published Monday, January 24th, 2011

Consumer advocate throws water on rate hike request

Tennessee's consumer advocate says that Tennessee American Water's claim of needing a 28 percent increase in Chattanooga water rates is all wet.

In testimony filed with the Tennessee Regulatory Authority, the state's attorney general contends only $589,000 should be granted of the nearly $9.4 million in higher rates the utility is seeking this year.

The attorney general argues that rates need to increase less than 2 percent to grant the company a fair rate of return.

Terry Buckner, a regulatory analyst for the Consumer Advocate and Protection Division of the Tennessee Attorney General's Office, contends that the water company is overstating expenses, undercounting revenues and trying to earn too much profit on the water it pumps from the Tennessee River and distributes to nearly 60,000 local homes and businesses.

But John Watson, vice president and general manager for Tennessee American, says the consumer advocate's position would push it into the red and weaken needed investment in equipment and services.

"If we do not get an adequate increase in rates, we would expect to actually have an operating loss for the business," Watson said. "That would be something that has never happened before and would make it difficult for the company to continue to make the investment we need to make in our infrastructure."

The water company said it needs to raise rates to offset higher costs for taxes, stormwater fees, chemicals, fuel and labor expenses.

Tennessee American asked for a 21.6 percent rate increase in 2008, but the Tennessee Regulatory Authority granted less than 4.4 percent.

Since then, Tennessee American has invested $26 million to maintain or upgrade equipment and facilities, spokeswoman Kim Dalton said.


* 28 percent: Rate increase sought by Tennessee American Water

* 1.8 percent: Rate increase recommended by the consumer advocate

* $4.68: Average monthly residential increase sought by Tennessee American

* 29 cents: Average monthly increase recommended by the consumer advocate

Source: Tennessee American Water, Consumer Advocate Division of the Tennessee Attorney General's Office.


* The Tennessee Regulatory Authority will meet at 1 p.m. CST today in Nashville to consider whether to convene a hearing in Chattanooga on the water rate case.

* A three-judge panel of TRA directors will conduct a hearing next month to consider oral arguments from the utility and those objecting to the rate increase.

* The TRA must decide by mid-March and any change in rates will be effective this spring.

"We need to recover our expenses, which continue to rise," Watson said.

Not only the consumer advocate but attorneys and witnesses hired by the Chattanooga Regional Manufacturers Association, Chattanooga and Utility Workers Union of America Local 121, which represents the water company employees, are fighting the rate increase.

The union complains that the utility has filled only 103 of the 110 positions that the company claims in its rate filing that it needs. Watson said he recently hired nine employees and is recruiting more workers.

Regulators Resolve Rates

A three-judge panel of the Tennessee Regulatory Authority must decide on the rate proposal by March 17, six months after the request was filed.

TRA directors are scheduled to decide today whether to hold a hearing on the request in Chattanooga rather than the agency's headquarters in Nashville.

Watson said the water company supports having a session in Chattanooga to gather local input. But he said moving the entire case hearing to Chattanooga could prove costly for the state agency and the attorney general's office.

Tim Spires, president of the Chattanooga Regional Manufacturers Association, said local manufacturers that could face hundreds of thousands of extra dollars in water costs from a rate case "deserve to be heard" in Chattanooga "and they should be able to see and hear the entire proceeding" where they do business.

"A 28 percent rate increase would create a big hardship for many companies," he said.

But Watson said the average residential customer would pay only 15 cents a day extra even if the full amount of the rate increase is adopted. That would still be only about 7 percent of the overall utility bills for the average Chattanoogan, he said.

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fairmon said...

A regulated business is difficult at best. It amazes me how people can be receptive to all the added taxes and fees by the mayor and council which has significant impact on all local businesses including TAWC then object to TWAC increasing their revenue. The quality of water is critical. I rather see the powers that be have more interest in assuring that TWAC purification systems, facilities and equipment are superior than being oppressive on their revenue and reasonable profits. There is a clue in the fact that sewer and water run off fees cost more than a supply of clean water. The city manages the sewer and storm water run off processes, a private company operates the clean water supply. One can't help but wonder why city operated entities cost so much more than the privately owned one.

