Industrial companies participating in a voluntary fee program won’t pay surcharges — if they were implemented — during a Level 1 water emergency in Corpus Christi.
It’s a question that “has come up quite a bit” and has been reviewed by the legal department, according to Nick Winkelmann, chief operating officer of Corpus Christi Water.
The conclusion: The voluntary fee program allows for exemptions from potential surcharges in a water emergency, he said.
Curtailment and other water restrictions, however, still apply, officials have said.
Under the drought surcharge exemption program, high-volume water users — largely industrial — pay an extra 31 cents per 1,000 gallons of water year-round, with revenue going to development of new water supply projects.
In return, participating companies are not required to pay surcharges that may be assessed to other customer classes — which do not have access to the fee program — in various drought stages, including a water emergency.
It’s a different circumstance than what some City Council members had previously thought. The point was raised March 31, as council members discussed whether to adopt optional surcharges on city customers’ water bills, should Corpus Christi eventually enter into a water emergency.
A water emergency is when the city is projected to be six months from water supply not meeting the demand.
New projections on whether the city is likely to enter into a water emergency — and, if so, when — are expected to be unveiled in the upcoming weeks.
No decisions have been about some of the specifics of response to a water emergency — including whether to endorse applying surcharges to water bills, which the council has as an option to do under the city’s drought contingency plan.
Those, like a number of provisions, are expected to be determined by the council before the end of April. The choices made by the council would not go into effect unless a water emergency was declared.
As a workshop, the March 31 meeting was primarily intended for information to take into consideration for when it comes time to vote.
City Councilman Gil Hernandez suggested that communication previous to the meeting had indicated a message different than the one in current discussion — that the surcharge exemption program was applicable in drought stages 2 and 3, but not during a water emergency.
He wasn’t opposed to the program, Hernandez said, but added that “it looks pretty stupid on our part, as a city writing regulations, that we exempt people when we actually need it in stage 4 or water emergency.”
“I’m not saying they’re not going to be good partners or anything like that, but there’s always some outlier,” he said. “It’s kind of like me paying for a monthly fee so if I get pulled over for speeding, then, OK, I paid my monthly fee, so I’m not going to pay this fine.”
There isn’t language in the drought contingency plan, the city’s official document guiding policies and procedures in drought, stating the program would be suspended during a water emergency.
It shows a list of optional surcharges for different drought stages for residents, commercial businesses, irrigation accounts, wholesale customers and non-exempt large-volume users.
A general agreement included in City Council documents from 2018 does not specifically state drought stages in which the program would or wouldn’t be applicable.
The drought surcharge exemption program, generally speaking, is controversial.
It has been praised by supporters as a valuable revenue stream backing efforts for new water supply, and denounced by opponents as a mechanism giving breaks to industrial companies not afforded to other customer classes, residential and commercial.
The drought exemption surcharge fee
Surcharges have never been assessed for any Corpus Christi Water customers, although the city has had the option to implement them since Stage 2 drought was declared in March 2024.
The fee was 25 cents in 2018, when the program was created, and bumped up to 31 cents in 2025, according to City Council documents.
Revenue so far generated stands at about $30 million, officials have said, with funds currently being used to pay interest on state loans approved for development of the Inner Harbor desalination plant.
About 10 companies pay the voluntary fee, City Manager Peter Zanoni said in an April 3 media briefing.
Bob Paulison, executive director of the Coastal Bend Industry Association, has said in the past that the drought surcharge exemption fee is “a win for the city.”
The fee can’t be reviewed and updated by the council more than every five years, according to the city’s drought contingency plan, and the program cannot be ended without five years’ notice.
Companies that are not participating cannot opt into the program once Stage 1 drought is declared, the plan shows. The city entered into Stage 1 drought in 2022.
In an April 2 email to the Caller-Times, Paulison wrote that “companies are evaluating everything they do plant-wide and adjusting activities and processes to reduce the amount of water they need to operate.”
“At present, they remain optimistic that the steps they’re taking (reducing water required and supplementing water supply through implementation of effluent reuse and other strategies) will enable continued operations through the water shortage,” he wrote.
Potential surcharges
The drought contingency plan lays out potential costs of optional surcharges for other customers, correlated with different stages of drought severity, beginning in Stage 2.
Stage 2 drought is called when the combined capacity of Lake Corpus Christi and Choke Canyon Reservoir dip below 30%.
Surcharges are intended to act as economic incentives to reduce water usage, but they also help make up for the revenue lost from water restrictions, Winkelmann told the council on March 31.
Listed in the plan for optional surcharges are residential and commercial accounts, as well as industrial companies that are not covered under the drought surcharge exemption program.
