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Click here for the full text of this decision FACTS:The city of Bulverde filed an application for a certificate to provide water utility service in western Comal County. In addition to its incorporated limits, Bulverde sought to serve its extra-territorial jurisdiction and some outlying areas. To provide a firm supply of treated water, Bulverde contracted with Guadalupe-Blanco River Authority (GBRA) to join the Western Canyon Lake Treated Water Supply Project. The operating agreement between GBRA and Bulverde obligated GBRA to design, construct, finance, operate and maintain the water distribution system to provide treated water on behalf of Bulverde. Bexar Metropolitan Water District (BexarMet), a water conservation district and municipal corporation, requested a hearing on Bulverde’s application, and filed an application to amend its certificate to provide water utility service to an area that overlapped with Bulverde’s requested service area. Despite finding that Bulverde proposed the most reliable long-range water source and would have satisfied the statutory requirements for a certificate if its contractual relationship with GBRA were considered, the administrative law judge (ALJ) recommended that its application be denied. The ALJ further recommended that the BexarMet application be approved in part. BexarMet sought judicial review of the Texas Commission on Environmental Quality’s approval of the City of Bulverde’s application for a certificate of public convenience and necessity for water utility service, after the commission issued the certificate against the recommendation of the ALJ. The district court denied BexarMet’s claims and affirmed the commission’s order. HOLDING:Affirmed. The court points out that, for an applicant to obtain a certificate of public convenience and necessity for water utility service, the Texas Commission on Environmental Quality must ensure pursuant to Texas Water Code 13.241(a)-(b) that the applicant 1. possesses the financial, managerial and technical capability to provide continuous and adequate service; 2. is capable of providing drinking water that meets specified statutory requirements; and 3. has access to an adequate supply of water. At issue on appeal, the court states, is whether a municipality as applicant may demonstrate this capability through contracts and interlocal agreements with a river authority that owns or operates water distribution and treatment systems throughout a river basin. BexarMet claims on appeal that, by issuing a certificate to Bulverde, the commission violated the water code and its own rules. Specifically, BexarMet contends that Texas Water Code 13.241(a) requires the applicant itself to possess the necessary capabilities to obtain a water service certificate, and urges that Bulverde’s reliance on GBRA to satisfy the requirements of the statute is not allowed by the water code. Alternatively, BexarMet argues that if 13.241(a) were interpreted to allow applicants to acquire the requisite capabilities through contract, the agreement between Bulverde and GBRA does not grant Bulverde sufficient control to satisfy the “continuous and adequate” service requirement. BexarMet further contends that the commission abused its discretion by failing to observe its own regulations requiring an applicant to prove that consolidation with another existing utility in the area is not economically feasible. The court states that if the commission based its order on substantial relevant evidence and it has made no clear error of judgment, the court is not authorized to overturn that order. The court examines 13.241 of the water code and finds that, while it requires the commission to ensure that the certificate applicant possesses certain capabilities, it does not require the applicant to own the facilities. The court also finds that the determination that a municipality may demonstrate the required capabilities through contracts and interlocal agreements with a river authority is consistent with the Interlocal Cooperation Act. Additionally, the court states that there is substantial evidence in the record to support the conclusion that Bulverde possesses the capabilities that would allow it to provide continuous and adequate service to its customers. The court points out that GBRA successfully operates five water treatment plants and has more than 30 years’ experience providing water to more than 70,000 persons, and that Bulverde had over $1 million in liquid assets for the fiscal year ending Dec. 31, 2000, and that it had sufficient funds budgeted for its annual water supply contract obligations to GBRA. Consequently, the court concludes that the commission acted within its authority when it granted a certificate to Bulverde. OPINION:Jan P. Patterson, J.; Patterson, Puryear and Waldrop, JJ.

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