### TEXA S C OU R T OF A PPEAL S, THIR D DIST R ICT , AT AU STIN

NO. 03-04-00574- CV

Be xa r M e tr opo lit an W at e r Di st r ic t, App e lla nt

v. Te xa s C om m iss ion on En vir onm e nt al Q ual it y, Ci tyof Bul ve r de and Guadal upe-Blan co RiverAuthority, Appellees

F ROM THE DISTRICT CO URT OF TRAVIS COUNTY , 250TH JUDICIAL DISTRICT NO. GV302775 , HO NORAB LE DARLENE B Y RNE, JUDGE P RESIDING
O P I N I O N
For an applicant to obtain a certificate of public convenie nce and necessity for water utilit y service , the Texas Commi ss i o n on Environmental Qua lity must “ensure ” that the a

pplicant (i ) p os se sse s the fi na

nc ia l, mana g e ri a l, an d tec hn ic a l c a pa bil ity to p ro vid e c on tin

uo us and a de qu a te service , (ii) i s capa

ble of providing drinkingwater that meets spec ified statutory require ments, and (iii) has ac cess to an adequate supply of water . Tex. Water Code Ann. § 13.241(a) -(b) (West 2000). Th e qu e sti on

pr e se nte d is wh e the r a

mun ic ipa lity as app lic ant m ay de mon str a te thi s c a

pa bil ity throug h contra cts and interloc al ag ree m en t s wi t h a rive r authority that owns or oper ates water distribution and treatment s y s t em s throug hout a river basin. Be x ar Me tropolitan Water District (“B exarMet”) soug ht judicial rev iew of the Commi ssion’s approva l of the City of B ulverde ’s application for a ce rtificate , afte r the Commission i ssued the ce rtificate ag ainst the rec ommendation2

of an a dminist rative law judge (“A L J ”). The district c ourt denied Be x arMe t’s claims and a ffirme d the Commiss ion’s order
.

I n four i s s u es , Be x ar M et ap p ea l s , co n t en d i n g t h at , b y i s s u i n g a c ert ificate to Bulverde, the Commiss ion violated the wate r code and its own rules. We hold that the Commissi on acte d within its authority

when it g rante d a ce rtificate to Bulver de. We there fore aff irm the judg ment of the dis tr ic t c ourt . F ACTUAL AND P ROCEDURAL BACK GR OUND

On J une 28, 2000, the City of B ulverde , a new

city located in a prime gr owth corr idor north of S an Antonio, filed an application for a certificate t o provide water utility service in western Comal County . I n addition to its incorporate d limit s, Bulver de soug ht to serve its extra-terr itorial jurisdiction and some outly ing a rea s. To provide a firm supply of treated wate r, B ulverde contra cted with Guadalupe -B lanco River Authority (“G BRA” ) t o join the Western Cany on L ake T reated Water Supply Project. The operating ag ree ment betwee n GB RA and Bulve rde obligates GB RA to desig n, construct, f

inance , operat e an d m ai ntain the wate r distribution sy stem to provide treated wate r on behalf of B ulverde
. Be x arMe t, a wate r conse rvation district and municipal c orporation created by the Texas L eg islature in 1945, re quested a hear ing on Bulve rde’ s application, and on N ovember 3, 2000, Be x arMe t filed an a pplication to amend its cer tificate to provide water utility service to an ar ea that overla

pped with B ulverde ’s re quested ser vice a rea . Af te r c on so lid a tin g the tw o a pp lic a ti on s, a t

hr e e -d ay he ari ngon

the me ri ts
c omm e nc e d o n Jun e 11 , 2 00 2, be fo re an A L J. Spe c if ic a lly , th e AL J found

tha t:3

• Bulve rde, by

itself, does not p ossess the financ ial, manag eria l, and technic al capa bility to provide continuous and a dequate service ;

• Th e B ulv e rd e /G B RAc on tr a c ts re ve a l an arm s- le ng th re latio ns hip wi th s e pa ra te rig hts and duties betwee n Bulve rde a nd GB RA;

• A n on -c e rt if

ic a te ho lde r i n G B RA ’s po sit ion wo uld no t be su bje c t to the same e nf or c e me nt a

uth or ity fr om the Co mmi ssi on

or the a tto rn e y

g e ne ra l a s a cer tificate holde r would be;

