published Friday, September 21st, 2012

Tennessee American Water customers object to water rate hike plan

The Tennessee American Water facility in Chattanooga is shown in this aerial photograph.
Staff File Photo by John Rawlston/Chattanooga Times Free Press
The Tennessee American Water facility in Chattanooga is shown in this aerial photograph. Staff File Photo by John Rawlston/Chattanooga Times Free Press

By the numbers

* 24.9 — Percent increase in rates sought by Tennessee American Water

* 14.8 — Percent increase granted to Tennessee American in the last rate increase implemented in April 2011, or about half of the utility's requested 31 percent increase.

* $10.6 million — Additional annual revenue generated by the latest proposed increase

* 11.3 — Percent rate of return on equity sought by Tennessee American

* $5.94 — The average monthly water bill increase for a Chattanooga household from the proposed rate increase, boosting the average bill to $25.15.

Source: Tennessee American Water filings with the Tennessee Regulatory Authority

Fight the hike

Local governments and a business group have filed objections to the rate increase. Those intervening in the rate case include:

• City of Chattanooga

• Town of Signal Mountain

• Town on Walden

• Chattanooga Regional Manufacturers Association

What's next

A three-member panel of the Tennessee Regulatory Authority will hear arguments in the rate case on Oct. 15. The TRA must decide on any rate increase by December.

Poll
Is a 25 percent water rate hike too much?

Customers of Tennessee American Water and their political leaders complained Thursday that a proposed 24.9 percent increase in water rates, if adopted, could threaten some businesses and hurt many low-income consumers.

"The outrageous and outlandish increases that Tennessee American is asking for will affect every single person they serve and hurt many single moms and seniors on fixed incomes," state Rep. Richard Floyd, R-Chattanooga, told state regulators at a public hearing Thursday night. "They keep coming every couple of years with huge increases and, at the rate they're going, nobody is going to be able to afford their water."

Tennessee American Water, the state's biggest privately owned water utility, is asking the Tennessee Regulatory Authority for permission to boost its rates by $10.6 million a year for its 74,500 customers.

Deron Allen, president of Tennessee American, said the increase is needed to help pay for more than $27 million of pipe, valve, tank and treatment upgrades in the next 18 months and to cover higher expenses for labor, energy and chemicals since the last rate increase in early 2011.

"To operate a 125-year-old system, we need to attract capital to do the work to maintain and upgrade our equipment and service," Allen said.

The proposed increase would cost the typical Chattanooga household another $5.94 a month, or less than 20 cents a day. Even with the increase, the delivered cost of water would be less than a half cent per gallon and remain one of the cheapest utility services for most homes.

But water-dependent businesses would have to pay much more.

Dan Nuckolls, a Koch Foods senior manager, said the proposed increase would cost his chicken processing plants an extra $16,000 a month at a time the company is already battling drought-induced increases in feed costs. If the Chattanooga plant is not competitive with its costs, Koch could shift operations elsewhere, he said.

"We're very, very concerned with this increase and what it will mean to our business," said Nuckolls, a former chairman of the Chattanooga Regional Manufacturers Association, which is opposed to the rate increase.

Signal Mountain Golf and Country Club estimates the higher water rates could cost an additional $75,000 a year.

"We're pretty much living hand to mouth and there is no way we can pass that along to our members, and we can't absorb it," said Bobby Morrison, president of the Signal Mountain golf course.

The TRA granted Tennessee American Water a 14.76 percent rate increase in 2011, which was then the largest-ever rate increase for the Chattanooga utility. The water company had asked for a 30.7 percent hike, however, and Allen said the utility is trying to make up for that shortfall.

The pending rate request is the third since 2009 and, if approved in total, would bring the increase for wholesale water customers like the town of Signal Mountain to 43.7 percent.

"I know of no other business that can impose such significant increases over such a short of a time," Signal Mountain Mayor Bill Lusk said.

The three-member panel of the TRA picked to decide on the rate request will hear oral arguments on Oct. 15 and decide on the case by December. The cities of Chattanooga, Signal Mountain and Walden and the Chattanooga Regional Manufacturers Association have each filed objections to the utility's proposed rate increase.

Tennessee's consumer advocate is recommending Tennessee American be granted only about a fourth of its request, or about a 6.5 percent increase.

Tennessee Attorney General Bob Cooper said Thursday his Office of Consumer Advocate determined that the water utility should receive only $2.8 million of the requested $10.6 million increase. If regulators approved all of the request, Cooper said Chattanooga would have the highest water rates of any major Tennessee city.

"We will urge the TRA to reject this proposed rate increase as disproportionate in relation to the company's ability to make a fair profit," Cooper said.

During Thursday's public hearing, Tennessee American was praised by community groups that the utility helps support with grants and staff assistance. Representatives from Junior Achievement, the Lookout Mountain Conservancy, a local anti-gang group and New Covenant Fellowship Church each said the water company has helped their programs.

But local businessman and activist Jim Folkner equated Tennessee-American's philanthropy to millionaire John D. Rockefeller handing out dimes.

"This utility must be controlled for the monopoly it is and there's simply no justification for the rate of return they are seeking in a virtually risk-free business," Folkner said.

about Dave Flessner...

Dave Flessner is the business editor for the Times Free Press. A journalist for 35 years, Dave has been business editor and projects editor for the Chattanooga Times Free Press, city editor for The Chattanooga Times, business and county reporter for the Chattanooga Times, correspondent for the Lansing State Journal and Ingham County News in Michigan, staff writer for the Hastings Daily Tribune in Nebraska, and news director for WCBN-FM in Michigan. Dave, a native ...

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