUC will initially rule on whether it has the legal authority to review and determine the current rate structure under the member cities’ agreement. If it has the legal authority to hear the case, the PUC will make a determination as to how to best adjudicate the contract and utility rate issues raised by the four cities under Texas law.
- How is McKinney planning on responding to this filing with the PUC?
McKinney has been actively involved in recent meetings with the NTMWD and all member cities to resolve the issues being raised by the four member cities. Unfortunately, those meetings did not produce results satisfactory to all member parties. McKinney is currently reviewing all options available and will be deciding on a course of action in the near future.