Signal Mountain fights water hike hitting wholesale customers around Chattanooga

Signal Mountain fights water hike hitting wholesale customers around Chattanooga

July 6th, 2012 by Kate Belz in News

Morning traffic passes the Tennessee American Water Company icon, Phillip D. Glass.

Photo by Ashlee Culverhouse /Times Free Press.


Current rates

Signal Mountain -- $1.03 per cubic foot (748 gallons)

Walden -- $1.21 per cubic foot

Catoosa County and Fort Oglethorpe -- $1.07 per cubic foot

Proposed rate change

$1.15 per cubic foot, and $2 per each additional cubic foot after 45,000 have been used.

As Chattanooga steps into the ring to fight a proposed 24 percent water rate increase, Signal Mountain is starting its own battle against a double-digit rate increase it learned of this week.

The town filed a petition Thursday to protest the proposal by Tennessee American Water for an increase of about 11 percent, one that could go higher depending on whether usage crosses a 33.6 million gallon-per-year threshold set by the company.

Tennessee American filed a rate change request about a month ago with the Tennessee Regulatory Authority for its wholesale customers -- which include Signal Mountain, Walden, Fort Oglethorpe and Catoosa County. But Signal Mountain Town Manager Honna Rogers said the town wasn't notified about the proposed hike by Tennessee American.

"I found out about it through a third party, and Tennessee American met with us after we requested a meeting," Rogers said. "When we did meet, they did not provide any documentation for us to study these changes. We had to find that ourselves."

Kino Becton, Tennessee American's manager for government affairs, said the company typically does not tell its customers of proposed rate changes before filing requests with the TRA.

"We are meeting with our customers to make them aware this has been proposed," he said.

Signal Mountain buys water from the company and then sells it to residents.

The wholesale communities now pay different rates, but the water company hopes to bring them all under a flat rate that will take the form of a "tiered system," based on water usage, explained Becton.

"It's a standardized system that allows for across-the-board rates," said Becton. "It's not something we just arbitrarily came up with. It makes it fair for higher users and lower users."

Those communities that use under 33.6 million gallons each year will pay $1.15 per cubic foot -- or 748 gallons. Above that, the rate will be $2 per additional cubic foot. With the new flat rate, Walden's water rates actually decrease.

But Rogers said it's unfair to create a flat rate for communities that buy wholesale.

Signal Mountain has traditionally paid a discounted rate because it pays to pump its own water up the mountain, while Walden pays extra for the company to pump its water.

"One of our biggest issues with this is that they are making us all pay the same, and we are just not the same," said Rogers.

Signal Mountain paid more than $200,000 on electricity to run its pumps this year, she said.

Some other officials who will be affected if the plan is approved could not be reached or wouldn't comment Thursday.

Interim Catoosa County Manager Ann Rice said she has not yet met with Tennessee American Water about its increase.

Officials with Fort Oglethorpe and Walden's water utility did not return calls.

In June, Tennessee American Rate Director Gary Verdouw filed testimony with TRA stating that the close concentration of these wholesale customers is considered a "significant business risk."

Combined, the communities make up 3 percent of Tennessee American's total water sales. If one or several communities decided to leave, it could be a deep financial blow to the company, Becton explained.

Verdouw testified that in September 2011, Walden's Ridge Utility District officials told the company they were planning to terminate their contract and either buy water from Hixson Utility District or restart their treatment plant.

It's unclear how the rate changes would affect companies and residents in the communities. Signal Mountain charges a standard per-gallon rate to all its customers. If the water hike is approved, the town's rates would have to rise and officials may have to consider special fees for the highest water users, Rogers said.

Exceeding the proposed 33.6 million gallon limit would cost Signal Mountain about 93 percent more for each additional cubic foot of water than now, she said.

That typically only passes that amount in the hottest summer months. It has happened only twice so this year, and five months in 2011, Rogers said.

Becton said the price tag has to increase at that point because of "infrastructure and operating costs."

Last year, Signal Mountain -- along with other Tennessee American customers, including Chattanooga -- battled a rate increase that ended up at 14.75 percent after starting at 30.5 percent.

The TRA has less than six months to decide on the request.

"How the town will handle this -- if it passes -- we just don't know. And we probably won't know until the end of the year," Rogers said.