Chattanooga Gas Co. is proposing to raise its rates by 8.6% this fall to help pay for planned expansions and upgrades of the natural gas network in Hamilton and Bradley counties and to recover costs incurred by the utility during the pandemic.
The utility is seeking permission from state regulators to raise gas rates enough to generate up to $6.8 million more each year over the next four years to help recover what it spent last year and to fund $150 million of planned capital improvements that the gas utility is planning to make over the next four years to extend its gas connections and better utilize its liquefied natural gas (LNG) plant in Chattanooga.
In its annual filing for the rate review mechanism used by the Tennessee Public Utility Commission, Chattanooga Gas estimates its costs rose in 2020 by $11.8 million due to higher expenses and writeoffs during the pandemic and continued expansion of its gas lines to serve new customers. To limit the rate impact from such expenses, the gas utility is proposing to cap its annual rate increase to $6.8 million and stretch out its cost recovery through 2025.
"Despite the economic uncertainty induced by the pandemic, demand for service from Chattanooga Gas increased in 2020, with more than 1,000 new residential and commercial customers connecting to the system," said Pedro Cherry, president and CEO of Chattanooga Gas. "In order to continue to safely and reliably meet the region's present and future needs, Chattanooga Gas made prudent, necessary enhancements to its infrastructure."
The rate filing is only the second time Chattanooga Gas has proposed a rate increase under the Public Utility Commission's annual review mechanism. Last September, state regulators approved $4.8 million in rate adjustments that boosted the typical residential gas bill by 7%, or $2.98 a month.
The Tennessee Public Utility Commission said the rate hike approved last fall allowed the gas utility to recover costs incurred in 2019 to enhance safety, reliability and growth in the Chattanooga region.
In the past decade, the Consumer Energy Alliance estimates that access to natural gas has helped to create or support more than 18,000 jobs and over $3.6 billion in investment in Hamilton and Bradley counties, according to the Consumer Energy Alliance.
The impact of the rate adjustment was minimized last year by the decision of regulators to accelerate the return of $3.4 million in credits stemming from the 2017 Tax Cuts and Jobs Act to customers of Chattanooga Gas, which is a subsidiary of the Southern Co.
Cherry said last year that despite that rate increase, the price of natural gas delivered to the home in Chattanooga was still 4.1% below where it was a decade ago due to lower commodity prices for the gas.
But both the price of gas and its distribution costs are rising again. Chattanooga Gas, which adjusts its rates based upon the price of the fuel it distributes in regular fuel cost adjustments to bills, has raised the fuel price of its natural gas by about 5.5% in the past year, including three price increases in the past six months as natural gas prices have rebounded from their pandemic lows.
If approved by regulators, the proposed rate increase would boost the typical residential customer's average monthly bill by $4.38. Even with the proposed rate adjustment, Chattanooga Gas officials said the average monthly gas bill would still be more than $60 below what it was two decades ago after accounting for inflation.
"We recognize that our role as an energy provider is to help sustain the daily lives of those we serve, which is why our customers are at the heart of every decision we make," Cherry said. "The significant infrastructure enhancements we made last year will not only augment safety, reliability and our ability to serve the region, but also ultimately save our customers millions of dollars over the long term."
Chattanooga Gas officials said the planned investments in the LNG plant should ultimately save $40 million over the next decade by avoiding costlier purchases of natural gas during peak demand periods.
"While this large surge in capital infrastructure investments is expected to continue, many of these programs, such as those associated with better optimization of Chattanooga Gas Co.'s (CGC) LNG plant, over the long run will result in significant commodity savings for customers as CGC will be able to more cost effectively address supply and capacity needs for customers," Nashville attorney J.W. Luna said in a 15-page rate filing with state regulators.
The Tennessee Public Utility Commission is expected to review the rate filing over the next four months, including an analysis by the consumer advocacy unit of the Tennessee Attorney General, and make a decision on the rate request by August.
Contact Dave Flessner at dflessner@timesfreepress.com or 423-757-6340.