• Bulve rde f

ailed to ade quately

demonstrate that it would not be fea sible to satisfy so me or a ll o f i ts w a te r n e e ds fr om e xistin g uti lit ie s;

• Bu l v er d e d i d s a t i s f y s o m e o f t h e s t at u t o ry

re qu i re m en t s fo r r ec ei v i n g a cer tificate if G BRA’ s capa

biliti es ar e also take n into consideration;

• I n th e lon g run , B ulv e rd e ’s a c c e ss t hr ou g h G B RAto C anyon L ake wate r i s su pe ri or to B e xarMe t’ s p ro

je c te d w a te r s up pli e s;

• B a se d o n G B RA ’s lon g his tory of su c c e ssf ull y pr ov idi ngdr ink ingwate r t o customers in seve ral a

rea s, Bulver de will be able to provide drinkingwater me e tin g a pp lic a ble le g a l r e qu ir e me nts ;

• Bulve rde w ill have suffic ient funds to pay its $23,000 to $27,000 per y ear obligation for its right to 400 ac re- fee t of wate r fr om GBRA; and

• Gr anti ng the c e rt if

ic a te wo uld

have a po sit ive e ff

e c t on B ulv e rd e by

he lpi ngto a ssu rea lon g -term wat er s up pl y

to it s re si den ts , t here by

pro mo ti ng dev elo pm ent, a dd ingto i ts e c on omi c ba se , a nd a ttr a c tin g bu sin e sse s. Despite findingthat Bulve rde pr oposed the most reliable long- r a n g e w a te r source and
wo uld have satis fi e d the statut or y re qu ir e me nts fo r a c e rt if ic ate if its c on tr a c tua l r e latio ns hip wi th GB RA w e r e c o n s id e r e d , th e A L J r e c o mm e n d e d th at i ts a p p li c a ti o nb e d e n ie d
. T h e A L J f urther
re c omm e nd e d th a t th e B e xarMe t a pp lic a tio n b e a

pp ro ve d in

pa rt . Af te r c on sid e ri ngthe AL J’s p ro po sa l f or de c isi on and the argume nts pr e se nte d at a h e ar i n g , t h e C o m m i s s i o n r e j e c t e d h i s r e c o m m e n d a t i o n . T h e C o m m i s s i o nd i s a g r e e d w i tht h e A LJ4

o nt h e t h re s h o l d

qu es t i o no f w h et h e r B u l v e rd e c o u l d ac qu i re th e r equ i s i t e c ap ab i l i t i es th ro u gh contra cts with GB RA, and found that the AL J ’s conclusion was not founded in law or based on the po lic y of the Com mis sio n. Th e Com mis sio n f ur the r d e te rm ine d that Bu lve rd e ha d the c a pa bil ity to pr ov ide c on tin

uo us and a de qu a te se rv ic e thr ou g h it s contr a c ts with GB RA and ha d th e mor e re lia

ble water supply for the longterm nee ds of the re quested ser vice a rea . I t unanimously

approv ed B ulv e rd e ’s a

pp lic a tio n, de nie d B e xarMe t’ s, and ame nd e d the or de r t o r e fl e c t th os e de te rm inatio ns . Be x arMe t filed suit for judicial revie w of the Commission’s decision. The district court de nied B exarMet’s re quest to remand the matter for ad d it io n a l e v id e n c e , d is mi s s ed B exarMet’s reque st for a te mporary

injunction as moot, and aff irmed the Commission’s orde r. This appea l ensued.
AN AL YSI S The Cont ro v e rsy B e xarMe t con te nd s th a t w a te r c od e se c tio n 1 3. 24 1( a ) r e qu ir e s th e a pp lic ant i tse lf

to possess the nec essar

y capa biliti es to obtain a water ser vice c ertificate, an durg es that B ulverde ’s relianc e on GB RA to satisfy the requirements of the s tatute i s not allowed by the wate r code
. See id. § 13.241(a)
. Alternatively , Be x arMe t a rgues that if section 13.241(a) wer e interpre ted to allow applicants to ac quire the r equisite ca pabilities through c ontrac t, the agree ment be tw e e n B u lv erde and GB RA does not g rant Bulverde sufficie nt control to satisfy the “c ontinuous and adequate” se rvice require ment. See id. Be x arMe t further contends that the Commission abused its discretion by failing to observe its own re g ulati o n s re q u i ri ng an applica nt to prove that consolidation with another exis ting utility

