Tennessee American Water rates go up to pay for capital improvements

Tennessee American Water rates go up to pay for capital improvements

Typical residential bill up 54 cents a month, but some saving may come late this year

April 16th, 2018 by Dave Flessner in Breaking News

This story was updated April 16, 2018, at 11:04 p.m. with more information.

The average water bill in Chattanooga for customers of Tennessee American Water Co. is going up 54 cents a month, starting this month, to pay for $20 million of capital upgrades the water utility plans to undertake this year.

The Tennessee Public Utility Commission (TPUC) last week approved a 2.48 percent increase in the infrastructure surcharge to pay for water system upgrades this year by Tennessee American Water, which supplies water to about 78,000 customers in the Chattanooga area.

But some of the increase in water rates may be offset later this year after regulators review company filings and arguments over a slight drop in operating costs and a cut in federal income taxes, which should help lower water bills.

The regulators last Monday approved an increase in the surcharge fee, which appears as a "Capital Recovery Rider" on customer bills, after reviewing the company's capital spending plans for 2018.

Tennessee American Water is building a new facility for bulk bleach for disinfection, which the company says is a safer alternative to handle and store than the chlorine gas it is replacing. The utility's infrastructure plan this year also includes the replacement of about 16,000 feet of water main across its water system in Hamilton and Marion counties.

"Our investments are focused on making sure that water is always there when we need it — for our homes, businesses, public health and firefighting protection," Valoria Armstrong, Tennessee American Water president, said in a statement. "We are committed to high standards in water quality and reliability of service for our customers."

The Environmental Protection Agency recently released its annual assessment of drinking water infrastructure, showing Tennessee has $8.7 billion dollars in drinking water infrastructure needs (based on 2015 dollars).

"Tennessee American Water makes continuous investments in our drinking water system to keep drinking water affordable, safe, clean and reliable," Armstrong said.

State regulators are still reviewing the company's annual adjustments to rates based upon actual operating expenses, compared to what was originally included in the water company's rate base. Because of lower-than-expected fuel and chemical expenses in the past year, Tennessee American Water has indicated that the average residential water bill could be reduced by 19 cents a month from the annual operating rider adjustment, which would offset about a third of the increase from the higher capital spending.

David Foster, director of the utilities division of the Tennessee Public Utilities Commission, said Monday that regulators are still reviewing the annual operating expenses and requested rider adjustment.

Tennessee American Water and the other four major privately held utilities in Tennessee also recently filed with TPUC their anticipated savings from the reduction this year in federal taxes from the new tax law, including a cut in the top corporate tax rate from 35 to 21 percent. Those savings are likely to show up on customer bills later this year, Foster said.

TPUC, the successor to the former Tennessee Regulatory Authority, approved in 2013 an alternative rate mechanism to allow Tennessee American Water and other regulated utilities to make annual adjustments to rates based upon approved capital infrastructure projects and operating cost adjustments.

Tennessee American Water, the largest privately owned water utility in Tennessee, is a subsidiary of American Water, which is the nation's biggest water provider serving more than 15 million Americans.

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.