Bill for 'alternative regulatory' methods moves through Tennessee House committee

Bill for 'alternative regulatory' methods moves through Tennessee House committee

March 6th, 2013 by Andy Sher in Local - Breaking News

The Tennessee State Capitol in downtown Nashville.

Photo by The Tennessean /Times Free Press.

NASHVILLE - Legislation that would allow monopoly utilities like Tennessee American Water Co. and Chattanooga Gas Co. to seek annual rate hikes with less review moved through the House Business and Utilities Committee today.

If the bill becomes law, customers can look for more-frequent rate hikes, an attorney with the Consumer Advocate Division of the state attorney general's office told lawmakers.

The bill "changes greatly the way rates will be set," attorney Vance Broemel told the panel.

"What this does in our opinion is make it more likely that rates will increase for business and households," Broemel said. The bill also greatly reduces the financial risk for regulated utilities, allowing them immediately to recover their capital costs and expenses, he said.

The bill, championed by Republican Gov. Bill Haslam, creates "alternative regulatory" methods.

For example, it would allow investor-owned utilities to seek annual rate reviews and recovery of expenses instead of going through a full-blown rate proceeding before the Tennessee Regulatory Authority.

Broemel warned that a provision allowing companies to seek annual reviews based on the methodology in their most recent rate case could mean no examination of their rates of return on equity.

Another Consumer Protection Division attorney, Ryan McGehee, said utilities could "cherry pick" areas for rate increases without regulators looking at their overall earnings.

TRA Chairman Jim Allison downplayed such concerns. He said annual rate reviews and automatic "trackers," allowing higher charges for some expenses like fuel, "is not new stuff," and already is used in some states, including Georgia.

"The attorney general is focused in a very narrow sense on the rate of return," Allison said. "But what they've missed is before TRA will allow anyone to enter into one of these, we have to go into a process to establish that this is in the public interest."

Businesses and residential users would be protected, Allison said.

"If the rate of return gets out of kilter we can open up a rate case," Allison said.

In a full-fledged rate case, regulators look at a utility's overall finances to balance a reasonable rate of return with consumer protection.

In recent years, Tennessee American, which supplies water to customers in Chattanooga, parts of Hamilton County and some areas of North Georgia, has aggressively pushed double-digit increases.

That's led to major battles before the TRA with Chattanooga and various other entities.

House Majority Leader Gerald McCormick, R-Chattanooga, who is handling the administration's bill, said the fights mean utilities often "hire lots of lawyers and spend a lot of money."

Outgoing Chattanooga Mayor Ron Littlefield said Tuesday he's still seeking details of the bill. But Littlefield said he is wary of giving Tennessee American Water Co. "greater voluntary capability to increase their rates."

"We've had to fight them every time," Littlefield said. "They come up with double-digit increases on a fairly regular basis and it costs a lot of money to contest it."