in the are a is not economica lly fea sible.5 The Commission responds that it correc tly construed se ction 13.241(a) to allow
c on tr a c ts t o s a tis fy

the wate r c od e ’s re qu ir e me nts fo r c e rt if ic a tio n and th at Bu lve rd e and GB RA
cre ated a n adequa te contra ct u al fr am ewor

k to acc omplish t his goa l. The Commissi on further responds that B ulverde ’s application fulfilled state policy objectives re g ardingreg ionalization. We are there f

o r e a s k e d wh e ther a municipality , afte r asse ssing its internal c apabilities
and fi nd ingthe m in a de qu a te , c an a c qu ir e the c a pa bil ity to p ro vid e wate r s e rv ic e thr ou g h c on tr a c ts
an d i n t e r l o c a l a g r e e m e n t s w i t ha r i v e r a u th o r i ty.
Stan dard of Revie w

We reviewissues of statutory construction de novo
. City of San Antonio v. City of Boerne , 111 S.W .3d 22, 25 (Tex. 2003). Her e, we are asked to c onstrue sec t i o n 1 3
. 2 41(a) of the water code, c oncer

ning the g rantingof cer

tificates by

the Commiss ion. Construction of a statute by the administrative ag ency char g ed with its enforc ement is entitled to g re at weig ht by revie wing courts. State v. Public Util. Comm’n , 8 8 3 S
. W
. 2 d 1 9 0 , 1 9 6 (T ex . 1 9 9 4 ) ( ci t i n g Dodd v. M eno , 870 S.W .2d 4, 7 (Tex. 1994)).

We review the C ommissi on’s determination that Bulve rde’ s cer tificate a pplication satisfied the re g ulatory

standards and was super ior to Be x arMe t’s application under the substantial evidenc e standa

rd. See Tex. Gov’t Code Ann. § 2001.174 (West 2000)
. When a cour t is apply ing the s ubstantial evidenc e st andar d of re view to an a g ency decision, the issue for

the re viewingcourt is n ot whe the r t

he a g e nc y ’s de c isi on

wa s c or re c t, b ut whe the r t

he re c or d d e mon str a te s so me
rea son ab l e b as i s for the a g ency ’s ac tion. Central Power & Light Co. v. Public Util. Comm’n , 36 S.W .3d 547, 557 (Tex. App.—Austin 2000, pet. denied). T he test her e is pri m ar i l y o n e of6

rationality . I f the Commission base d its orde r on substantial r eleva nt e vidence and it ha s made no clea r er ror of judgme nt, we ar e not authorized to overtur n that order
. We also use the substantial evidenc e standa rd to deter mine whether

the Commiss ion satisfied its own reg ionalization rules. An ag ency ’s i nterpre tation of i ts own regulations is entitl ed to defe renc e by

the courts, eve n though that interpretation is not binding. Public Util. Comm’n v. G u lf S ta te s U ti ls

. Co. , 8 09 S.W. 2d

20 1, 20 7 ( Te x. 19 91 ); Lone Star Salt W ater Disposal Co. v. Railroad Comm’n , 800 S.W .2d 924, 929 (Tex. App.—Austin 1990, no writ). We will reverse the Com mis sio n w he n it

fa ils to f oll owthe c le ar, un ambi g uo us langua g e of its ow n r e g ulatio ns , th a t is , when its ac tions are a

rbitrar y and c apric ious. Power Res. Group, I nc. v. P ublic Util. Comm’n , 73 S.W .3 d 3 5 4 , 3 5 7 ( T e x. Ap p . — A u s ti n2 0 0 2 , p e t. d e n ie d )
. T hu s , a b s e n t e v id e n c e th a t t

he Commi ssion is di sreg ardingthe plain languag e of its rules, we look to its expertise in calibrating
v arious policy

considerations. Id
. T h e a g e n c y r e s p o n s ib le f

o r r e g u lati n g anin d

u s tr y mu s t be aff orded suf ficient fle x ibilit y

to determine a

nd car ry out its clear leg islative mandate. Id.
Interpretin g Water Code Section 13.241(a)