January 24, 2011 at 8:14 a.m.
jpo3136 said...

If they say they need the money to buy better equipment and supplies and pay taxes, let's see it. We can understand an invoice.

There's a world of difference between approving the idea of spending more money on something "because they said so" and spending that same money on observable assets.

We do not want any significant indebtedness anywhere. Any debt we carry needs to be paid off by the end of the month or year. It's the same standard we use to run our lives and our households to survive times of crisis.

Discouraging non-emergency debt is a desirable practice. Yet, show us what needs to be replaced. Show us the broken equipment. Show us the cost projections on the taxation.

In a similar but unrelated system, we had a massive sewage spill all over Chattanooga's North Shore about a year ago: the mayor apparently did not care. We know that many politicians think some regulations are only useful for increasing their costs. Perhaps they should come to understand catastrophic waterborne diseases.

The idea that manufacturing water bills will go up is below standard. The manufacturers can get to the end of the line. They are one of our leading sources of waterborne pollutants.

Water's main function for people is not commercial bulk coolant supply. Its main function is supporting life through potable, safe and tasty drinking water.

Yet, show us the bill, a detailed, itemized bill. We will probably have to wait for the trial in order to see the information; but, without it, we can't bring ourselves to a decision. We know we don't want more indebtedness. Unreasonable debt would only serve to bring us down.

But we're not interested in letting polluters set the rates. Let the main users of critical services set the rates: those of us who drink water as people, not as a business.

Perhaps we could solve part of this problem by charging all manufacturers a sewage charge for all forms of lost or discharged water. This would be to filter and cleanse and return to that business both the water and the filtered out bulk waste that they're flushing out.

If manufacturers want to suppose that they represent the city's interests in a water quality discussion, perhaps they could begin by showing us their CEOs taking a big hearty drink of parking lot stormwater.

Refuse polluters the chance to represent our clean water interests. Move the trial here so that residents can understand what's happening.

January 24, 2011 at 8:45 a.m.
fleet2011 said...

I hope the Tn Reg Authority blocks this grab for profits. The requested 28 percent increase is far beyond the utility's actual and projected needs. I seriously question the 15-cent-a-day estimated impact on each Chatt household. The utility must be counting a lot of addresses without running water. The financial impact on typical Chatt residents will be a lot more than 15 cents a day, and the increase will be an extreme hardship on many local businesses. The water utility's demand for a 28 percent rate increase is an example of greedy arrogance, and it is impossible to justify based on the utility's own financial statements. The public is getting scammed and the Regulatory Authority is our last hope.

January 24, 2011 at 9:30 a.m.
Gilligan said...

It's payback time Chattanoogans! Remember when the city tried to take over the Water Co. way back when it was owned by Americans?! Now it's owned by German's I believe and they are going to charge us for the legal fees! We are one of the very few cities that don't own their water rights!

January 24, 2011 at 11:03 a.m.
commoncause said...

Hey Gilligan. Get your facts straight. VW is owned by Germans. The water company isn't owned by a German company anymore and so what if it was. What's wrong with being German? Sure wish us voters had the same chance to comment on increased rates for sewer and stormwater-at least Tennessee AmWater has to ask the state for a rate increase which is more than our city government has to do.

January 24, 2011 at 11:41 a.m.
BigRidgeGOP said...

Last time I checked my water bill, the TAW portion of the bill was pretty cheap when compared to what we pay for wastewater services from the city of Chattanooga.

It's funny how residents tend to remain silent when it comes to the City Council raising taxes or approving increases in our wastewater and storm water rates -- all which happen without any oversight or verification of the need. I wonder what the AG's Consumer Advocate would say about any of the multiple increases we have seen from the city.

At the end of the day and even with this increase, I will still pay less for my water service than most of my other utility services.

January 24, 2011 at 1:54 p.m.
GARRS said...

I donno about YOU, but If I WERE IN TENNESSEE, I would find that guy, and make him my bitch, untill he got his head on straight.

January 24, 2011 at 7 p.m.
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