Staff file photo / John "Thunder" Thornton, center, CEO of Thunder Enterprises and developer of Jasper Highlands, talks in the wellness center at the Marion County mountaintop development last year.

Companies tied to Chattanooga developer John "Thunder" Thornton have agreed to pay $50,000 to settle a state of Tennessee complaint alleging legal violations over the Jasper Highlands water system.

The settlement is contingent on the sale of the Marion County development's water system to Tennessee American Water Co., which must still be approved by the Tennessee Public Utility Commission (TPUC), according to the proposed agreement.

Tennessee American wants to buy the water system from Thornton's companies for $2.39 million, filings show. The Commission could decide on that proposed deal next month.

A filing with state regulators said that Thunder Air Inc., doing business as Jasper Highlands Development, is entering the settlement agreement to avoid the time and expense of litigation and denies any wrongdoing related to the state complaint.

"We remain confident that our system is in full compliance with all regulations and look forward to TPUC's decision on the sale in November," said Dane Bradshaw, president of Thunder Enterprises.

Over the past decade, Thornton's companies have sold more than $100 million of property at Jasper Highlands and are preparing a fifth phase in the 8,893-acre development to add 150 additional lots for sale.

But in August, the Consumer Advocate unit of the state Attorney General's office said Thunder Air failed to obtain a certificate of public convenience and necessity concerning the water system at the mountaintop project near Kimball.

The filing said the company also failed to pay annual inspection fees and charged rates not approved by the the Public Utility Commission. It alleged the company violated state law when the water system withheld or refused to provide service to customers.

The filing said that Robert Schlenkert, a Jasper Highlands resident, brought a complaint with the state Department of Consumer Affairs last November stating that the developer refused to provide water service after he paid a $2,150 hook-up fee. It said that Schlenkert has been forced to purchase water and transport it to his home for daily use.

Schlenkert said Thursday that the water situation stems from a dispute related to a builder fee that a Thornton company wanted him to pay and a cargo trailer the resident had in front of his house.

The resident said his house still currently doesn't have water from the system. Schlenkert said he has been hauling water in by truck from nearby South Pittsburg and then transferring it into a tank in his basement.

While he wants the water system out of Thornton's company's control, he said, he expects to pay four times more to Tennessee American than it's now costing him if that deal goes through.

Daphne L. Kirksey, external affairs manager for Tennessee American, said the Commission held a public hearing Oct. 12 on the matter and took the proposed sale under advisement.

"We appreciate this opportunity to potentially partner with Jasper Highlands. If approved, we look forward to providing quality water service to Jasper Highlands residents and businesses," she said.

Kirksey said Tennessee American already provides safe, reliable drinking water in the greater Chattanooga area, including to Suck Creek, Whitwell, Powells Crossroads and North Georgia.

"Acquiring the Jasper Highlands water system, which is geographically near our Whitwell operations in Marion County, will provide a multitude of benefits to our existing customers, to Jasper Highlands' water customers and to Tennessee American Water," she said. "Among other things, consolidating systems provides a larger customer base over which to distribute fixed costs, capture operational efficiencies and utilize economies of scale."

According to a filing in the Tennessee American case, Jasper Highlands has 139 active water customers. Tennessee American and Jasper Highlands said the acquisition would not adversely impact rates of current customers of Tennessee American.

Thunder Air originally funded the water system at Jasper Highlands. The Consumer Advocate alleged in the August filing that Thunder Air has unlawfully operated the water system at least since 2016.

But Thunder Air has denied that it's subject to regulation by the Utility Commission and all the other allegations.

The proposed settlement calls for Thunder Air to connect or reconnect any residents to water service that it has either refused to connect or disconnected for any reason other than nonpayment of a connection fee or bill.

Thunder Air agreed to make the settlement payment to TPUC within 15 days of closing on the deal with Tennessee American.

If the Commission doesn't approve the acquisition or the sale doesn't close, the settlement agreement is considered null and void and the parties can continue to litigate, according to the filing.

Some Jasper Highlands residents have said they're upset with Thornton, saying his company has used heavy-handed tactics in business disputes.

Residents James and Shirley Long said two years ago after they filed a lawsuit that a Thornton company cut off their internet service and sought to ban them from the common areas of Jasper Highlands under threat of arrest.

But Thornton has said the couple owed his company $27,700 after building their house and have refused to pay. His company, JHH LLC, later sued the Longs in Marion County Chancery Court.

Contact Mike Pare at Follow him on Twitter @MikePareTFP.