This story was updated Monday, August 3, 2020, at 8 p.m. with more information.
After local and state officials objected to an attempt to pass on to customers some costs of responding to a massive water outage nearly a year ago, Tennessee American Water has reached a deal to put on hold their request to recoup those costs.
"Tennessee American Water and the [Tennessee] Attorney General's Office have agreed that the costs associated with the September 2019 main break are deferred until the next Capital Recovery Rider filing," utility spokeswoman Daphne Kirksey wrote in an email on Monday evening.
In recent hearings before the Tennessee Public Utility Commission, a representative from the Consumer Advocate Unit of the Attorney General's Office testified that the utility has declined to share information about the cause of the September 2019 water outage.
"Despite our best efforts through discovery, the company has provided little information regarding the cause of the outage," said David Dittemore, according to a transcript of testimony from a June 30 hearing. "And despite its assurance that concluding the evaluation of the water main break was a priority, no further information has been provided by the company concerning the nature or cause of the service interruption."
The outage left 35,000 Chattanooga businesses and households dry for several days. Tennessee American Water has cited a pending class action lawsuit over the water outage as the reason it can't share information about the investigation of the outage, but that explanation doesn't hold water, Dittemore said.
Testimony of David DittemoreView
"Sensitive information may be provided to regulators under seal for appropriate consideration in regulatory proceedings," he said in his testimony.
In responding on July 14 to Dittemore's comments, a Tennessee American Water official said the company has been responsive to requests for information about the cause of the break, but that the investigation of the cause is ongoing.
"As the analysis is being performed by an independent third party, TAWC has no definitive date for the completion of the analysis," said Kurt Stafford, the utility's director of engineering for Tennessee and Kentucky. "As Mr. Dittemore points out, there is pending litigation related to the event."
During the June 30 hearing, Dittemore challenged the utility's request to write off the costs of supplying bottled water and water trucks as a capital expense, passing the costs on to customers in its accounting.
"Within the company's filing, the ratepayers would reimburse the company for the costs of the September water main break," Dittemore said. "I suspect TAWC customers would be surprised to learn of the company's underlying accounting in this case, which would have them, rather than the company, incur the cost of the water provisions instigated by the water main break."
Stafford said in July that expensing the costs of alternative drinking water during an outage as operation and maintenance costs is a standard practice.
Rebuttal testimony from Tennessee American WaterView
"This practice is not new or isolated to this event," he said.
According to information included as part of the hearing, the utility spent $41,605 on bottled water; $63,430 on drinking water; and $5,360 on legal service during the outage, or $110,395 in total. It also estimated a financial impact of $233,322 from September through December on its operation from the outage, according to that documentation.
The hearings before the Public Utility Commission are related to the utility's request to make changes to a capital recovery rider. Yearly capital costs for utilities appear as a rider on bills, and utilities are granted rate changes to cover their approved costs.
Similar riders have been approved by the Tennessee Public Utility Commission each year since 2013, when the state adopted the capital recovery method of adjusting rates to pay for system improvements. Under the process, utilities submit their capital plans and what it costs to adopt, and regulators approve what they deem appropriate each year.
Lee Davis, who has filed a class action lawsuit against the utility company with attorney Van Bunch, said the utility's attempt to add these expenses to the rider meant the cost would ultimately be borne by consumers.
"They can't change the rate, but they can bury it in there as an additional cost," Davis said. "The break's their fault — they didn't take care of the water system. Customers shouldn't have to pay for it."
Chattanooga Mayor Andy Berke said the city contacted the Tennessee Public Utility Commission to object to the utility's move to write costs related to responding to the outage into the rider.
"Any expenses incurred by Tennessee American Water as a result of their asset's failure are their responsibility," Berke said. "The city of Chattanooga believes that it is highly improper to charge expenses to the customers who were left without service during one of the hottest weekends of the year, and have indicated as such to the Public Utility Commission to reject TAWC's effort to shift these costs to its customers."
Tennessee American Water is the state's biggest privately owned water utility, delivering water to nearly 375,000 people in the Chattanooga area. In October, the utility said completed maintenance now provides sufficient redundancies to prevent future mass water outages in Chattanooga.
Kirksey said the company will share the findings of the investigation of the outage with the public when that investigation concludes.
"In 2020, we are making $29 million in capital improvements across the system," she said in a written statement. "We are deeply invested in the community and have continuously worked to maintain and modernize our infrastructure."
Contact Mary Fortune at firstname.lastname@example.org or 423-757-6653. Follow her on Twitter @maryfortune.