Tennessee Regulatory Authority overhaul bill facing trouble

photo Tennessee Gov. Bill Haslam
Arkansas-Tennessee Live Blog

NASHVILLE - Gov. Bill Haslam's proposal to overhaul the Tennessee Regulatory Authority scraped though a Senate committee last week with a "neutral" recommendation and could be headed for more trouble this week.

Two area lawmakers pointedly told Haslam's legal counsel, Herbert Slatery, that officials need to come up with better answers to criticisms of elements such as turning the agency's full-time director slots into part-time positions.

"I think, going forward, you will find it much more difficult and you will need to answer the questions," Sen. Mike Bell, R-Riceville, warned Slatery in the Government Operations Committee hearing. Bell is committee chairman.

At one point, Slatery couldn't recall the names of people in the regulated utilities who were asked for advice about the proposed changes.

Earlier, Henry Walker, a former TRA general counsel who now represents clients before the agency, warned that having part-time directors could hurt the quality of decisions in utility rate cases.

"The TRA is probably, in terms of economic impact, the most important agency in the state," said Walker, who has represented the Chattanooga Manufacturers Association in bitter rate-hike fights involving Tennessee American Water Co. and Chattanooga Gas. "There are literally tens of millions of dollars at issue in rate cases."

Rate hearings, where monopoly utilities ask for more money from customers to recover costs and return what they consider reasonable profits, are extremely complex and intensely debated.

"As a lawyer who practices before the agency, I'm asking you to please help me and my clients have an agency of judges that will devote the time that is necessary to make the right decisions," Walker said. "Cut the number of [full-time] directors. Pay them less. But keep them full time."

Senate Speaker Pro Tempore Bo Watson, R-Hixson, the committee's vice chairman, noted that the panel isn't allowed under Senate rules to keep the measure bottled up. On his advice, the panel passed the bill 5-4 with a neutral, rather than positive or negative, recommendation.

What's the idea?

The TRA's four directors now are appointed by the governor and the House and Senate speakers. They set rates and service standards for investor-owned telephone, water and natural gas utilities such as Tennessee American Water and Chattanooga Gas, and are directed to balance the interests of consumers and utilities.

Haslam's original bill called for creation of a full-time executive director, appointed by the governor.

Critics, including TRA Chairman Kenneth Hill, charged that effectively would put the governor in charge of the independent agency and its part-time board.

Haslam retreated; new language provides for an executive director jointly appointed by the governor and the House and Senate speakers for a three-year term.

On Friday, Haslam told reporters he "strongly" believes the TRA needs a full-time executive director with a professional background. Currently, directors rotate the chairmanship and management responsibilities annually.

"You can't show me another management structure like that [which] is effective," Haslam said.

"At the end of the day, what the TRA bill is about is providing utilities at the lowest price possible for those people who use those regulated agencies," Haslam said.

The amended bill also would save more than $347,000 a year, the administration says.

The four full-time directors now are paid $152,400 plus benefits. Part-time directors would be paid $36,000 a year, plus benefits. Qualifications would include at least a bachelor's degree and at least three years' experience in a regulated utility industry or in "executive-level management," plus expertise in an area such as economics, law, finance, accounting or engineering.

The executive director's salary could not top $140,000 a year. The director would be required to have at least a bachelor's degree and five years' experience in a regulated utility or executive-level management.

Commission member Lauren "Bubba" McDonald said every state public service commission in the nation except for Delaware has full-time directors. Delaware plans to reinstate a full-time regulatory panel, he said.

It "will be very difficult to identify and recruit truly qualified individuals to take on the burdens and positions for part-time pay," McDonald said.

Aid to efficiency

Slatery told senators last week the proposed overhaul stems from Haslam's "top to bottom" reviews of agency effectiveness and efficiency.

He said administration officials met with current and former TRA directors and staff, affected companies and the Tennessee Attorney General's office, which represents consumers' interests before the agency.

Administration officials argue the regulatory function is different in Tennessee because the dominant electric utility is the federally owned Tennessee Valley Authority, which is outside the TRA's purview.

Slatery said TRA also has no oversight over public power distributors like Chattanooga's EPB. As a result, only 64 energy customers per 1,000 come under TRA purview, about a quarter the number per thousand in Georgia and Alabama, he said.

Investor-owned utilities - electricity, gas, water and telephone services - under TRA regulation only account for 402,000 customers, Slatery said, and the agency handles fewer rate cases than other states.

But Hill, the TRA chairman, charged Slatery with cherry-picking facts. The agency's actions touch 1 million Tennesseans, he argued.

Sharp questions

Senate Minority Leader Jim Kyle, D-Memphis, was among the questioners last week. His wife, Sarah, serves on the TRA.

She's not the only TRA director with political ties. Hill's son is state Rep. Matthew Hill, R-Jonesborough. Commissioner Mary Freeman was appointed by former Gov. Phil Bredesen, for whom she once worked. The fourth position is vacant.

Kyle acknowledged that he has a potential conflict of interest but said he must answer to his "conscience" and the public.

"Is this a proposal that some of the stakeholders presented to you?" Kyle asked.

Slatery said it was.

"Could you tell us who they are?" Kyle asked.

Slatery said, "I can't recall every one of them."

Kyle replied, "Just give me one or two of them."

Then Kyle asked which representatives of regulated utilities spoke to administration officials.

Slatery said, "I honestly don't recall specifics."

In response to questions, Walker said some of his clients had been consulted.

But, he said, "I don't know anyone who actually recommended that commissioners become part time."

The bill's next Senate stop is the Commerce Committee. It's also set for Tuesday in the House State and Local Government Committee, where Republicans say the vote may be equally tight.

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