The McAllen Public Utility is reviewing a proposal to switch from mechanical water meters to new meters equipped with ultrasonic or electromagnetic technology.
Under the proposal, the public utility would borrow about $18 million to $22 million for new meters.
The new, more accurate meters would result in higher bills for some customers — and more revenue for the public utility. The new meters would also require fewer employees to maintain, saving the utility money.
Together, the additional revenue and cost savings would cover the debt payments.
“My position as a trustee is: We’re not ready to make that decision,” said utility board Trustee Ernie Williams. “There’s just too many unknowns.”
An Indiana-based company called Performance Services Inc., which specializes in “guaranteed energy savings” projects, approached the public utility in 2019, according to documents released under the Texas Public Information Act.
After initial discussions, the public utility allowed PSI to conduct an “investment grade audit” in January 2020. The audit, essentially an analysis of whether or not the new meters would pay for themselves, started the following month.
PSI conducted the audit without any upfront cost.
The contract, though, included a catch: If the project met agreed-upon goals but the public utility decided against working with PSI, the public utility would pay about $69,000.
PSI determined the new meters would generate about $1 million per year in additional revenue. The new meters would also require fewer employees to maintain.
Under the current system, the public utility employs nine meter readers and a supervisor. That could be reduced to seven meter readers and one supervisor, according to a summary prepared by PSI.
The public utility could also eliminate two employees in the Billing Department and three employees who handle water meter maintenance.
PSI suggested the public utility could reduce personnel costs by not replacing the employees when they retired or resigned.
The utility board, however, wanted more information about the proposal.
“I think there’s a lot to negotiate,” said former utility board Trustee Tony Aguirre, who resigned to run for City Commission.
Aguirre, who served on the utility board from 1993 to 2021, said the trustees wanted to review financing options and different types of water meters.
The new meters provide many advantages. They would allow customers to manage their bills, quickly spot leaks and more accurately measure water usage.
“We do need to upgrade,” Aguirre said. “Without a doubt.”
The questions facing the utility board include which smart meters to buy, how to finance the purchase and whether or not the PSI deal makes sense for McAllen.
Trustees also had questions about the guarantee from PSI, which promised that higher revenue and lower costs would cover the debt payments.
“Guarantees? You’ve got to look at how they’re guaranteeing it,” Aguirre said. “If it’s mandatory rate increases, no, you can’t guarantee it that way.”
Mayor Jim Darling, who serves on the utility board, said he had questions about the guarantee too.
Darling said he asked: “How much is this guarantee costing me?” but didn’t receive a clear answer.
“And that’s what I don’t like about it: It’s like buying a car,” Darling said.
Representatives from PSI didn’t respond to a request for comment Tuesday.
The company successfully completed a similar project for the Agua Special Utility District, which installed new meters, and a wide-ranging energy savings project for the La Joya Independent School District.
Williams said the utility board is still weighing the proposal from PSI. Like any major project, the board wants to thoroughly discuss all options before making a decision.
“We want to eliminate as much risk as possible,” Williams said.