Chattanooga officials question Tennessee American Water's rate increase proposal

Chattanooga officials question Tennessee American Water's rate increase proposal

June 19th, 2012 by Cliff Hightower in News

The Tennessee American Water Co. File photo.

Photo by Angela Lewis/Times Free Press.

BY THE NUMBERS

• 75,000: Number of Tennessee-American Water Co. customers in Chattanooga and North Georgia

• $25 million: Water company's proposed capital expenditures over the next two years

• $1.1 million: Tennessee-American Water Co.'s estimated cost of this rate case

• $10.6 million: Estimated annual revenue increase from rate hike

Source: Chattanooga, Tennessee-American Water Co.

POLL: Should the city fight the water rate hike?

City Attorney Mike McMahan said Monday he hopes to convince Tennessee American Water officials that they shouldn't be asking for a proposed 24.9 percent rate increase.

And he'd like to meet with company officials before they approach the Tennessee Regulatory Authority, which will decide whether to grant the increase.

"That's certainly the objective," McMahan said. "But that hasn't happened."

Tennessee American officials said Monday they are willing to discuss their rate hike request. If state regulators approve the request, the increase would be the company's largest ever.

No specific date has been set for a hearing in front of TRA.

Vince Butler, spokesman for the water company, said most of the money generated from the rate increase will be used for capital improvements such as repairs to meters, pipes and water tanks.

Defending and fighting proposed rate hikes costs customers and taxpayers, he said.

Tennessee American expects to pay $1.1 million this year on legal costs associated with its rate hike request. The company spent $1.5 million in legal costs two years ago on another rate increase hearing.

At the same time, the city spent $280,000 in legal fees.

"We don't think it's best for the city, so that's why we want to sit down and talk," Butler said.

Mayor Ron Littlefield said the water company has been unwilling to compromise after discussions with the city during previous rate increase proposals. If the company is willing to back off its rate increase, he said, then Tennessee American is asking for too much.

"So what is the real number they are looking for?" he asked. "This to me shows the disingenuous nature of the company."

The TRA is expected to decide on the rate increase by December. The TRA is the state governing body that has authority to determine whether a water rate increase is needed and how much it can be raised.

The City Council is expected to vote on whether to intervene in the water rate increase next week.

McMahan said the city has intervened in these cases since 2004.

Two years ago, Tennessee American proposed a 28 percent increase and ended up receiving 14.6 percent.

McMahan said the city understands rising costs mean more operating revenue is needed, but a 24.9 percent increase is too much.

"You don't try to stop the increase," he said. "You just try to make sure it's reasonable."

Council Chairwoman Pam Ladd said she met with Tennessee American officials and that the council plans to hear from McMahan within the week. She said she is now gathering information and doesn't want to comment until she hears from McMahan, which she expects to happen by next Tuesday's council meeting.

"I'm going to wait until I hear what our attorney has to say," she said.

Littlefield said he would be surprised if the council did not approve intervention.

"I can't imagine the council not intervening and just sitting back passively while the largest increase ever is passed," he said.

Staff writer Ellis Smith contributed to this report.

Contact staff writer Cliff Hightower at chightower@timesfreepress.com or 423-757-6480. Follow him at twitter.com/cliffhightower or facebook.com/cliff.hightower.