Section 13.241(a) of the water c ode g overns the grantingof certificates. Tex. W ater Code Ann. § 13.241(a ). I t states, “In deter mining whe ther to g rant a cer tificate . . . the commission shall ensure that the applicant possesses the financ ial, manag eria l a nd technica l capa

bility to provide continuous and ade quate se rvice .” Id. We look first to the plain and common meaningof the statute’s words. Fitzgerald v. Adv anced SpineFixation Sys., Inc ., 996 S.W .2d 864, 865 (Tex. 1999) (c i t i n g Liberty Mut. Ins. Co. v. Garrison Contractors, Inc. , 966 S.W .2d 482, 484 (Tex. 1998)).Whe n th e le g isl a tur e ha s f a ile d to de fi ne a

sp e c if ic wor d in a statut e , c ourt s a pp ly its 1 ordinary meaning . Tex. Gov’t Code Ann. § 312.002(a) (West 2005). Bla ck’s L aw Dic tionary define s “possess” a s “to have in one’s actua l c ontrol.” Bla ck’s L aw Dictionary 1183 (7th ed., 1999). 7 “In determ inin g wheth er to grant a certificate . . . the Com m ission shall ensure” “[E] very word in a statute is presumed t o have been used for a purpose, a nd a ca rdinal
ru le of statut or y c on str uc tio n is that e a c h s e nte nc e , c la us e and wo rd is to be g ive n e ff e c t if re a so na ble and possible.” Texas W

orkers’ Comp. Ins. Fund v. D el Indus., Inc

. , 35 S.W .3d 591, 593 (Tex. 2000) (c i t i n g Perkins v . S

tate , 367 S.W .2d 140, 146 (Tex. 1963)). L ikewise, e very word e x cluded f

rom the statute must be presumed to ha ve been excluded for a

purpose. Morrison v. Chan , 699 S.W .2d 2 0 5 , 2 0 8 (T ex . 1 9 8 5 ) ( ci t i n g Cameron v. Terrell & Garrett, Inc. , 618 S.W .2d 535, 540 (Tex. 1981)).

T h e o p e n in g w o r d s o f

th is s e c ti o nar e w o r d s o f d is c r e ti o n . T h e p h r a s e s , “ [i ]n deter mining whe ther to g rant a

cer tificate,” and “the commissio n shall ensure ,” g ive the Commissi on broad discretion in c hara cter izi ng the requisite capa biliti es, and in de termining which ca ndidates for
cer tificates mee t the statutory require ments. The leg islature could have limited the Commi ssion’s discretion by

using la ng uag e that appe ars late r i n t h e s am e section, but it chose not to do so. Specifica lly , section 13.241(e ) re quires the Comm i s s i o n to develop “by rule . . . a

standardized method,” while se ction 13.241(d) state s what “the applicant must demonstrate .” Te x . Water Code Ann
. § 1 3
. 241(d)- (e) (West 2000). Thus, the languag e make s clea r that the leg islature veste d dis c re tio n in

the Commis sio n to e va luate the c omp e tin gint e re sts and the ir va ri ou s c a pa bil iti e s.
“T he ap plic ant po sse sse s” The ter m “possess” is d ef

i ned neither

in the statute nor in the Commissi on’s regulations. Whil e s ec t ion 13.241 of the water c ode re quires the Commission t o ensure that the

1I t defines “ control” a s “the direc t or indirect power to direct the ma

nag ement and policie s of a pe rson or entity whether
. . . by contra ct or other

wise.” Id. at 330. Acc ording to the ordinary meaningof the te rm s, the n, B ulv e rd e po sse sse s the ne c e ssa ry c a pa bil iti e s to pr ov ide c on tin

uo us and a de qu a te service throug h its contracts with the GB RA.
8 cer tificate a pplicant possesses c erta in capa biliti es, it does not require t h e ap p l i cant to own the fa c ili tie s. Th is i s c on sis te nt w iththe wate r c od e’s de fi nit ion of “ re ta il p ub lic uti lity ” a s a

“ mun ic ipa lity

[or ] pol iti c a l su

bd ivi sio n . . . op e ratin g , ma int a ini ng , o r c on tr oll ingin t his state fac iliti es for providing potable water service . . . .” Id. § 13. 00 2( 19 ) (We st 2 00 0) . We a g re e wi th Commi ssioner Whit e’s statement at the hear ing that, “[o] wner ship is not s omething le g ally require d, which may

be the only

thing a bsent in Bulver de’s a

pplication on the first cr iteria.”
Com panion Statu tes

The de termination that a municipality may demonstrate t he re quired c apabilities throug h contra cts and interloc al ag ree ments with a river authorit y

