Tennessee American Water will seek to hit the brakes on rising regulatory and litigation costs arising from water rate increases through a more streamlined system of surcharges.
The new rate system, similar to that used by TVA to pass on its fuel costs, would reduce the frequency and expense of pitched courtroom battles, and instead make surcharges contingent on a number of factors, such as the cost of power.
But such a change still must be approved by state lawmakers or regulators who may be reluctant to give the utility such rate flexibility.
State Rep. Richard Floyd, who proposed legislation last session to limit the utilty's frequency of rate increases, said Thursday he would have to study Tennessee-American's proposal.
"Right now, Tennessee American Water is a rate making company that happens to own a water company, and I totally disagree with the TRA allowing them to get by with the outrageous increases and the courts allowing them to pass their legal expenses to the consumer," he said.
The legal fees the Chattanooga utility incurred from its last rate increase but excluded from the utility's previous rate hike - about $275,000 - will be passed on to customers via a 62 cent surcharge on their bill for six months, said Tennessee American's new president, Deron Allen.
The utility will call it a "temporary fee rate case surcharge," according to spokesman Kino Becton.
Under the new system, the company hopes to extend the amount of time it can go between legal fights, which Becton said will save money for the company and its customers.
"We don't want to have to ask for more money," he said Thursday. "When we do, we want those rates to go up at less of a steep incline."
The company is also working to implement what it calls a distribution improvement cost surcharge. Under the rules that regulators and lawmakers are considering, the surcharge could be raised only to cover the replacement of broken or blocked pipes, but not installation of new pipes for new customers, he said.
If an increase in the surcharge meets all the legal criteria, the Tennessee Regulatory Authority "would go through a checklist" rather than a drawn-out series of hearings and filings, Allen said.
Allen says that the surcharge wouldn't be used as an end-run around the TRA to increase revenue, but would be combined with cost-cutting measures designed to be revenue neutral.
"We're doing anything we can do to reduce costs," he said.
In the meantime, there are "no concrete plans" to begin another rate increase battle, he said.
If approved, the proposed surcharges could go into effect within a year.