NASHVILLE — Water rates are expected to go up 12.77 percent next year for Signal Mountain and Walden’s Ridge when the two communities’ current contracts with Tennessee-American Water Co. expire, officials say.

The increase was part of the ruling handed down Monday by the Tennessee Regulatory Authority when the agency decided on Tennessee-American’s latest rate increase request.

While Tennessee-American had asked for a 21.7 percent increase in rates paid by its Chattanooga customers, the company had not sought any increase at all for Signal Mountain and Walden’s Ridge Utility District.

Signal Mountain Town Manager Honna Rogers said Wednesday she had been out of town when the ruling came down and had not seen details on the order for higher rates in her town.

“I’d have to think about that” and study the issue further, she said. But town officials were expecting some type of increase after their current contract expired in July 2009, she said.

Officials from Walden’s Ridge Utility District did not respond to an interview request. Walden’s contract with the water company expires in March 2009.

Tennessee-American has three-year contracts to supply water in bulk amounts to Signal Mountain and Walden’s Ridge Utility District.

Regulatory authority directors, however, reduced the proposed Chattanooga increase to a trickle — 4.37 percent — and ruled the company would increase its charges to Signal Mountain and Walden’s Ridge once current contracts expire.

“The reason for this differential is that these areas have not been subject to past rate increases (in 2004 and 2006) and also because of the terms of the contracts,” authority Director Eddie Roberson said this week.

The eight-page authority ruling also provides that $75,000 of the additional revenues from Signal Mountain and Walden’s Ridge go toward offsetting Tennessee-American’s charges to commercial users.

Ms. Rogers said that, under Signal Mountain’s current contract with Tennessee-American, the town pays nearly 77 cents per 100 cubic feet for water, about $1.061 per 1,000 gallons.

“We charge a higher fee (to consumers) because we’re buying it ... kind of wholesale from them (Tennessee-American), and we have to pump it up the mountain and store it,” Ms. Rogers said.

Signal Mountain’s water department has about 3,000 customers, she said.

Tennessee-American Water spokeswoman Kim Dalton said Wednesday the company still was reviewing the regulatory authority’s order and had not finalized tariffs for any customer groups.

On Monday, the authority said Tennessee-American had 30 days to file new tariffs outlining the new rates it would charge Chattanooga residential, industrial and commercial users under the 4.37 percent increase.

The authority also directed that charges to Fort Oglethorpe and Catoosa County, Ga., go up 4.37 percent — the same increase as for Chattanooga customers.

Tennessee-American supplies water to both Fort Oglethorpe and Catoosa County under contracts. According to the company, the Fort Oglethorpe contract requires 12 months notice for new tariffs, while only 30 days notice is required for Catoosa County.

Tennessee-American’s petition request for a $7.6 million increase in charges was reduced to $1.65 million. Chattanooga, the state’s consumer advocate and Chattanooga Manufacturers Association had intervened in the rate case and opposed the full increase.

“We’ve got actual costs that are greater than the revenues will support,” Tennessee-American President John Watson said this week. “We’re going to do everything we can to control expenses, but the fact of the matter is that we will have to look at what we can do to reduce costs in a number of areas.”

Staff writer Dave Flessner contributed to this story.

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