is also consistent with the I nterloca l Cooperation Act. See Tex. Gov’t Code Ann. § 79 1
. 0 2 6 (W es t 2 004). De signe d by the leg islature “to incr ease the ef ficienc y and ef fec tiveness of loca l gove rnments by authorizing them to c on tr a c t, t o th e g re a te st p os sib le e xtent, w ith
. . . a g e ncie s o f t he state ,” the statut e sp e c if ic a lly contemplates c ontrac ts fo r wa t er supply fac iliti es. Id. §§ 791.001, .026 (West 2004). Section 791.026(a) states in pertinent p ar t , “A municipality , district, or river authority of this state may contra ct with another

municipality , district, or river authority of this state to obtain or provide pa rt or all of: (1) water

supply or wa stewate r treatment fac iliti es . . . .” Id. § 791.026(a)
.9 To be sure , th e I nte rl oc a l Co op e ra tio n Ac t do e s n ot s up e rs e de the sp e c if ic require ments for c ertifica te applica nts. I t makes cle ar, how ever , the leg islatur e’ s i n t ent to allow
m u n i ci p al i t i es t o o b t ai nt h e r equ i re d cap ab i l i t i es t o o p er at e a n d co n s tru c t w a t e r s y s t em s th ro u gh contra cts with river a

uthorities and its b el i ef t h at these c ontrac ts increa se the e fficie ncy and
e ff e c tiv e ne ss o f l oc a l g ov e rnme nt.
Cont inu ous an d Adequate Service Be fore g ranting a cer

tificate, the statute require s the Commi ssion to ensure that the proposed sy ste m p o s s e s s e s “ the financ ial, manag eria l, and technic al ca pability to provide continuous and ade quate se rvice ” to its customers. Ther efor e, the r equire ment of “c ontinuous and ade q u at e” in se c ti o n 1 3
. 2 4 1 ( a ) is th e s ta n d ar d to w h ic h B u lv e r d e ’ s c a p a b il it ie s mu s t r is e b e f

o re the Commi ssion may

g rant it a c ertifica

te. The statutory

“continuous and a dequate ” st andar d for the actua l provision of water service arises e lsewher e in the code , apar t fro m the re quirements for
rec eiving a ce rtificate
. S

ee Tex . Wate r C od e Ann. § 1 3. 25 0 ( Wes t 20 00 ). Th is i s c on sis te nt w ith the no tio n th a t th e g ra

nti ng of a c e rt if

ic a te is no t an ind ic a tio n that th e Com mis sio n a pp ro ve s o f a ll aspec ts of a par

ticular plan, nor does it imply that a ca rrier is prepar ed to beg in service at once . The pu rpo se of

c e rt if ic a tio n is to p ro vid e fo r a ratio na l di str ibutio n o f p ub lic uti lity se rv ic e s w ith in define d g eog raphic al ar eas. See Br adley Toben, Certificates of Conve nienceand Nece ssity Under the T exas Public Utilit

y Re gulation Act , 2 8 B aylor

L . Re v. 11 15 , 1 11 6 ( 19 76 ). Th e re fo re , a s it s name implies, t h e ce rtificate is intended to be a “ nece ssary” but not a suff icient condition of operation.10 There is substantial evidence in t h e record to support the conc lusion that Bulverde po sse sse s th e c a

pa bil iti e s th a t w ou ld a llo w i t to pro vi de con tin uo us and a de qu a te se rv ic e to i ts customers. The Commi ssion’s order r ecognizes that GBRA succ essfully o p er at es five w ater treatment plants and has over thirty y ear s’ ex perie nce providing water to more than 70,000 per sons in T e xas. At

the tim e of

the he ari ng be fo re the AL J, GB RAe mpl oy e d 2 7 w a te r s y ste m op e rator s. The AL J and the Commi ssion f ound that Bulve rde ha d over $1,000,000 in liquid assets for the fiscal y e ar e nd ingDe c e mbe r 31, 20 00 , an d that it ha d suf fi c ie nt fund s bud g e te d for its annua l w a te r s up ply contra ct obligations to GBRA.

