Chattanooga water bills rising to pay for legal squabble

Chattanooga water bills rising to pay for legal squabble

August 24th, 2011 by Dave Flessner in Business Around the Region

Legal liquidity won in 2008 rate case

Ratepayers and taxpayers have had to pay for the costs of lawyers and expert witnesses involved in recent Tennessee American rate cases:

For the 2008 rate request that yielded the water utility another $1.65 million, water users will pay $550,000 and Chattanooga taxpayers $277,641 to cover legal and expert witness expenses in deciding the rate case.

For the most recent rate request that yielded the water utility another $5.5 million a year, ratepayers also must pay $645,000 in legal and witness expenses incurred by Tennessee American and an estimated $250,000 for legal expenses for the city's challenge to the rate filing.

Sources: Tennessee Regulatory Authority, city of Chattanooga

Chattanooga water bills will go up by an average of 62 cents a month for the next six months to pay for the utility's legal expenses in a 2008 rate dispute that has continued in the courts and before state regulators for the past three years.

By a 2-1 vote, the Tennessee Regulatory Authority agreed to allow Tennessee American Water Co. to charge its consumers another $275,000 to recover legal and administrative expenses previously denied by the TRA. The state agency was required to reverse its earlier decision to pay only half of the utility's legal bills after the Tennessee Court of Appeals ruled in February that such expenses can be charged to ratepayers.

In that 2008 rate case, state regulators decided that the water company was due less than 22 percent of what it requested, granting only a $1.65 million increase in annual rates. But the court said utilities are entitled to recover from ratepayers the expense of their rate filings. That decision ensures the utility will add another $550,000 on to the 2008 rate increase, plus another $645,000 for the costs of the most recent 14.75 percent increase that yielded the company a record $5.5 million increase.

Water users must not only pay for the costs incurred by the utility in such rate requests, city taxpayers also have had to pay more than $500,000 to hire outside attorneys and experts to fight the utility's last two rate increases, according to TRA and city of Chattanooga records.

"There's definitely too much spent hearing these rate cases and anything we could do to help lower these costs would help every consumer," said Tim Spires, president of the Chattanooga Regional Manufacturers Association, which also has had to spend its money to intervene in the water company rate cases.

TRA Chairman Eddie Roberson said he is interested in finding lower cost methods to hearing and resolving rate requests from Tennessee American and other utilities. Roberson has scheduled a workshop in September for TRA staff, regulated utilities and other interested parties to consider cheaper ways to resolve disputes over rate requests.

"I believe we need to look at taking an innovative approach to reducing expenses to the parties, and ultimately to ratepayers, of all of our proceedings," Roberson said. "The promotion of judicial economy is good public policy."

Deron Allen, president of Tennessee American Water, said Tuesday he welcomes the TRA's attempt to help limit the expenses involved in hearing rate requests. In the meantime, the utility will file a proposed tariff next week to include a line item on September water bills for the extra expense, Allen said.

"We're following the process, but I don't think anybody is satisfied when you have to go the legal route" of appealing the TRA decision to an appellate court, he said. "We'll certainly support in the future any ratemaking strategy that makes things simpler and ensures we can take care of our customers."

Tennessee American implemented its biggest water rate increase in history this spring, but the hike was still only about half what Tennessee American requested. The utility has pared its staff to about 100 employees, even though regulators authorized the utility to employ 110 workers.

"We had to make some changes within our budget given that we were granted less than what we thought was appropriate," Allen said.