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Water war comes to Chattanooga

By: Dave Flessner
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By: Andy Sher
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Ron Littlefield
John Watson

When the Tennessee Regulatory Authority comes to Chattanooga on Monday to consider the largest proposed water-rate increase in the city’s history, the state agency will navigate through what may be the most turbulent rate hearings in its 11-year existence.

Tennessee-American Water Co. and its critics have been warring for months through legal filings over the investor-owned company’s effort to win a 20.58 percent rate increase. In recent weeks, the fight has developed into a full-fledged public relations blitz with overtones reminiscent of Chattanooga’s failed bid to take over the company a decade ago.

The city, county, Chattanooga Manufacturers Association and other business and civil rights groups are rallying around a campaign to “Fight the Hike” proposed by Tennessee-American. Chattanooga Mayor Ron Littlefield said the utility got more than it deserved last year when rates were raised 12.3 percent and that asking for more now “is the height of audacity.”

“We’re mounting a more vigorous challenge because we’re afraid of what might come next year,” he said.

Tennessee-American officials, however, insist their proposed rate increase — although bigger than any prior such request — is still smaller in dollar terms than other utility increases in the past year. The state’s biggest privately owned water utility says the increase is needed to fund a $21.3 million capital program over three years and to cover soaring costs for gas, chemicals and electricity that are not regulated by the state.

Tennessee-American General Manager John Watson said the typical water bill in Chattanooga has increased less than the inflation rate since 1995.

“Even if the full amount we requested is approved, the typical customer’s bill will still be only about $20 a month, and water will still be priced at less than a penny a gallon,” he said.

In a mailing to its 75,000 customers last week, Mr. Watson said the “Fight the Hike” campaign is “doing more to misinform than inform.”

But Ray Childers, president of the Chattanooga Manufacturers Association, insists that he and others involved in the campaign simply are trying to make sure the Tennessee Regulatory Authority knows that Chattanoogans are tired of repeated water-rate increases.

“They seem to be coming back more frequently for larger and larger increases, and that needs to stop,” he said.

Legal fees mounting

The Chattanooga Manufacturers Association and the city jointly are paying for a legal challenge to Tennessee-American’s rate filing. So far, the city has spent more than $50,000 this year fighting the water rate increase, and city attorney Mike McMahan said legal costs are likely to go much higher.

Randy Baker, a North Chattanooga developer and chairman of the “Fight the Hike” campaign, said the request for a water-rate increase in Chattanooga is part of $271 million in water-rate increases being sought by the parent company of Tennessee-American — New Jersey-based American Water Works — in nine states.

“This reflects a pattern of doing business and, as far as we’re concerned, asking for $11 million of additional revenues since May of 2007 in Chattanooga, as Tennessee-American has done, is completely unacceptable and unjustified,” he said.

Bill Sudderth, a local developer who serves on the Tennessee-American board of directors, insists the local rates are driven by rising costs and the need to invest in improvements in the 138-year-old business. The costs for chemicals to treat Tennessee-American water alone are expected to jump by more than $500,000 next year, he said.

“I don’t know why we’ve had this emotional campaign that sort of tries to circumvent the orderly process of the TRA,” he said.

Tennessee Regulatory Authority Director Eddie Roberson, one of three officials who will conduct the hearing this week, said they will approach the rate “to make sure that everybody gets a fair hearing.”

“We act in this case similar to a judge in that we hear both sides,” he said.

Former Regulatory Authority Director Lynn Greer, a businessman who served from 1996 to 2002, said that when he was on the board, he tried to ignore news accounts, political appeals and public relations campaigns over rate cases.

“I paid absolutely no attention to anything but what was said in the courtroom,” he said.

29.8 percent increase

Since 1995, the Tennessee Regulatory Authority has granted Tennessee-American rate increases totaling 29.8 percent, or only about half of the 55.3 percent requested by the utility in the same period.

The city is appealing the Regulatory Authority’s increase granted in May 2007, claiming the board didn’t review Tennessee-American’s request adequately. Mr. McMahan acknowledged getting an appellate court to overturn the authority’s rate decision “is a very hard hurdle to overcome.”

“But with all due respect, we think the TRA ignored some very important proof in the case,” he said.

Mr. Littlefield, who previously has supported efforts by the city to buy the water utility, said he still is interested in studying whether Eastside Utility District could expand its water service to offer competition to Tennessee-American.

“Looking down the road in the future, perhaps we may need to address that,” he said.

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