Buying and developing land in Texas involves much more than having the intrepid spirit to make the purchase and enough capital for the down payment. Access to water is one of the most important factors to consider when deciding whether to invest in land ownership in Texas. Not in the traditional sense of being near a lake, a coast, or a river, but rather in the industrial sense of being near a utility company who can supply you with a safe and consistent source of drinking water. While this may not seem like a significant hurdle in the modern era, it can be more complicated than you might expect. Under Texas law, an investor-owned utility (an “IOU”) cannot provide any retail water service to the public without first getting a certificate of convenience and necessity (a CCN) from the Public Utility Commission of Texas (the PUC). This means that if an IOU does not have a CCN to provide water services to your land, then you will be unable to get any service from it, even if it provides water to your next-door neighbor, until it gets an amendment to its service area approved by the PUC. This amendment process can take several months and is expensive for the IOU, which can make an IOU resistant to amending its service area.
What is a CCN?
A CCN is an order issued by the PUC granting an IOU the exclusive right to provide retail water and sewer services to an identified geographic area. These areas are referred to as “certificated service areas.” According to the PUC, there are three types of certificated service areas:
- Bounded Service Areas: A certificated service area with closed boundaries that often follows recognizable physical and cultural features such as roads, rivers, streams and political borders.
- Facilities + 200 Feet: A certificated service area represented by lines on a map, plus a buffer of a specified number of feet (usually 200 feet). The lines on a map normally follow along roads and may match pipelines or facilities underground.
- Facilities Only: A certificated service area for a "point of use" that covers only the customer connections at the time the CCN is granted. Facility Only service lines normally follow along roads and may match pipelines or facilities underground.
What Does a CCN Do?
A CCN essentially grants a mini-monopoly to its holder. The IOU that holds a CCN has the exclusive right to provide retail water service within its certificated service area. This means that other retail utility providers are strictly prohibited from providing water services within that specific area, and residents and landowners within the area can only get retail water services from the CCN holder. However, it is possible for CCNs to overlap. The holders of the CCNs must agree to allow their certificated service areas to overlap, and an area of dual certification is then created. Areas of dual certification are very advantageous to the people whose land lies within the overlapping areas, as they will have the choice of which utility to request service from, rather than being stuck with only one option. However, areas of dual certification are rare, as CCN holders are very territorial.
Who Needs to Have a CCN?
Besides Investor-Owned Utilities (IOUs), retail Water Supply Corporations (WSCs) and affected counties are required under Texas law to obtain a CCN before they are able to provide retail water service to the public in any manner. Once a utility company acquires a CCN, they are required by the Texas Water Code to provide continuous and adequate service to their certificated service area. This means that if you purchase land within a utility company’s certificated service area, the company is legally obligated to provide your land with water services, subject to certain limitations. Government entities such as municipalities and municipal utility districts (MUDs) are not required to have a CCN unless the district or municipality wishes to provide retail water service in an area that is already being lawfully served by another CCN holder. However, these government entities may still decide to obtain CCNs in order to establish their territory and protect against encroachments by other utility companies. In this sense, the right to provide water services in Texas is “first come, first serve.”
Certain small utility companies may be exempt from the CCN requirement. To become registered with the PUC as an “Exempt Utility,” a utility must provide retail water service to less than 15 potential connections, and the connections must not be located within another utility’s certificated service area.
How are YOU Affected by CCNs?
If you are looking to live on or to own land in a highly populated area of Texas, then chances are you won’t need to worry about CCNs. It is all but guaranteed that either a local district, municipality, or utility company has a long-established certificated service area that encompasses the land you are interested in. However, Texas contains over 260,000 square miles, and less than half of this area is serviced by CCN holders. The vast majority of this unserved land lies in the far western and southern regions of the state, as well as in th
nt struggle ahead of you when it comes to obtaining a dependable source of retail drinking water. Your alternative is to drill your own water wells.
CCN holders can potentially be very inflexible and difficult to work with if your land does not fall within their certificated service areas. For example, you may purchase land that is not within any utility company’s certificated service area. However, your neighbor’s property does fall within such an area, and therefore receives water from a CCN holder. You can request that the CCN holder provide your property with water service, and they may agree to do so. Beware however: even if the utility company’s certificated service area ends exactly at the borderline between you and your neighbor’s land, because the company’s CCN does not cover your property, they have no legal obligation to supply you with water. Some utility companies may agree to change their CCN so that it now includes your land, but just as many will simply reject your request. For this reason, it can be potentially disastrous to purchase land in Texas without first checking to see if the property is serviced by a utility company with a CCN.
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e Panhandle. This is likely because although there is a massive amount of land in these regions, most of it is undeveloped. Therefore, while it is probable that you can purchase a large piece of Texas land in these parts of the state, you may have a significacontact The Jones Law Firm PC at (512) 391-9292 or at wjones@thejoneslawfirm.com.