Water rates may rise 28% this week

Water rates may rise 28% this week

March 13th, 2011 by Ellis Smith in News

The Tennessee American Water Co. is poised to push through a 28 percent residential rate increase - the largest in Chattanooga history - as soon as this week, according to statements the company made to regulators.

An increase of that magnitude would cost the average residential customer more than $50 per year. Industrial or other big water users could end up paying thousands of dollars more.

Tennessee American could raise rates on or after Thursday, company attorney Dale Grimes told the Tennessee Regulatory Authority last week, even though the state board will not have ruled on the utility's rate request.

This would be the first time that Tennessee American has raised rates without prior state approval. Officials said in hearings that the company is acting because the rate case has dragged on for six months and resulted in repeated requests for new information.

WATER COSTS

• The average residential customer uses 4,405 gallons of water and pays $16.62 per month.

• Tennessee American Water wants to raise the average rate by 28 percent, or about $4.68.

• The increase will amount to about 15 cents per day.

Source: Tennessee American Water

Meanwhile, water company officials say, the system needs money for maintenance and capital projects.

State law allows Tennessee American to raise rates if regulators take longer than six months to rule on a request, officials said. But the utility could be forced to give back some of the money if the TRA later approves a lesser increase than the company is seeking.

"It's discouraging that they're taking these steps ahead of the TRA, that they've ignored the voices of those people who are struggling to survive," community activist Joe Rowe said Friday.

The impact

Under the new rate, the University of Tennessee at Chattanooga could owe an additional $115,000 more per year, on top of tens of thousands of dollars in stormwater fees, said Dr. Richard Brown, vice chancellor for finance and operations.

"My primary concern is keeping the cost of education affordable," Brown said. "If the state doesn't appropriate funds for it, you have to pass it along to students who are attending institutions."

At the Community Kitchen, assistant director Jens Christensen said the increase would raise the charity's water bill by $8,540 to $36,540 a year.

"Something like that, we have to ask the people who support us already to assist us in making up that difference," Christensen said.

Officials with Tennessee American Water, the state's biggest private water company, said Friday the company still is weighing its options.

Company President John Watson noted that "state law allows private utilities to place the proposed increase into effect while a case is under review by the Tennessee Regulatory Authority."

Chattanooga has opposed Tennessee American's rate proposal.

"The city has been disappointed in the repeated extremely large rate requests that they have made, and the city would be extremely disappointed if they implemented a rate increase prior to the TRA having an opportunity to be heard," said Rick Hitchcock, an attorney for the city.

The company view

Water company officials say the additional money is needed to maintain aging infrastructure and make capital improvements.

The company has taken issue with reports from the water workers union that existing valve infrastructure is in poor condition. But Watson acknowledged that "the company cannot continue to perform valve operation and maintenance in the long term" without the infusion of cash.

Grimes spoke at a supplementary rate hearing to determine how much of the company's $1.24 million in legal fees from this rate case it may pass on to consumers.

The fees, nearly twice the initial estimate of $645,000, pushed the company's requested rate increase to more than $11.5 million, according to TRA Director Eddie Roberson.

Roberson wants a hearing to review the utility's costs for filing and processing its rate request. But Grimes said another TRA hearing, tentatively set for the week of March 28, will delay further what he said is a needed rate increase to keep Tennessee American operating in the black.

Henry Walker, an attorney for the Chattanooga Regional Manufacturers Association, said nothing is set in stone until the TRA rules.

"You won't know until you get your bill," Walker said.

The TRA must render its ruling within nine months of the company's filing, which was Sept. 17, 2010.