Texas: A Water Law Overview

Securing Texas’s Water Future Takes More Than Infrastructure

Reflect on this: “The water industry might be the best career you have never considered.” That is the title of an editorial from June 2026 in The Washington Post by Colby Sneed of San Jose Water. He observes water utility work as critical, interesting, spanning a range of disciplines suited to diverse talents, offering a meaningful but under-appreciated career. He urges the need for more talent recruitment to assist the industry in addressing significant long-term challenges that will need fresh faces, voices and ideas. I want to emphasise this point through the prism of challenges water and wastewater utilities face in Texas.

Texas is a massive state with hundreds of individually owned water and wastewater systems that serve hundreds of individual communities. Its infrastructure was built in a highly fragmented way because – unlike electric utilities transmitting their product hundreds of miles at a relatively low cost – moving massive amounts of water is considerably more difficult and expensive. There is no centralised water production or treatment or statewide transmission grid to shift billions of gallons hundreds of miles to meet demand. Communities must locate where reliable water supplies already exist. Accordingly, hundreds of individual water and wastewater systems were constructed to serve hundreds of individual neighbourhoods and communities. Many serve a single subdivision and few dozen customers.

Water availability and quality vary by location such that two different systems in the same area with similar facilities may require significantly different levels of investment and O&M to provide the exact same service (safe drinking water), resulting in what may appear to customers to be arbitrary differences in rates. Customers often do not understand it is the water source – not the utility – causing their costs to increase. Further, fresh groundwater is finite and becoming scarcer due to drought, population growth and industrial usage. As water sources degrade, they become more expensive to capture and treat. Utilities must increase rates to maintain the same level of service. Customers on fixed incomes accustomed to cheap water learn that clean water is no longer cheap. 

Compounding the problem is that many systems suffer from years of under-investment. Smaller utilities without a large customer base or access to sufficient capital often cannot afford to repair, modernise and expand, or just meet increasingly stringent compliance standards. The burden of maintenance is shifted to a future generation that may be unable (or unwilling) to pay the tab. If service quality deteriorates too quickly, customers leave the system. Previously stable utilities start to struggle to serve their existing customers and cannot expand to serve new customers, like those moving to Texas from other states – the lifeblood of the “Texas Miracle”. You can read about these communities in the newspaper almost every day. Sustainable economic development – not just critical to the Texas Miracle but to the vitality of a rural way of life – evaporates.

Adding to that intergenerational shifting, many small utility owners and operators are approaching retirement. They must find new willing stewards of these daunting financial, operational and regulatory challenges. When they cannot, they often abandon the utility to the state’s receivership and temporary manager programmes to stabilise the system, but with few long-term prospects for future growth. Taxpayers are left to pay the bill.

The question becomes: what is the value of universal access to high-quality, continuously available water when it is no longer available? Even if you are not a customer of an abandoned system, what is the value to you of rural water access when you the taxpayer must be the perpetual caretaker to of the abandoned systems? Viewed through this prism, clean water is undervalued not just by affected customers but by everyone.

Texas has effected promising strategies to arrest this trend. The legislature has enacted statutes incentivising investor-owned utilities to acquire distressed systems by facilitating consolidation and streamlining cost recovery. Existing Texas utilities – like Texas Water Utilities, Texas Water Company, and Aqua Texas – responded by significantly expanding. Several new companies – California Water, Northwest Natural Water, American Water, and Central States Water Resources, among others – are entering the state. These large, sophisticated utilities can improve service quality by consolidating operations and systems into broader customer bases to achieve economies of scale, which allows them to make investments, improve O&M practices, and spread costs over a larger customer base to keep rates as low as possible. They have answered the call by investing hundreds of millions of dollars in critical infrastructure in Texas communities over the last few years. The result: Once water quality improves, communities stabilise, with opportunities to grow. Regulators are relieved from managing distressed systems. Taxpayers are relieved from paying for them. Customers benefit from safe, reliable, affordable service. Hundreds of distressed systems have been acquired and rehabilitated. While costs have inevitably increased, my experience in a couple of recent rate cases suggests customers do appreciate the impacts: an intervenor-customer opposed to a proposed rate application thanked the utility on the record at the hearing after learning the good work done in her community. In another, customers requested the utility’s growth plan to understand how increasing customers will eventually offset costs and asked how they could help.

However, Texas is only a few years into this decades-long effort. Hundreds of distressed systems still must still be acquired, consolidated and rehabilitated. It is a generational problem requiring generation-spanning solutions. Which begs another question: who will be the stewards of those solutions once the torch passes? We need creative, motivated, dedicated people who understand these challenges and are eager to accept them. Many do not even know these opportunities exist, oftentimes in the same communities where these utilities are located. Further, the skills taught in school need to be updated to address the evolving demands of a modernising industry. It will require sustained generations of talent to oversee the development of new technology and update regulations to accommodate them.

At the same time, those generations will rely on existing experienced practitioners to help them understand ratemaking, rate design, regulatory economics and how utilities raise capital, finance construction, and manage the risks of regulatory lag, concepts not easily generated through AI (yet). They will also need skills that AI cannot replicate (yet), like the adaptability to change operations in real-time as laws evolve, are modified and reinterpreted, as they frequently are. It will require “soft” skills to communicate difficult concepts to regulators, the legislature and customers who have legitimate concerns about costs but must reconcile those concerns with the economics of modern water production, treatment and distribution.

As counsel to many of these utilities, I specifically seek out young talent who can be “thought leaders” – not gatekeepers but custodians to the cause of ensuring sustainable, safe, reliable, affordable service for all. It cannot just be a “career option”. It has to be a mission. That is how we approach the challenge at Spencer Fane. My clients have said Spencer Fane is one of the only firms meaningfully committed to training lawyers in this field. That is how I measure our success. The challenges are significant, but they can be addressed with a sustained pipeline of professionals willing to take on this mission and guide it. As stated in the op-ed in The Washington Post recent, to succeed, “[w]e need a new generation of stewards to keep our water systems healthy”.