Water rates poised for largest-ever increase

RATE BREAKDOWNAccording to Tennessee American's request, if approved in full, drinking water rates for a residential customer who uses 4,153 gallons of drinking water per month would:• Increase in the Chattanooga service area by $5.94, or about 20 cents per day, to $25.15.• Increase in the Lookout Mountain service area by $5.24, or about 17 cents per day, to $30.16.• Increase in the Lakeview service area by $8.06, or about 27 cents per day, to $30.16.• Decrease in the Suck Creek service area by $2.17, or about seven cents per day, to $39.41.• Decrease in the Lone Oak service area by $10.06, or about 34 cents per day, to $41.38.Source: Tennessee American Water

A 23 percent water rate increase proposed by Tennessee American Water -- the city's largest ever, if approved -- has prompted Chattanooga's mayor to call for a city takeover of the utility.

Mayor Ron Littlefield put Tennessee American on notice earlier in the week, telling officials that "they need to sit down with us and negotiate a sale."

"The water company is like a bad tooth," said Littlefield. "We spend money on it, we spend money on it, and the pain keeps coming back."

Tennessee American's current proposal could increase the average Chattanooga ratepayer's bill by about $6 per month, or about 20 cents per day, to an average of about $25.15 a month.

That's on top of a $3 hike that consumers will see as Tennessee American utility shifts the billing for sewer services to the city, the mayor said.

And Littlefield has proposed a 9.7 percent increase in sewer rates for the fiscal year that begins July 1 to absorb rising costs of meeting federal regulations for water runoff and sewage disposal.

The Tennessee Regulatory Authority is scheduled to decide on the rate increase by December.

The state-regulated utility granted Tennessee American Water a 14.76 percent rate increase in 2011, which was then the largest-ever rate increase for Chattanooga-area residents. The utility had asked for a 30.7 percent hike.

All bets could be off if Littlefield stages a takeover of the utility or successfully defeats the proposed rate hike.

"The days of enduring this year after year have got to end," Littlefield said. "It seems that they are just no longer interested in being a supportive partner in all that we are becoming as a community."

Ready to grow

AVERAGE BILLIn Chattanooga, the monthly water bill today for an average Tennessee American Water residential customer (4,153 gallons per month) is $19.20 per month.

Water company officials say they need the roughly $10.5 million in new revenue to invest $25 million in water treatment facilities, pumps and pipelines over the next two years.

Tennessee American has invested more than $127 million into local infrastructure over the past 16 years, company President Deron Allen said, yet water still costs less than a penny per gallon.

During those same 16 years, the cost of water only has increased a cumulative 2.8 percent, including recent increases, he said.

"Our rates reflect the true cost of providing water service to our customers," Allen said. "This includes significant investment in local infrastructure to enhance and maintain our systems to ensure the quality and reliability of our service."

Takeover talk

The idea of the city acquiring its water supplier rose in the late 1990s under former Mayor Jon Kinsey, who dropped the effort in the face of public opposition. Littlefield has pushed for a takeover of Tennessee American since about 2005.

The utility responded in 2011 that "Tennessee American Water will not consider participating in any regional water authority or selling its assets until Mayor Littlefield provides the company a meaningful opportunity to review a detailed written proposal," according to news reports.

Water officials on Friday declined to discuss the mayor's proposed takeover but asserted that the utility's rate proposals were in line with other utilities across the state.

Spokesman Vince Butler said Tennessee American still offered "a great value." The city's sewer rates and stormwater fees are set independently of the water utility's rates, he said.

"The primary driver of this rate filing is the ongoing investment that we're making in the water system to ensure that our customers have reliable service and quality water," Butler said.

In 2012 alone, the utility will revamp its landmark water tank on Riverside Drive and install 6,000 feet of 24-inch water main along Ringgold Road.

The company pointed to a study by the American Society of Civil Engineers that estimates utilities across the state will have to spend $2.7 billion over the next 20 years to keep up with Tennessee's drinking water needs.

Building that infrastructure is going to require rate increases, Tennessee American officials said.

"Our company works to operate efficiently and control operating expenses," Allen said. "Our aim is to balance that goal with the continuous need for significant capital investment in local infrastructure to ensure system reliability and meet increasing state and federal quality requirements."