CORPUS CHRISTI — In the fall of 2023, the Corpus Christi City Council voted 8-to-1 to double water rates for large-volume industrial users. The decision, based on a city-commissioned study showing industrial customers had long underpaid for water service, prompted a formal protest from major energy companies that could result in a multimillion-dollar refund.

Valero, Citgo, and LyondellBassell protested the rate increases to state regulators and demanded that Corpus Christi refund almost $80 million of their water-rate increases. The companies, which buy water directly from the city’s utility to operate facilities outside city limits, formed an industry group called Affordable Water for Corpus Christi to challenge the new rates. They argued that their facilities do not own, maintain, or benefit from the city’s full water distribution infrastructure and should therefore receive a discount—a claim city officials reject.

Corpus Christi had sold water to a handful of large industrial plants at a discounted rate for at least a decade. City rate models indicate that residents and businesses paid more than $100 million to subsidize water for energy companies during that time. In 2016, large-volume industrial customers outside city limits paid about $2 per 1,000 gallons of water, while many residential and commercial customers inside the city paid three times that rate. In 2023, the city commissioned a study to assess whether water rates accurately reflected the cost of service across customer types.

The 2023 study found that large-volume industrial users were under-recovering their cost of service by $15 million annually, while smaller commercial businesses were over-paying by about $9 million annually. Based on those findings, the council approved the rate hike, which raised Valero’s annual water bill from $9 million to $18 million. City Manager Peter Zanoni defended the move, saying, “The large industry is not paying their fair share.” 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 multi-billion dollar corporations and pay their water bills.”

City Council member Sylvia Campos supported the rate change, stating, “They know very well how long they’ve gotten away with not paying their fair share.” Campos also expressed concern about a potential refund, saying, “I’m holding my breath,” and adding, “Let’s hope that we don’t have to pay them back.” Council member Roland Barrera cast the sole vote against the increase. “My objection was to the drastic increase that we implemented one year to another,” he said. Barrera warned, “If we want to remain a manufacturing community, which we’ve been for over 70 years, we have to have some level of predictability.”

The dispute has moved to the state level. A public hearing before the State Office of Administrative Hearings in Austin is scheduled to take place over three days. An administrative law judge will issue a recommendation, but the final decision rests with the Public Utility Commission of Texas, a panel of gubernatorial appointees. Public Utility Commission staff have already reviewed the case and recommended a refund of $6 million. The industry coalition offered to settle for $4 million, but Corpus Christi officials declined the offer.

Why It Matters

The outcome could reshape how Texas cities charge major industries for water—a critical issue as the state faces long-term supply challenges. Texas’s latest water plan, released in May, estimated it could cost $174 billion to avoid water shortages over the next 50 years. With funding identified as the primary barrier to meeting future needs, cities like Corpus Christi are under pressure to ensure water rates fairly reflect infrastructure costs and avoid placing disproportionate burdens on households and small businesses.