A judge will hear arguments this week after industrial users protested a rate hike by the city, which said residents and businesses were unfairly subsidizing industrial rates.
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For at least a decade, Corpus Christi sold water to a handful of large industrial plants at a steeply discounted rate, according to documents and interviews with city officials. Residents and businesses paid more than $100 million to subsidize water for some of the world’s richest energy companies, the city’s rate models show.
Three years ago, Corpus Christi doubled the companies’ water rates in an effort to correct the imbalance. But the companies, including Valero, Citgo and LyondellBassell, protested to state regulators, sparking a legal battle that will come to a head today as a public hearing over the matter begins in front of an independent state agency in Austin.
The outcome will have major implications for Corpus Christi, which is facing an unprecedented water supply crisis, as well as the energy companies that have long dominated its economy. If the companies prevail, Corpus could be forced to refund them tens of millions of dollars even as it desperately seeks funding for new water projects and raises rates on the rest of the region’s consumers.
“I’m holding my breath,” said Sylvia Campos, a City Council member who campaigned on raising industrial water rates. “Let’s hope that we don’t have to pay them back.”
Valero, Citgo and LyondellBassell, which buy water directly from Corpus Christi’s water utility to operate oil refineries and petrochemical plants just outside city limits, commented through an industry group they have formed called Affordable Water for Corpus Christi.
“The issue before the Public Utility Commission is whether the City’s rates were developed using a fair, evidence-based and legally compliant methodology,” said Heath Armstrong, a lawyer for the group.
Campos responded: “They know very well how long they’ve gotten away with not paying their fair share.”
The industry group’s arguments for lower water rates are spelled out in thousands of pages of documents filed with the Public Utility Commission of Texas, a state regulator headed by a panel of gubernatorial appointees. In one filing, a consultant wrote that the group’s members should get a discount for water because they shouldn’t have to pay for “distribution infrastructure they do not own, maintain, or benefit from in the same way as inside-city users.”
Kamil Taras, the city’s assistant director for finance and administration, said that’s not the case. Industrial facilities benefit from the entire water distribution system that the city’s water utility manages, he said, not just the portion outside city limits that connects them to its treatment plant.
“They just want to pay for the one single line that they’re connected to, and that’s it,” Taras said, referring to the companies’ argument. “It doesn’t work like that in the municipal water world.”
Earlier this year, the companies demanded that Corpus Christi refund almost $80 million of their water-rate increases, according to a recent city memo that summarized the utility commission filings. The commission’s staff then looked at the evidence separately and recommended a refund of just $6 million, the city memo explains.
Taras said the industry coalition led by Valero recently offered to settle the case for $4 million, but the city chose not to settle and instead to go to the next step: a public hearing that will resemble a trial at an agency called the State Office of Administrative Hearings.
At that hearing, which will take place over three days this week, Corpus Christi officials and the companies will argue their respective positions in front of a state official called an administrative law judge. The judge will then make a recommendation, but the final say rests with the utilities commission.
Peter Zanoni, Corpus Christi’s city manager, said he hopes the city can preserve the rate increases because “the large industry is not paying their fair share” for water.
He added, “It’s not fair to the retired family or the hardworking family that might have one parent and two, three jobs for them to support multibillion-dollar corporations and pay their water bills.”
Water systems face funding shortfall
Even as they’re being challenged on the rate increases they already implemented, Corpus Christi officials say they’ll have to continue raising rates to pay for a host of new water projects. It’s a common need across Texas: The state’s latest water plan, released in May, estimated it could cost Texans $174 billion to avoid water shortages in the next 50 years.
“The only thing that’s keeping Texas from meeting its water needs is money,” Republican state Sen. Charles Perry, chair of the Senate Water, Agriculture and Rural Affairs Committee, said during a hearing in May.
Perry made it clear that many communities need to be prepared to pay a lot more for water, maybe even “double what we’re paying. But that’s the cost of new water in Texas,” he said.
Source: Neena Satija, Texas Newsroom, and Dylan Baddour, Inside Climate News
Photo Credit: Former Paxton aide and DOJ official Aaron Reitz speaks with media following a debate hosted by the Republican Attorneys General Association (RAGA) at the Grenada Theater in Dallas on Feb. 17, 2026. Shelby Tauber for The Texas Tribune
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