NASHVILLE -- Chattanooga Gas Co. could charge local ratepayers more for using less natural gas under a proposed three-year experiment with energy conservation that will be considered today by the Tennessee Regulatory Authority.
TRA Director Eddie Roberson's plan is on the TRA's agenda in the form of a motion in Chattanooga Gas' ongoing rate case. The motion, filed Friday, needs two votes on the three-person panel in order to be approved.
If that happens, the Roberson motion grants something to all of the major players in the case -- Chattanooga Gas; the Consumer Advocate's office, which intervened on behalf of Chattanooga ratepayers; and the Chattanooga Manufacturers Association, which also intervened in the case to protect its members.
For example, the motion slashes from $2.44 million to just $60,000 Chattanooga Gas' request to increase regular charges for the company's residential users. The company originally sought a $2.6 million increase, about a 4.1 percent hike.
Then again, ratepayers would have to pay a special assessment on $744,000 in legal fees to Chattanooga Gas. The company says it racked up the expenses from 2007 to 2009 in a bitterly disputed unrelated matter with the consumer advocate. The consumer advocate's office has argued the TRA has no authority to award the fees.
Chattanooga Manufacturers Association attorney Henry Walker said Sunday the group is "very pleased with the result, happy that Mr. Roberson recognized the harmful economic impact that a rate increase would have. We hope that the other directors will agree."
If adopted, the Roberson proposal could prove to be a landmark ruling regarding "decoupling" in Tennessee, Mr. Walker said.
Decoupling, adopted in a number of other states, breaks the link between a company's traditional method of recovering expenses and profits from the amount of natural gas it sells customers. Chattanooga Gas and other natural gas companies argue decoupling lets them earn a "fair and reasonable return" while promoting and implementing new conservation programs.
Efforts by Chattanooga Gas, which is owned by AGL Resources of Atlanta, Piedmont Natural Gas and Atmos Energy, to push decoupling last year through the General Assembly failed.
One critic, state Rep. Susan Lynn, R-Mount Juliet, has argued the idea of consumers paying more while using less gas "is just wrong."
But state Sen. Andy Berke, D-Chattanooga, told TRA directors during a recent hearing that incentives need to be changed to "ensure that it (the company) is instead able to engage in environmentally sensitive techniques without harming its shareholders."
Mr. Roberson's motion grants the company an "alignment and usage adjustment" or decoupling provision for residential and commercial class customers but only for what the motion describes as a "three-year trial basis."
It limits the amount customers' rates could rise in any given year to 2 percent. At the end of the trial, the company must provide a report on the program's effects on ratepayers and the company.
Chattanooga Gas' return on equity won't generate as much profit as the company wanted. Company attorneys argued in a post-hearing May 7 brief that with decoupling, which is expected to lower the company's risk, the company should be able to earn 10.75 percent. They said the TRA should consider the costs and risks to Chattanooga Gas and not parent company AGL Resources. Mr. Roberson's motion grants 10.05 percent.
The company also won't get as much money for its proposed energySMART program that it proposed to encourage consumers to save more. Only $275,000 remains of the company's proposed $800,000 plan. The company would instead be limited to providing programmable thermostats and a more limited educational and outreach program.