Chattanooga Gas seeks 11 percent increase in residential rates

Chattanooga Gas seeks 11 percent increase in residential rates

First rate request in 8 years faces little opposition

August 9th, 2018 by Dave Flessner in Business Around the Region

The typical Chattanooga household that uses natural gas for heat would pay an extra $5.73 a month if state regulators approve a rate increase requested by the Chattanooga Gas Co.

The proposed 11 percent rate hike is the first sought by for the local gas utility in eight years and would still leave the average Chattanooga Gas customer paying less than a decade ago due to lower prices for the commodity price of gas.

"The price of natural gas has gone down more since 2010 (when rates were last increased) than what we are proposing as an increase," said Paul Leath, director of external affairs for Chattanooga Gas Co. "We've gone as long as we can without raising our rates, but gas is still a great bargain and there are not many products that you can buy today cheaper than you could have in 2009."

The $6.2 million rate increase sought by Chattanooga Gas plan drew little opposition during a public hearing Thursday night on the campus of the University of Tennessee at Chattanooga. No residential gas users spoke against the company's request and both of Chattanooga's biggest business groups — the Chattanooga Area Chamber of Commerce and the Chattanooga Regional Manufacturers Association — said they don't object to some rate increase, although an energy consultant for the manufacturers group objected to a proposal by Chattanooga Gas to boost the penalty for excess consumption for businesses on interruptible contracts.

David Klinger, purchasing manager at McKee Foods in Collegedale and one of the biggest customers of Chattanooga Gas, said he objects to company plans to raise the penalty charge for industrial customers that go above their contracted monthly maximum gas consumption levels. But Klinger said he supports a broad funding basis for paying the cost of upgrading service to Collegedale.

"The availability and supply of natural gas is very important to us in our operations in Collegedale and we support the upgrade of service in our area to make sure that we a future reliable supply of natural gas," he said.

Chattanooga Gas, which supplies natural gas to more than 60,000 customers in most of Hamilton and Bradley counties, said an increase in its base rates is needed to cover higher labor and material costs since the last rate hike and to help fund more than $20 million of pipeline upgrades needed to help Chattanooga Gas better deliver gas from an existing liquefied natural gas (LNG) plant into the Red Bank and Signal Mountain areas and to make pressure improvements to better serve Lookout Mountain.

Mekka Parish, a manager of media relations for Southern Co. Gas, the parent company of Chattanooga Gas, said inflation has increased 14 percent since the company's last rate increase in 2010 and more than $100 million of system improvements in the past eight years are not reflected in the current rate base.

The gas utility, which currently employs 42 workers in Chattanooga and Cleveland, also is expanding its staff to 50 as it prepares for the retirement of up to half of its staff in the next few years.

Chattanooga Gas is carrying out a $29.8 million system upgrade for safety and reliability, according to company filings with state regulators.

"Our analysis indicates we must have new capacity online by 2022 so that we not only can accommodate new prospects like the Volkswagen Plant that came online in 2011, but also ensure we do not have service interruptions on the coldest days of the year for industrial and perhaps even some residential customers," said Wendell Dallas, vice president of operations for Chattanooga Gas, a subsidiary of the Atlanta- based Southern Co.

The gas utility has asked the Tennessee Public Utility Commission to grant the utility a 7.8 percent rate of return on its investments in Chattanooga and to approve rate changes and higher penalty fees for industrial interruptible customers that go over their monthly contractual purchase level. In all, the Public Utilities Commission, which must still vote on the proposed increase, said the rate filing would raise overall rates by an average of 19.5 percent across all Chattanooga Gas customers.

The Public Utilities Commission will conduct a hearing in Nashville on Aug. 20 to hear witnesses about the company's spending and its requested rate of return.

Once regulators consider this rate case and set an acceptable rate of return, Leath said Chattanooga Gas plans to move to the Public Utilities Commission's alternative rate plan and submit spending data each year to state regulators to adjust rates up and down without having a thorough rate review, hearing and commission vote.

Contact Dave Flessner at or at 757-6340