Chattanooga natural gas users will see their gas bills go up about $23 a year after a state authority ruled this week that the city can charge the gas distributor a franchise fee.
A 30-year-old agreement between Chattanooga and Chattanooga Gas Co. was renegotiated last year and changed from a flat rate to a percentage of gas sales. The new agreement will bring in more money for the city than the former fee.
Under the old agreement, the fee was included in customer's bill. The new fee will be broken out on bills and passed along to consumers, officials said.
Chattanooga Gas Co. officials have said the average residential customer's gas bill will rise by about $1.87 a month.
City Attorney Mike McMahan said the fee becomes effective July 1.
Monica Smith-Ashford, a senior policy adviser with the Tennessee Regulatory Authority, said the three-member panel unanimously approved the franchise agreement Monday.
She said the Consumer Advocate Office of the Tennessee Attorney General had stepped in to make sure Chattanooga residents would not be charged twice - once for the rate and once for the fee.
"They wanted to make sure the citizens weren't paying more than they should," she said.
26,648: Chattanooga Gas Co. customers in Chattanooga
$711.96: Average yearly residential bill
$59.33: Average monthly residential bill
$1.87: Average monthly residential fee in first and second years
Source: Chattanooga Gas Co.
Tami Gerke, spokeswoman for Chattanooga Gas Co., said Wednesday the fee is a cost of doing business.
"The fee is a pass-through cost to customers within the city limits of Chattanooga," she said. "The increase goes directly to the city to offset costs associated with the company's use of the city rights of way, such as street inspections, repaving and administrative costs."
That increase would start at 3.15 percent of a customer's bill this year and rise to 5.15 percent over time.
Last year, the gas company paid Chattanooga a flat fee of $355,000 under the old agreement. The new agreement means the city will collect $1.2 million the first year and, over five years, the payment would rise to about $2.2 million, city records show.
The City Council approved the franchise agreement in February.
Contact Cliff Hightower at email@example.com or 423-757-6480. Follow him on Twitter at twitter.com/CliffHightower.