There is also substantial evidence that Bulve rde is capa ble of providingsafe drinking water and that it has ac cess to an a dequate supply of water. See Tex. Water Code Ann. § 13.241( a)- (b). The AL J found a “demonstrated nee d for se rvice in the are a,” a nd conclude d that “[i] n the long run, B ulverde ’s ac cess t

hr o u gh G B RAto Cany on L ake w ater is superior to B exarMet’s proje cted water
su pp lie s. ” Th e AL J found

—a nd the Com mis sio n a g re e d— that B ulv e rd e , thro ug h it s c on tr a c ts w ith GB RA for a long- term supply of surfa ce water , could provide the more re liable wate r supply for the long- term nee ds of the ar ea. I n addition, the AL J found that “[g ]ranting the [certificate] would have a positive eff

ect on B ulverde by

help i n g t o as s u re a

long- term water supply

to its residents, thereby promoting de velopment, addingto its economic base, a nd attrac ting business.” Th e A L J a l s o r e c o g n i z e d th e m e r i t s o f B e xa r M e t ’ s a p p l i c a t i o n , h i g h l i g h t i n g its experience and ca

pabi lity as a w ater

supplier for ove r 50 y ear s, with 70,000 acc ounts and 250 employ ees. A s Chairman Robert J
. Huston observe d, the Commi ssion ha d to make a c hoice be tween “two compe ting interests by
. . . two quality play ers.” But it ca

nnot be said that the Commission failed11

to consider the r eleva

nt data, or that its de cision was a rbitrar y , capr icious, or re prese nted an a buse of discretion. While we re cog nize that ag ency action is not without b o unds, if the Commiss ion has cry stalliz ed the c ompeting inter ests and dra wn rational conclusions from the evidence prese nted, we
can r equire no more
. We find substantial evidence to support the Commiss ion’s deter minations that Bulve rde’ s cer

tificate application satisfied t he reg ulatory standards and was superior to Be x arMe t’s application. Enf or c e ment Whil e it is und i s p u t ed t hat B ulverde , as the c ertificate holder, is subjec t to the enfor ceme nt of the Commissi on, Be x arMe t argues that the Commission i s powerle ss to bring a n enfor ceme nt action ag ainst GBRA. The brea dth of the Commi s sion’s authority over public w ater
su pp lie rs and re ta il pu

bli c uti lit ie s, ho we ve r, a lso a llo ws it to e nf or c e the statut or

y sta nd ard s a g a ins t GB RA. The Commission cites water c ode sec tion 13.411 as i t s authorit y to enforc e ser

vice obligations ag ainst G BRA. Id. § 13.411(a) (West 2000). Section 13.411(a) empower s the attorney g ener al to bring an ac tion on behalf of the Commi ssion ag ainst any retai l public utilit y

that violates Chapter 13 of the water code or an act of the Commi ssion a dopted under it. Id. In any

enfor ceme nt action ag ainst GBRA, se ction 13.411(a) would work in conjunc t i o n with one of the w ater code provisions t h at impose obligations on retail public utilit ies that provide water without a c ertificate. These se ctions include sec tion 13.250(c), whic h prohibits any discontinuance, re d u cti on, or imp a ir me nt o f w a te r s e rv ic e wi tho ut Comm iss ion a pp ro va l and

se c tio n 1 3. 25 0( d) , w hic h s pe c if ic a lly prohibits a retail public utilit y that has not been gr anted a cer tificate f rom discontinuing, r educing , or12

impairing reta il water or sewe r ser vice without appr oval of the Commission. Id. § 1 3. 25 0( c )- (d ) ( Wes t 200 0 )
. A d d it io n a ll y , s e c ti o n1 3
. 1 3 9 ma n d a te s e v e r

y d is tr ic t t h a t f ur n is h e s r e ta il w a te r

to p r o v ide service , instrumentalities, a nd fac iliti es that are safe , adequate, eff icient, and rea sonable. Id. § 13.139 (West 2000). The Commission may enfor ce the se statutory

obligations through a dminist rative a ction or civil suits, including suits for injunctive re lief. Id. § 13.411.

Sub sta nti a l e vid e nc e a lso su

pp or ts the Com mis sio n’ s de te rm inatio n th a t G B RAis contra ctually

obligated to operate the sy stem in compliance w ith applicable leg al standar ds. The operating ag ree ment betwee n Bulve rde and GB RA is “specif ically subject to all applica

ble sec tions of the Te xas Wate r C od e and Com mis sio n r

ule s. ” Ad dit ion a lly , G B RAmus t c omp ly wi th a ll c ity
o rd i n an ce s co n ce rn i n g t h e c o n s t ru ct i o no f t h e s y s t em an d h as agr ee d t o p ro v i d e Bu l v er d e w i then o u gh treated wate r per

