NASHVILLE - Gov. Bill Haslam is calling for a review of the Tennessee Regulatory Authority and is raising the possibility of abolishing the agency, which sets rates and service standards for most for-profit utilities.
"Should there be a TRA, given the change in regulatory function?" Haslam asked in an interview with the Chattanooga Times Free Press. "If so, what size should it be?"
He suggested that functions of the agency, an independent entity with directors appointed by the General Assembly and governor, might better be folded into the executive branch.
The TRA, which wields both judicial and executive powers, oversees rates for some investor-owned telephone utilities as well as for investor-owned water, natural gas and electric utilities. Regulated companies include Tennessee American Water Co. and Chattanooga Gas Co.
In 2009, state legislators approved market regulation for telecommunications, doing away with a price cap on phone and other services and removing them from the TRA's jurisdiction.
Since becoming governor in January, Haslam, a Republican, has pushed "top to bottom" reviews of state operations in pursuit of what he calls cost-efficient, effective and accountable state government.
TRA Chairwoman Mary Freeman said there's "definitely a role" for the TRA.
"You have 49 other states that have public service commissions, and though we serve different areas, I think it's a necessity," she said.
Freeman said the TRA's mission is regulating monopolies or near-monopolies and "trying to find that balance with the consumers."
The agency has about 70 employees, including directors, attorneys and experts in utility operations and rates. In addition to its regulatory duties, the agency fields consumer complaints, conducts gas pipeline safety inspections, runs Lifeline linkup programs and operates telephone discount programs for the needy.
TRA Director Eddie Roberson, who grew up in Chattanooga, has spent 36 years at the TRA and its predecessor, the Public Service Commission. He said it's appropriate for the governor and lawmakers to look at the agency's function and performance.
"I think that it is relevant," he said of the TRA, "but I think it is also relevant for the agency to be reviewed."
Senate Government Operations Chairman Bo Watson, R-Hixson, said the oversight panel already is moving on Haslam's request to review all board and commission operations. Adding the TRA is no problem, he said.
"All ideas need to be on the table," Watson said.
House Majority Leader Gerald McCormick, R-Chattanooga, said he supports the review but isn't eager to see TRA brought into the executive branch.
While he trusts Haslam, McCormick said, problems could develop at an agency where any number of political appointments have been made.
Haslam raised questions about the TRA last week with House and Senate leaders, said McCormick, who has pushed telecommunications deregulation in recent years.
"I think the general consensus is there are some big utilities or monopolies or near-monopolies that need to be watched. I don't think anyone wants to get rid of that function of government - they're just looking for better ways to deliver that service."
If necessary, he said, rate and service regulation could be handled by the state comptroller or secretary of state's office. Those officials are named by the Republican-controlled legislature.
McCormick said state lawmakers took issue with Haslam over his plan to appoint a Democratic supporter, Andrew Fowlkes, as a TRA director.
He said the idea of appointing Fowlkes, who is black, to meet diversity goals drew "some negative feedback" because Republicans believed a black Republican could be found to replace Freeman, who also is black.
"I'm sure he [Fowlkes] is a great guy ... but he's a Democrat, and I think a lot of our members didn't feel comfortable supporting him for that position," McCormick said.
Speaking to the Times Free Press, Haslam acknowledged GOP lawmakers' opposition.
"Yeah, well, to be frank, there was some concern there," Haslam said of the nomination, which ultimately was dropped. Fowlkes could not be reached for comment.
Haslam's administration also dropped a push to cut the number of TRA directors from four to three as a cost-saving measure.
Freeman and Roberson, both Democrats whose terms are to end July 1, are expected to serve until replaced or a position is abolished.
When pressed whether regulation is needed, Haslam conceded that many companies overseen by the TRA are monopolies not subject to a competitive market.
"Maybe there is a need," he said. "I don't know enough to make a final call yet. Or maybe an existing state department can do it. We have state departments that oversee a lot of things."
Attorney Rick Hitchcock, who has represented Chattanooga before the TRA on battles over Tennessee American Water Co. rate hikes, said for-profit utilities' services and rates should be regulated.
He said lawmakers believe telecommunications are effectively regulated through "broad competition" rather than government rate-setting.
Tennessee American or other monopoly providers are a different story, he said.
"There is no other place for people who live in their current service area to go," Hitchcock said. "That service area is defined, and basically no other provider can come into that service area without TRA approval. You've got no opportunity for there to be effective competition under the current scheme."
If lawmakers are unhappy with the TRA's process, they could reform it, Hitchcock said.
Rate cases are long and costly because "utilities get to charge their ratepayers all the costs of their regulatory proceedings."
That might change if each side paid its own costs, he suggested.
Tennessee American attorneys have blamed rising costs of ratemaking on voluminous information requests brought by the city, the Chattanooga Regional Manufacturers Association and the state attorney general's Consumer Advocate Division.
Tennessee American spokeswoman Kim Dalton said by email that "generally, we believe there is value in the state regulatory process that provides third-party oversight and ensures the right balance between customer and company needs."