In this 2016 staff file photo, the dewatering facility is shown at the main treatment plant for Tennessee American Water in Chattanooga.

Chattanooga water users will soon get a reprieve on their monthly bills due to cuts in corporate tax rates and investment incentives adopted by Congress nearly two years ago.

State regulators Monday approved rate changes by the Tennessee American Water Co., which should cut the typical water bill by more than 3% and save the average residential water customer in Chattanooga about 84 cents a month, effective immediately.

The Tennessee Public Utility Commission Monday voted to pass through the Chattanooga water utility's tax savings for the next three years through a 6.6% base rate reduction, which would reduce the average bill for a typical water customer using 4,154 gallons of water a month by $1.43 a month. At the same time, the state regulatory board approved the proposed capital cost recovery plan by Tennessee-American that calls for about a 2.6% increase, or 59 cents more a month, to the same average water bill.

The net effect of the tax savings and the extra funds for capital upgrades will provide a slightly lower water rate in Chattanooga even as Tennessee American spends more to replace pipes and install new treatment systems.

"The allows us to make over $20 million of capital investments for the drinking water system with little impact to our customers and also to pass along the savings from the Tax Cuts and Jobs Act," Tennessee-American spokesman Daphne Kirksey said Monday night after the commission hearing on the water case.

In 2019, Tennessee American said it is replacing an aging sedimentation basin to create 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.

Tennessee American Water, a subsidiary of American Water Co., delivers water to nearly 375,000 persons in the Chattanooga area. The tax cuts approved by Congress in December 2017 reduced the top corporate rate for American Water and other businesses from 35% to 21%. State regulators have ordered utilities to pass along those corporate income tax savings in their regulated rates, although calculating and adjudicating the value of those tax savings has taken 20 months since the tax cuts were approved.

The rate cuts for Tennessee American, the state's biggest privately-owned water company, come as America's biggest government-owned utility, the Tennessee Valley Authority, also is pledging to try to keep electricity rates stable for the next decade after years of rate increases.

The Tennessee Public Utility Commission (TPUC) approved the water rate changes for Tennessee American on Monday following a review of the utility proposal by the Tennessee Consumer Advocate, an office in the state Attorney General's office.

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.

Contact Dave Flessner or at or 757-6340.