Chattanooga's biggest users of natural gas said Tuesday their businesses could suffer if a proposed increase in Chattanooga Gas Co. rates is approved as requested.
"We're in a competitive business, and any increase in our costs cuts into our margins and also cuts into our jobs," said David Klinger, commodities manager for McKee Foods Corp., the maker of Little Debbie Snacks in Collegedale. "Over the past few years, our margins have already been squeezed, and any price increases hurts our business."
But Chattanooga Gas Co. officials counter that many customers actually could save money from their rate proposal by taking advantage of new conservation programs funded by the rate changes. The utility is proposing to use nearly $800,000 a year to help fund low-income weatherization programs, provide free programmable thermostats and offer rebates for more energy-efficient furnaces and water heaters.
"Our rate plan is designed to help consumers lower their natural gas bills by aligning our interests as a utility with those of our consumers to use less energy," said Larry Buie, general manager for Chattanooga Gas.
The company is seeking an extra $2.6 million, or about a 4.1 percent increase for residential gas users, to cover increased operating costs since Chattanooga Gas proposed its last rate increase in 2006. Since then, Mr. Buie said, inflation has risen nearly 7.5 percent and 20 other states have adopted rate plans to encourage more consumer conservation.
Two decades ago, Chattanooga Gas spent more than $1.5 million a year marketing natural gas to sell more of its product. But the company since has slashed its local staff from 165 employees to only 45 workers by cutting out most marketing programs and consolidating staff with its corporate parent -- AGL Resources Corp. -- in Atlanta. The newest rate change would help ensure the utility covers its costs even if it gets its customers to use less gas.
Ryan McGehee, an attorney for the consumer advocate division of the Tennessee attorney general's office, said Chattanooga Gas "should not be guaranteed a profit regardless of what they sell." If the utility gets such a guarantee, then its return on equity should be cut, he said.
WHAT'S NEXT* A 3-member panel of the Tennessee Regulatory Authority will hear the rate case next Monday in Nashville.* The Tennessee Regulatory Authority must decide on any rate change by mid May.* Any change in gas rates will become effective on June 1.BY THE NUMBERS* 4.1 percent -- Proposed increase in residential gas rates by Chattanooga Gas Co.* 7.5 percent -- Inflation increase since the last Chattanooga Gas Co. rate increase proposed in 2006* $34 -- Average annual increase in yearly costs for natural gas for typical homeowner under proposed rate hike* $280 -- Potential yearly savings from using all of the company-sponsored energy savings measures in the rate case* 45 -- Number of employees of Chattanooga Gas Co., down from 165 in the 1980sSource: Tennessee Regulatory Authority, Chattanooga Gas Co.
The consumer advocate is urging state regulators to grant only $41,000 of additional revenue for Chattanooga Gas, or less than 2 percent of the amount sought by the utility. The company wants a rate of return on its equity of about 11 percent, but the consumer advocate claims the company needs only about a 9 percent return on a much smaller capital base.
Local manufacturers complained that in the current market they have no such profit guarantees and many are struggling to keep business. The largest local gas user, NA Industries, is moving much of its operation to Houston in the next two years.
Derrick Watson, an official for NA Industries, told regulators that the remaining business in Chattanooga "needs to remain competitive" and avoid utility increases such as that proposed by Chattanooga Gas.
At Burner Systems International, the proposed gas rate increase would cost the burner maker an extra $8,000 a year.
"That makes it harder for us to compete for business," BSI Executive Peter Poggi said, noting that some contracts already have been lost to Chinese competitors.
Chattanooga Manufacturers Association President Ray Childers said his group will continue to oppose any rate increase, although he said he is pleased the utility is proposing to shift more of the costs away from major gas users after a recent cost-of-service study.
"You don't create jobs by raising gas rates," Mr. Childers said.
At the urging of the manufacturers group in previous rate cases, state regulators have granted Chattanooga Gas only about one fourth of what was requested. In 2004, Chattanooga gas requested $4.6 million but was granted only $642,777. In 2006, a $5.8 million rate request yielded the company only $1.9 million.
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Article: Chattanooga: Manufacturers object to gas rate increase