Tennessee American Water buys 'dilapidated' Whitwell, Tenn., water system

Tennessee American Water buys 'dilapidated' Whitwell, Tenn., water system

December 17th, 2013 by Ellis Smith in Business Around the Region

Deron Allen

Photo by Tim Barber/Times Free Press.

Tennessee American Water has closed a deal to buy the City of Whitwell's water system for $1.5 million, picking up 2,800 new customers in Marion and Sequatchie Counties to join more than 350,000 in Tennessee and North Georgia already receiving service from the privately-held water company.

It took more than a year to buy what one industry expert has called Whitwell's "dilapidated" water system. The purchase will place the burden for an estimated $5 million in repairs on the shoulders of Tennessee American, which is owned by Voorhees, New Jersey-based American Water.

"With this acquisition, we will expand our existing footprint of operations in Marion County, and help ensure local residents have access to a long-term, reliable water supply foryears to come," said Deron Allen, president of Tennessee American Water.

Tennessee American said in a news release that it will make investments to renew and replace the aging water infrastructure over the next few years, as an attempt to "help address the ongoing water losses in the system, increase the water supply for local residents, improve service reliability for outlying residents and upgrade the water treatment plant to meet state and federal rules."

But Allen and other officials have offered assurances that the financial strain of rehabilitating Whitwell's water won't be shared by customers outside of the city. Instead, the company will manage the Whitwell and Chattanooga water systems separately, keep costs separate and set rates -- which are based on costs -- separately, said Kevin Rogers, manager of operations at Tennessee American.

"There will be an independent manager who will run that district for us -- it will be its own operation," Rogers said. "There will be no sharing of equipment, no sharing of supervisory resources, to a large extent because it's 30 miles away and it's not very practical to try to intermingle those things."

However, the financial firewall between the Chattanooga and Whitwell operation won't stop Tennessee American from saving money to fix up the neglected municipal water system, he said.

Parent company American Water can exercise significant buying power when purchasing chemicals and other equipment, allowing them to get better deals than the city alone could negotiate. And as a publicly-traded company, American Water can also more easily secure a pool of investment dollars than a municipality, Rogers said.

"We have the ability to have access to cheap capital, we have strong buying power, and we are going to be able to focus that operation, with its management team over there, and build long term plans in a systematic process to improve that water system," he said.

Contact staff writer Ellis Smith at esmith@timesfreepress.com or 423-757-6315.