day to meet the ser

vice a rea ’s projec ted nee ds for 20 y ear s. We theref ore disagree with Be x arMe t’s asser

tion that there a

re ina dequate enfor ceme nt mechanisms ava ilable to the Commi ssion in these circumstanc es to ensure a continuous and a dequate water supply to Bulver de’s service are a. Regionali

zation Be x arMe t co n t en d s that the Commis sion erre d by not requiringBulve rde, a s an applicant, to comply

with the Commi ssion’s own reg ionalization rules. I t is the policy of the State of Te xas t o e nc oura g e the op timum r e g ion a l de ve lop me nt o f s y ste ms bui lt fo r the fi ltr a tio n, tr e a tme nt, and tra nsmissi on of water. Te x . Const. art. I I I , § 49-d(a ). This policy , which preve nts redundanc y and
ensure s low rates for water service , is c odified in the water c ode and the health and sa fety code. See Tex . Water Code Ann. § 13.241( d); Tex. Health & Safety Code Ann. § 341.0315(b) (West 2001).13

Section 13.241(d) of the water code states that bef ore the Commi ssion gr ants a c ertificate for a n are a wh ic h w ou ld r e qu ir e c on str uc tio n o f a

“ phy si cal ly

se pa rate ” wate r s y ste m, a

n a pp lic ant m

us t de mon str a te that r e g ion a lizatio n o r c on so lid a tio n w ithano the r r e ta il pub lic uti lity is n ot e c on omi c a lly fea sible. The C o m m i s s i o n ’s own rule s implement the policy . 30 Tex. Admin. C ode § 291.102(b) (2003). Substantial evidence supports the Commi ssion’s finding that Bulver de’s sy stem is not

“ ph y sic a lly se pa

rate .” B ulv e rd e ’s sy ste m w ill be pa rt of the Wes te rn

Canyon Tr e a te d Wate r P ro

je c t,
a re g ion a l treate d water

supply sy stem that will deliver 10,000 ac re- fee t of wate r annua lly from Canyon L ake to Comal, Ke ndall and par ts of Be x ar C o u n t y . GBRA’s Direc tor of Projec t Development explained that the projec t draws r aw water fr om Cany on L ake, se nds it to a storag e unit, treats it, and then distributes it to several sy stems in the are a, includingBulve rd e. He testified that B ulverde ’s sy stem is not a stand-alone sy stem beca use “Bulver de’s dist ribution sy stem will be connec ted to the [W estern Cany on Project].” Additionally , the Commiss ion found that, “having w ater supplied from
a re g ion a l pr ov ide r s uc h a s th e GB RA ’s Wes te rn Canyon Pr oje c t sh ou ld r e su lt i n e c on omi e s o f s c a le and thus lower c osts to consumers.” B eca use B ulverde ’s wa t er sy stem is a reg ional sy stem as contemplated by

the statutory

scheme , Bulve rde’ s application met the re quirements of the water code. I n its final issue, Be x arMe t argues that its motion t o rema nd was im proper ly

denied by the dis tr ic t c ourt . B e c a

us e the dis tr ic t c ourt

did no t a bu se its dis c re tio n in

fa ili ngto r e mand

the c a se to allow Be x arMe t to pr es en t additional evidenc e, we disag ree . Section 2001.175(c) of the Administrative Procedur e Ac t allows a par ty in an appeal of an age ncy decision to apply to the court to p re se nt a dd iti on a l e vid e nc e . Te x. Go v’ t Cod e Ann. § 20 01 .1 75 (c ) (We st 20 00 ). Ho we ve r, the pa rt y14

must demonstrate to the cour t’s satisfac tion that the additional evidence is material and that there w ere g ood rea sons for fa iling to pre sent it in the procee ding be fore the ag ency . Id. In the instant case, the evidenc e in question is neither mate rial nor ne w, as it was presented in the contested he aringand wa s considere d by

the Commiss ion before Bulve rde’ s application for a ce rtificate was a

pproved.
CO NC LU SION We ag ree with the district court that the Commission acted within its authority when it gr anted a

cer tificate to B ulverde
. W e o v err ule the issues pre sented by Be x arMe t and af

firm the jud g me nt o f t

he dis tr ic t c ourt .

__________________________________________ J an P. Patterson, J ustice Be fore J ustices Patterson, Pury ear and Waldrop Affir med Filed: Oc tober 20, 2005