North Texas Municipal Water District
Frequently Asked Questions About the North Texas Municipal Water District
Posted December 2020
Negotiations with the 13 member cities to amend the existing contract with the North Texas Municipal Water District (NTMWD) began in 2016. Four petitioning cities (Plano, Richardson, Mesquite and Garland) filed a rate case with the Public Utility Commission of Texas (PUCT) in December 2016 against the NTMWD, which directly affected the nine remaining member cities. The petitioning cities wanted to end the long-standing method of how the “Take or Pay” water pricing model is calculated.
Negotiations between 13 member cities continued during PUCT hearings until an agreement was reached in September 2020. The NTMWD and all 13 member cities approved the agreement and the settlement in October 2020.
1. What is the North Texas Municipal Water District (NTMWD)?
The North Texas Municipal Water District formed approximately 70 years ago in response to concerns of diminishing groundwater and cyclical droughts 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.
2. 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.
3. What is in the new settlement?
The new agreement institutes a revised take-or-pay system based on a member city’s 5-year rolling average usage. The new rate model will be phased-in during the next 13 years.
4. How is this agreement beneficial to McKinney and the other member cities?
The agreement recalibrates the relationship among the member cities and the NTMWD to prepare for growth in the coming decades. It allows non-growth cities to gradually move toward rolling average model and allows growth cities like McKinney to better control their destinies with respect to water usage and conservation.
5. Will residents see an increase to water bills?
Water rates are set by individual cities for their own retail distribution systems. A rolling average calculation would tend to result in higher wholesale water rates for growing cities and lower rates for non-growth cities. However, rates are determined by many factors, and steps toward conserving water usage, among others, will likely offset any increase in wholesale rates over time.
6. What was the previous Take or Pay system under the former agreement?
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. Under the new system, that usage will be determined over a 5-year rolling average.