The corporate tax cuts approved by Congress nearly two years ago may soon help cut Chattanooga water bills, offsetting an increase sought by the utility for the cost of more than $20 million of capital improvements being made this year.
State regulators will consider two proposals Monday to adjust the water rates charged by Tennessee American Water, the state's biggest privately owned water utility which delivers water to nearly 375,000 persons in the Chattanooga area.
The Tennessee Public Utility Commission is scheduled to vote on proposed surcharges by the Chattanooga water company for its annual capital cost recovery which, net of tax savings for such investments, would add 59 cents a month, or about 2.4%, to the average residential water bill.
But if regulators agree with the staff proposed rate changes, those capital costs should be more than offset by the utility's savings from the tax reductions stemming from the Tax Cuts and Jobs Act, which Congress adopted in 2017 to cut the corporate tax rate from 35% to 21%. The tax savings for Tennessee American when passed along the consumers should save the typical residential water user in Chattanooga $1.43 a month, or more than twice the extra amount due for capital spending by the company.
By the numbers
* $25.10 - The current average monthly water bill for typical residential customer using 4,154 gallons of water a month in Chattanooga* 59 cents - The 2.4% monthly increase for the average residential water user due to the annual capital cost recovery for water system improvements.* $1.43 - The 6.6% monthly reduction for the average residential water user's base rates in Chattanooga due to the tax savings on the base rate, scheduled for the next three yearsSource: Tennessee American Water filings with the Tennessee Public Utility Commission
The net effect of the two proposals will be to cut most water bills by nearly $1 a month starting this fall, if the plans are accepted by the Public Service Commission panel on Monday in Nashville.
If approved, for the next three years, the tax reduction will be approximately 6.62% of customers' annually billed water service charges. After the initial three years, the reduction will be about 4.32% of customers' annually billed water service charges, according to company spokeswoman Daphne Kirksey.
Monday's vote on the surcharges and tax savings by the Tennessee Public Utility Commission comes nearly nine months after Tennessee American, a subsidiary of American Water, first filed for its 2019 capital cost recovery. The yearly capital cost program for utilities appears as a rider on bills and utilities are granted rate changes to cover their approved costs rather than requiring the utility to undergo a complete rate request and review process for such expenses.
Similar riders have been approved by the Tennessee Public Utilities Commission each year since 2013 when the state adopted the capital recovery method of adjusting rates to pay for system improvements. Under the revamped rate-making process, utilities submit their capital plans and what it costs to adopt and regulators approve what they deem appropriate each year.
Previously, utilities had to file with the then Tennessee Regulatory Authority for any rate change and regulators undertook a complete rate review process, including public hearings in both Nashville and Chattanooga and reviews by the Tennessee Attorney General's office of consumer affairs.
In 2019, Tennessee American said it is replacing an aging sedimentation basin to creat new efficiencies and provide the ability to treat more water. The utility also is constructing a building to house a new disinfection process as it transitions from chlorine gas to bleach for safety and efficiency purposes.
Tennessee American also said it also is replacing about 22,000 water meters as the water company transitions to automatic meter reading.
Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.