NASHVILLE — The tap water that flows from Tennessee-American Water Co.’s pipes into the average Chattanooga home is the most expensive among the state’s six largest cities, according to the state’s Consumer Advocate and Protection Division.
In testimony filed with the Tennessee Regulatory Authority, which is considering Tennessee-American’s latest rate request, state regulatory analyst Terry Buckner said officials “should be mindful” of how the investor-owned utility ranks with its counterparts in Memphis, Nashville, Knoxville, Murfreesboro and Jackson.
The five utilities are publicly owned.
“This survey clearly demonstrates that TAWC (water company) has the highest customer rates among Tennessee’s major cities,” Mr. Buckner said, citing an examination of state water utility rates published in June 2008 by the consulting firm Allen & Hoshall.
The filing by the Consumer Advocate’s division, which is part of the Tennessee attorney general’s office, also states that if Tennessee-American’s latest request for a 20.58 percent increase is approved, the water utility’s rates will have gone up nearly 45 percent since August 2003. The latest rate request is the company’s fourth in six years.
In an interview Friday, Tennessee-American President John Watson downplayed the criticisms contained in the recently unsealed testimony of Mr. Buckner and other expert witnesses being used by the state, city and Chattanooga Manufacturers Association to contest the rate request.
“We’re just not going to deal with randomly selected statements at this point designed to make the company look bad,” Mr. Watson said. “We look forward to our opponents being required to testify under oath in Chattanooga.”
The Tennessee Regulatory Authority rate hearing is scheduled to get under way Aug. 18 in Chattanooga.
“I think what will be realized here is one, we’re a very good company that provides good service to our customers at a fair price,” Mr. Watson said. “I think that the city and the Chattanooga Manufacturers Association both fail to realize and recognize the cost required to continue to provide that service.”
In the latest request, Tennessee-American, which is owned by American Water Works Co., says it needs $7.6 million more from ratepayers because of higher costs of water treatment, fuel, critical infrastructure improvement needs and costs of capital.
The company emphasizes the increase would raise the average residential ratepayer’s bill by $3.65 a month.
But the state contends that Chattanooga residential, commercial and industrial users already are being overcharged. Instead of being allowed to increase rates by $7.6 million, Tennessee-American actually needs to slash existing charges by $1.6 million, the state argues.
That still would provide the company with enough money to meet its expenses and provide a fair rate of return to American Water Works stockholders, the state says, noting what the company is seeking for shareholders has the “effect of unreasonably inflating” the rate increase by $3.7 million.
HOW THEY RANK
Here are how Tennessee’s largest cities rank statewide from highest to lowest in estimated monthly charges for the average residential user at 5,000 gallons per household.
* Tennessee-American Water Co. — $19.39 — No. 86
* Murfreesboro Water & Sewer — $18.32 — No. 70
* Knoxville Utilities Board — $18.22 — No. 68
* Jackson Energy Authority — $12.85 — No. 18
* Memphis Light, Gas and Water * — $12.47 — No. 14
* Metro Water Services (Nashville) — $12.12 — No. 11
* Memphis says its rates for city users is lower
Source: Based on Allen & Hoshall survey published June 2008; Page 23 of Tennessee-American President John Watson’s testimony in company’s March 14 rate request petition.
Two public comment sessions will be held as part of a state hearing on Tennessee-American Water Co.’s proposed 20.58 percent rate increase. The first will take place Aug. 18 from 6:30 p.m. to 8:30 p.m. at the Hamilton County Courthouse. The second will be Aug. 19 from 8:30 a.m. to 9:30 a.m. at the courthouse.
In its March rate request, Tennessee-American said its average residential customer currently pays $19.39 per 5,000 gallons of water used. Company officials then cite engineering firm Allen & Hoshall’s 2007 survey of Tennessee water utilities to say that its rates are 61 percent less than 265 utilities surveyed.
But Mr. Buckner, who has 30 years of experience examining utilities, said that when compared to other large cities in the Allen & Hoshall 2008 survey, “Chattanooga’s residential rates are the highest.”
The 2008 Allen & Hoshall survey did not include Tennessee-American. But Mr. Buckner cites the current $19.39 per month charge cited by Tennessee-American in its filing. That puts the company, which draws its water free from the Tennessee River, at No. 86 before any new rate increase.
Metro Nashville, which draws its water free from the Cumberland River, has the 11th-lowest average residential rate — $12.12 — for 5,000 gallons a month, according to Allen & Hoshall’s survey. The survey ranked Memphis 14th lowest with $12.47 while Jackson was No. 18 with $12.85. Knoxville ranked 68th at $18.22, and Murfreesboro was No. 70 at $18.32.
Chris Stanley, a spokesman for Memphis Light, Gas and Water, questioned the Allen & Hoshell figures, saying the city’s average residential rate for 5,000 gallons is actually $8.76 for residents inside Memphis’ city limits. He said the rate is closer to the $12.47 figure for customers living in Shelby County.
In defending comparisons of Tennessee-American to Chattanooga area utility districts last year, Mr. Watson noted that the company was the only local water supplier that does not impose a meter charge to tap into its system.
Moreover, he said, Tennessee-American pays developers for some or all of their water system investments made in new subdivisions as homes are built and hook onto Tennessee-American.
Chattanooga businessman Randy Baker, a North Chattanooga resident who is heading a group called Fight the Hike, said that although Tennessee-American’s No. 1 ranking among the six largest cities is a “good fact,” it remains “totally irrelevant to me.”
“I’d like to compare it to the utilities that are sitting with their main processing plant 500 feet from an endless supply of raw material,” he said, alluding to Tennessee-American’s location near the Tennessee River.
“They may very well deserve the increase,” Mr. Baker said. “But there’s not enough information out there that they’re providing to justify it. Obviously they’re a publicly traded company. They’re obviously entitled to make a profit. But we certainly think that based on what we’ve seen today, that the increase is simply unreasonable.”
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, ...