Surcharges would work by applying an extra cost for each 1,000 gallons of water used over a certain allocation — the volume of which will ultimately be determined by the City Council, officials have said. That’s because the council has the power to amend the current document.
Under the plan, residents could be charged an additional $4 for every 1,000 gallons used over 7,000 gallons per month, and commercial businesses could be assessed $4 for every 1,000 gallons used over 55,000 gallons per month.
Large-volume users that do not participate in the drought surcharge exemption program could be required to pay $12 more for each 1,000 gallons over roughly 13 million gallons, it states.
Revenue
City Councilwoman Sylvia Campos referenced in the March 31 meeting a proposed Fair Water Amendment.
The effort aims for voters to decide whether to eliminate or continue the drought surcharge exemption fee.
The first step needed to kick off the process is collecting the signatures of at least 5% of voters, according to organizers.
That would equate to about 9,700 voters, according to county records from the 2024 election.
Isabel Araiza, among those involved in the effort, wrote in an April 3 message to the Caller-Times that signatures “are trending to hit a goal of (15,000).”
“A dominant theme among those I’ve talked to, they note the people have been making all the sacrifices,” she wrote.
There’s discussion about the possibility of raising the fee. City Councilman Mark Scott suggested on March 31 that the city consider having “a conversation that when it gets closer to Level 1 (water emergency), (the fee) goes from 31 to 35 to 40.”
Staff has pointed out that the fee — at least under the in-place agreement — doesn’t increase with severity of drought stage.
Paulison told the Caller-Times on April 1 that he had made a note of Scott’s comment in the March 31 meeting and planned to discuss it with large-volume users.
“In the context of the water emergency, it’s the first time it came up,” he said.
Staff is working on a financial analysis of the drought surcharge exemption fee, according to Zanoni.
It compares the “funding benefit with the drought exemption surcharge fee over the surcharge fee, when considering certain variables to include 10 years of exemption payments,” he wrote in a message to the Caller-Times on April 3.
In a water briefing, Zanoni stated that the analysis showed “nearly a break even on that comparison … with more money coming in if we had the surcharge.”
However, he believes that in the longer-term outlook, the voluntary program is “a better financial gain” as opposed to companies paying “a higher amount for a limited amount of time.”
Curtailment
Although large-volume water users participating in the program are exempt of potential surcharges, they would not be exempt from curtailment in a water emergency, city staff said.
In part, that’s because percentage of water use curtailment, for all customer classes, hasn’t yet been approved by the council.
However, it would be no lower than 5%, officials have said.
It was unclear as of the morning of April 3 what proposed curtailment for the industrial sector may look like.
There were no proposed baselines or possible water allocations disclosed in the March 31 meeting for the 23 water connections that link to industrial customers.
It was not immediately clear how many companies that may represent.
Some companies may have more than one connection, staff has said.
Each company would have its own baseline and allocation, according to officials, because of the variance in water use company by company, as well as seasonal fluctuations.
It’s proposed that water allocation for industrial customers take into account water consumption from 2022 to 2024, while excluding the lowest month, Winkelmann told the council.
Residential customers are recommended by staff to all have the same blanket baseline — a “starting point” of 7,000 gallons per month. Commercial customers’ baselines are proposed to be based by meter size, the March 31 presentation showed.
Enforcement
Enforcement mechanisms are also unclear.
There are fines that could be imposed for violations of any water emergency rules — as much as $500 per day — or with a second “conviction” on the Class C misdemeanor, shutting off a water connection, according to the presentation.
Because of the industry’s limited number of connections, staff can review consumption “more closely” and ensure compliance, Winkelmann told the council.
Hernandez questioned whether there would be no penalties for potential curtailment noncompliance by industrial customers.
“Are you looking to cut them off if they don’t follow your rules?” he said. “Are you going to shut off their water? I don’t think so.”
Turning off valves to industrial operations would be a decision that would need to be made with great care, Zanoni said April 3.
“You’re dealing with plants that are handling highly explosive materials,” he said.
Responding to a question about what incentivized industrial companies to curtail, Winkelmann referenced projects in process that would allow Valero and Flint Hills to use effluent for some of their operations.
The companies “are expending significant amounts of capital money supported by their executive branches of their businesses to be able to reduce their demand,” he said.
“I can’t speak enough about those contracts,” Winkelmann said. “Those contracts are going to help our situation long into the future.”
Kirsten Crow covers city government and water news. Have a story idea? Contact her at kirsten.crow@caller.com.
Consider supporting local journalism with a subscription to the Caller-Times.
This article originally appeared on Corpus Christi Caller Times: Surcharge exemption remains for industry through water emergency
Reporting by Kirsten Crow, Corpus Christi Caller Times / Corpus Christi Caller Times
USA TODAY Network via Reuters Connect
