City objects to proposed water rate increase

The average Chattanooga household will pay another $1.12 a month for water if state regulators grant a rate increase request from Tennessee American Water Co.

But the city of Chattanooga is objecting to the proposed 5.2 percent increase, claiming that the Chattanooga utility is trying to pass through environmental, infrastructure and economic development expenses without review through a new alternative rate-setting system adopted by Tennessee lawmakers two years ago to help lessen rate disputes.

The Tennessee Regulatory Authority, the state agency that regulates private utilities and their rates, has scheduled a hearing Monday to consider the utility’s proposed capital cost recovery plan and the city’s objections to the proposal.

Tennessee American is seeking another $2.4 million from the rate increase to help pay for the projected $15.8 million of capital projects planned by the utility in 2015.

“Convenient water and wastewater services have been one of our community’s greatest achievements over the past 125 years,” Tennessee American President Deron Allen said in a statement Thursday. “Now it is up to us to keep those systems performing at the level we need to continue growing our community and maintaining the high level of environmental stewardship that is expected in the Tennessee Valley.”

In the past, such investments required a full-blown rate review every few years by the Tennessee Regulatory Authority and such filings were usually opposed by local manufacturers and the city of Chattanooga. Tennessee

American usually requested rate increases two to three times more than what regulators ultimately allowed.

In 2013, the Tennessee Legislature adopted an alternative rate mechanism to allow Tennessee American to pass through on a more timely basis changes in fuel, chemical and other investments agreed to by local parties.

Last year, Tennessee American actually reduced its water rates by 1.15 percent due to savings from gas, fuel, chemicals and other expenses that turned out to be less than projected in previous rate filings. The city did not intervene last year in the utility’s rate filing with regulators and agreed to allow Tennessee American to pass through certain expenses.

Although fuel and chemical expenses fell again in 2014, Tennessee American said it needs to raise its capital recovery and qualified infrastructure spending this year to help fund improvements and line extensions. Those expenses will more than offset cheaper fuel and will require an increase in water rates, company spokeswoman Daphne L. Kirksey said.

The Chattanooga utility is providing water line extensions under its economic development program to help Chattanooga Coca-Cola Bottling Co. to build a $62 million distribution center to the former Olan Mills facility along Highway 153.

Tennessee American also is building a dewatering-facility at the Citico Plant, replacing six filter underdrain systems and installing a tank aeration system at Elder Mountain. Such improvements are designed to help the city meet terms of a wastewater agreement with federal regulators.

The city is objecting to the utility trying to pass all of those costs on to ratepayers without a general rate increase request.

In a 19-page filing with the Tennessee Regulatory Authority, Rick Hitchcock, a special assistant to the city attorney’s office, claims that “significant portions of Tennessee American Water Co.’s requested rate increase are not authorized by law and are not in the public interest.” Hitchcock said the utility is trying to recover the costs of capital projects “after rate increases were approved to finance them in previous dockets.”

The hearing before the Tennessee Regulatory Authority on Monday will be one of the first to test the new alternative rate setting system the Tennessee Legislature adopted in 2013. Lawmakers changed the rate making process to try to avoid the lengthy and costly rate battles that were ultimately funded by Chattanooga taxpayers on one side and Chattanooga water ratepayers on the other.

Kirksey, external affairs manager for Tennessee American, said the average Chattanooga household spends $21.50 a month for water. The proposed rate increase Tennessee American is seeking through the alternative rate-setting process would add another $1.12 per month to that cost.

Water users on Lookout Mountain and rural areas pay slightly higher water bills.

Tennessee American, the state’s biggest privately owned water utility, provides water connections to 79,000 homes and businesses that serve 370,00 people.

Contact Dave Flessner at dflessner@timesfree press.com or at 757-6340.