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Chattanooga: City appeals water rate hike approval

By: Andy Sher
(Contact)

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NASHVILLE — Chattanooga officials are asking the Tennessee Court of Appeals to overturn a ruling that granted Tennessee-American Water Co. a 12.2 percent increase in local water charges.

The city’s legal shot across the bow of the Tennessee Regulatory Authority comes just days before authority directors hold an Aug. 18-22 hearing on the water company’s latest rate request. The company this spring asked the regulatory authority to grant it a 20.58 percent rate increase.

In their appellate court petition, city attorneys questioned whether Tennessee Regulatory Authority directors abused their discretion and failed to properly apply required burdens of proof when they awarded the investor-owned utility $4,079,865 in increased fees in May 2007, money that came from a 2006 rate request.

Tennessee Regulatory Authority spokesman Phil West said the city’s contentions “will be dealt with in the appeals process. Let’s just leave it at that.”

The city’s appeal was filed Friday. Chattanooga Mayor Ron Littlefield’s office announced the filing Monday in a news release.

Chattanooga Assistant City Attorney Mike McMahan said in the release that although the city has “great respect” for the Tennessee Regulatory Authority, the city “believes that the authority did not correctly apply the provisions of Tennessee law that place the burden on (Tennessee-American) to prove that it is prudently managing its system and that the costs it seeks to pass on to ratepayers are just and reasonable.”

Tennessee-American spokeswoman Kim Dalton said that in Chattanooga’s appeal of the 2006 rate case, the city “claims that the TRA’s 2007 decision was arbitrary, capricious and supported by evidence and it’s unlawful.”

“If the city really believed its claim, the city would not have delayed its appeal of the TRA decision for over a year after the new rates went into effect,” Ms. Dalton said.

In an interview, Mr. McMahan noted that the regulatory authority only issued its official written order in the 2006 rate case on June 10, 2008. That came nearly three months after Tennessee-American filed its 2008 petition seeking the latest rate increase.

“They just put the decision down within 60 days ago,” Mr. McMahan said, and the city could not file an official appeal until the written order was filed.

He declined to elaborate further on the city’s news release.

The news release points out that the management fees sought by Tennessee-American more than tripled from about $1.3 million to about $4 million between 1996 and 2006.

The city, the state’s Consumer Advocate and Protection Division and the Chattanooga Manufacturers Association have intervened in the 2008 rate case as they did in the 2006 case.

Ms. Dalton said in a subsequent statement that Chattanooga taxpayers “need to begin to pay attention to the city’s selective opposition to utility rate increases because they are wasting large sums of money to support an agenda that has nothing to do with a $3.65 a month rate increase by the water company.”

The company says $3.65 is the increase that the average residential user would pay if the rate increase is approved. The water company’s rate increase, which also affects commercial and industrial users, would increase rates overall by $7.6 million annually. The consumer advocate’s office argues existing rates should actually be cut by $1.7 million.

Tennessee-American points out that its operating costs and expenses have increased and the company needs to make about $21.4 million in capital improvements.

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