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Chattanooga: Soaring costs hurt utilities

By: Ben Benton
(Contact)

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Craig Mullinax
David Ashburn

Almost everyone in Southeast Tennessee and North Georgia is paying less for water than Chattanoogans who buy from Tennessee-American Water Co.

Chattanooga’s privately owned Tennessee-American Water Co. drew fire when it sought a rate increase to fund a $21.3 million capital program and to cover soaring costs for gas, chemicals and electricity.

Southeast Tennessee and North Georgia utility officials said public water utilities can operate more cheaply than private companies because they don’t have to make a profit and they answer to their customers.

But they said they aren’t spared the financial impacts of improvements, expansion, labor expenses and rising material costs.

“We’re seeing escalating prices in power costs. We’re seeing escalating prices in chemical and material costs,” said Craig Mullinax, manager of the water division at Cleveland Utilities.

Rising costs forced an 8.5 percent rate increase in July, Mr. Mullinax said. But Cleveland’s water customers understand the situation, he said.

“System improvements, trying to provide for future growth, all those things are a part of the overall budget process,” he said. “Typically, most folks understand.”

Jerry Lee, chairman of the utility in Catoosa County, said rates are set by publicly-elected officials who represent customers.

Mr. Lee said excess revenues for the district go back into the operation for improvements.

Catoosa Utility has raised rates twice in 11 years, most recently a $1 increase on monthly bills to start a fund for a filtration plant, he said. That increase was an investment to reduce future costs, he said.

Kim Dalton, Tennessee-American’s external affairs specialist, said the difference between public and private operations can’t be judged on rates.

“Our (minimum monthly) rate of $10.42 includes funds for services that the other utilities charge for like tapping fees, new customers deposits, new meters,” Ms. Dalton said. “Those items can be costly.”

She said people should understand that a private utility also falls under stricter regulations, especially when seeking a rate increase.

“Other agencies don’t have to go through what we’ve gone through just to ask for an increase,” she said. “And it’s a six-month process.”

But Ms. Dalton said the same factors that affect rates for public utilities — materials and power costs, improvements and labor expenses — also apply to private ones.

David Ashburn, with Walker County, Ga.’s water department, said that even the source of water has an impact on rates.

“If you’re pumping water that’s not under the influence of surface water (water in rivers and creeks), then you don’t have to run it through a water treatment facility,” Mr. Ashburn. “You just inject it with chlorine and send it on its way.”

Treatment plant operations use lots of electricity and chemicals that cost more now than they did just a few months ago, he said.

Mr. Ashburn said utility costs and rates also can be affected by leaks, age of infrastructure and debt repayment.

Lori McDaniel, with Georgia’s Dalton Utilities, said the utility there has “several different customer classes.” Ms. McDaniel said more expensive projects in some areas may require higher rates.

Officials in Monteagle, Tenn., just restructured their rate system to encourage people to conserve and to “reflect costs and construction,” said Jim Boynton, the public works director.

The restructuring reduced the minimum monthly bill from $22 to $16.60, but the water rate increases with usage, Mr. Boynton said.

“We charge $9 for every 1,000 gallons (above the 2,000-gallon minimum), so there’s an escalator for every 1,000 gallons used,” he said.

Mike Patrick, Dayton, Tenn.’s water superintendent, said the service there has tried to absorb rising expenses, but the cost of treatment chemicals forced an increase in July.

He said he hopes the utility can temporarily absorb the looming 20 percent TVA electric rate increase that takes effect in October. But his and most other utilities’ rates eventually will go up in response the increase, he said.

“It’s a domino effect with gasoline prices,” he said. High fuel prices affect all other costs, he said.

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