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Chattanooga Gas Co. is proposing to raise the average homeowner's gas bill by $3.26 a month to help pay for additional upgrades and expansions in Hamilton and Bradley counties to help facilitate new industrial, commercial and residential growth.

The natural gas utility filed for about a 7% rate increase in a request submitted Friday to the Tennessee Public Utility Commission, which must decide how much of the increase it will grant. Even if regulators authorize all of the requested rate increase, the price of natural gas will still be lower than it was a decade ago, even without considering inflation.

"Last year was the most capital spending we have made in Chattanooga and is really a testament to the growth in the region," said Bryan Batson, president of Chattanooga Gas and an executive for the Southern Co., which bought Chattanooga Gas and AGL Resources in 1988. "We spent $38 million last year upgrading the piping and infrastructure and we will spend about $29 million to $30 million a year for the next several years making sure that Chattanooga has adequate gas and can accommodate the economic growth and businesses that are moving into the area. We're making sure that there is plenty of gas and appropriate pressure piping to handle the growth that is coming."

Chattanooga Gas, which serves 68,0000 customers in Hamilton and Bradley counties, is the fastest growing gas supplier among the operations that Southern Co. has in Georgia, Virginia, Tennessee and Illinois.

Last year's capital spending by the gas utility was more than triple the $12 million it spent on system upgrades in 2012, which Batson said reflects more extensions to new territories, industrial parks and connections to its LNG (liquefied natural gas) plant. Chattanooga Gas built its LNG plant in 1973, which it continues to operate and expand on North Hawthorne Street in Chattanooga to allow it to buy and store natural gas when it is cheaper in the summer months.

Batson said to buy the additional natural gas from other pipeline suppliers needed to meet the growing demand in Chattanooga, the typical homeowner who heats with natural gas would pay an extra $152 a year. But by using the LNG plant, even with the costs of its operation and improvement, that additional cost for the extra gas is equal to only $44 a year for the typical residential gas customer because the plant allows Chattanooga Gas to buy fuel at better times of the year.

The company submitted its capital recovery filing to the state on Friday, the first by the gas utility since Tennessee revamped its rate-making process to provide annual regulatory reviews of capital spending rather than the less-frequent, complete rate-making hearing and proceeding. The rate of return has already been set and the TPUC sets the rates based upon what the actual costs turned out to be based upon the last rate increase granted two years ago.

In 2018, Chattanooga Gas initially requested a rate increase of about 13% after going nearly eight years without any base rate hike. Ultimately, state regulators granted the gas utility only a 4.4% increase.

Batson said higher rates are needed to cover the higher capital expenditures for a growing business. In 2019, Chattanooga Gas added 991 residential customers and 142 commercial customers. In 2018, the utility added 953 residential customers and 140 commercial customers.

To minimize the impact on customers' bills, Chattanooga Gas is proposing to accelerate the return of credits stemming from the 2017 federal Tax Cuts and Jobs Act (TCJA) to help save about $1.8 million for the company this year.

Using such tax advantages will limit the increase in gas rates, which remain 4.13% less than the rate in 2010. Chattanooga Gas and other gas distributors pass along the fuel cost portion of natural gas deliveries and costs of the commodity have dropped significantly in the last decade.

"Since we bought Chattanooga Gas in 1988, there have only been five rate adjustments and one of those was down," Batson said. "We have averaged less than 1% in our annual increases over those 32 years, while the cost of living has gone up about 2% a year.

The Public Utilities Commission has yet to schedule any hearing, but the rate filing will be reviewed by TPUC's staff and the Consumer Advocate's office before the commission decides on any rate changes in the price of natural gas.

A decision on the proposal is expected in September and any new rate adjustments likely would go into effect in October.

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

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