published Thursday, March 7th, 2013

Tennessee bill allows easier rate hikes by utilities

Governor Bill Haslam answers questions in this file photo.
Governor Bill Haslam answers questions in this file photo.
Photo by The Tennessean /Chattanooga Times Free Press.

NASHVILLE — Tennessee Attorney General Bob Cooper's office warned Wednesday that Gov. Bill Haslam's plan to streamline rate setting for utilities shifts their "business risks" onto households and businesses, effectively making them guarantee the monopolies' profits.

"What this does in our opinion is make it more likely that rates will increase for business and households," Assistant Attorney General Vance Broemel told House Business and Utilities Committee members Wednesday.

Broemel is the chief attorney in the attorney general's Consumer Advocate Division, which often intervenes in rate hearings on increases sought by utilities.

But Tennessee Regulatory Chairman Jim Allison sought to assure lawmakers, saying similar changes have been put into place in states like Georgia. Tens of thousands of customers served by companies like Tennessee American Water and Chattanooga Gas need not be fearful, he said.

"The attorney general is focused in a very narrow sense on the rate of return" for utilities, Allison said. "But what they've missed is before TRA will allow anyone to enter into one of these, we have to go into a process to establish that this is in the public interest."

The panel approved the administration bill, sponsored by House Majority Leader Gerald McCormick, R-Chattanooga, on a voice vote.

Haslam's bill, developed in conjunction with the governor's recently reshaped TRA, creates a new regulatory framework for dozens of investor-owned utilities.

It won't apply to public power distributors or AT&T and some other telecommunications companies under "market regulation." The bill also cuts regulatory fees paid to the state by some companies, including AT&T, while increasing them for others like the water and gas utilities.

Lowered fees will reduce TRA's revenues for operations by an estimated $1.1 million annually and result in staff reductions, according to a fiscal note on the bill.

The bill creates "alternative regulatory" methods that can be used instead of full-blown rate hearings utilities now must go through. But it keeps such hearings for utilities that wish to continue them.

For example, it would allow investor-owned utilities go before the TRA and seek annual rate reviews and recovery of expenses, which could lead to increases for consumers.

It also allows "trackers" that allow companies to hike rates on specific items like fuel or chemicals without looking at the utility's overall picture, according to Cooper's office.

The bill "changes greatly the way rates will be set," Broemel said. He warned that a provision allowing companies to seek annual reviews based on the methodology in their most recent rate case could mean no examination of their profits.

Allison disagreed, saying the TRA would be able to delve into such issues.

"If the rate of return gets out of kilter, we can open up a rate case," Allison said.

In a full-fledged rate case, regulators look at a utility's overall finances and seek to strike a balance between a company's expenses and a reasonable rate of return on its investment with consumer interests.

In recent years, Tennessee American, which supplies water to customers in Chattanooga, parts of Hamilton County and some areas of North Georgia, has aggressively pushed double-digit increases. That's led to major battles before the TRA with Chattanooga and various other entities.

McCormick said the fights mean utilities often "hire lots of lawyers and spend a lot of money."

Broemel said Tennessee American's rate case last year was more amicably settled with less expense. The company had switched law firms.

Outgoing Chattanooga Mayor Ron Littlefield said Tuesday he's still seeking details of the bill.

But Littlefield said he is wary of giving Tennessee American "greater voluntary capability to increase their rates."

"We've had to fight them every time," Littlefield said. "They come up with double-digit increases on a fairly regular basis and it costs a lot of money to contest it."

Efforts to reach a Tennessee American spokeswoman and the company's chief lobbyist, Kino Becton, were unsuccessful. Tennessee American is owned by the publicly traded American Water.

Following Wednesday's hearing, David Foster, the TRA's Utilities Division chief, said, "We'll continue to have oversight over all the expenses of a company. The burden is still on the company to show the expenses are prudent and they need recovery" of them.

about Andy Sher...

Andy Sher is a Nashville-based staff writer covering Tennessee state government and politics for the Times Free Press. A Washington correspondent from 1999-2005 for the Times Free Press, Andy previously headed up state Capitol coverage for The Chattanooga Times, worked as a state Capitol reporter for The Nashville Banner and was a contributor to The Tennessee Journal, among other publications. Andy worked for 17 years at The Chattanooga Times covering police, health care, county government, ...

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