Tennessee American Water Co. asked state regulators Friday to raise Chattanooga water rates by more than 28 percent next year to pay for increased operating costs and system upgrades since water fees were last increased two years ago.
The proposed increase would add $4.68 to the typical monthly residential bill in Chattanooga if the Tennessee Regulatory Authority were to approve all of the requested increase.
But in the water company's last request for a 21.6 percent rate increase in 2008, the Tennessee Regulatory Authority granted the company an increase of less than 4.4 percent.
John Watson, vice president and general manager for Tennessee American, said the water company is earning only a fraction of its allowable rate of return and will lose money next year unless rates are increased.
Water rate requestsIn the past 14 years, Tennessee-American rates have increased 35 percent, but the company has requested rate increases of nearly 69 percent, not including the most recent.* November 1996: 4.96 percent increase granted from 8.67 percent request* August 2003: 9.14 percent increase granted from 12.72 percent request* March 2005: 0.91 percent increase granted from 5.96 percent request* May 2007: 12.3 percent increase granted from 19.67 percent request* September 2008: 4.37 percent granted of 21.7 percent rate request* September 2010: 28.1 percent rate request; TRA to decide by next MarchSource: Tennessee-American Water Co., Tennessee Regulatory AuthorityProposed water rate increase* In Chattanooga, the average monthly residential water bill would increase by $4.68 to $21.30 for 59,743 customers.* On Lookout Mountain, the average monthly residential water bill would rise by $4.70 to $26.27 for 1,900 customers.* In the Lakeview area of North Georgia, the average monthly residential water bill would rise by $7.14 to $26.27 for 2,701 customers.* In the Suck Creek area, the average monthly residential water bill would decrease by $4.47 to $31.56 for 214 residential customers.* In the Lone Oak area, the average monthly residential water bill would decrease by $4.10 to $40.47 for 118 customers.Source: Tennessee American WaterComparing utility billsThe average Chattanooga household pays:* $83.05 a month for electricity* $56.99 a month for cable TV* $56.80 a month for natural gas* $29.99 a month for telephone* $16.62 a month for water* $9.60 a month for stormwater feeSource: City of Chattanooga, Tennessee American Water Co.
"We've gone as long as we can between rate increases because we understand what customers are going through now in this economy," Watson said Friday. "But we need to pay our expenses, which continue to rise, and we need to earn a sufficient return on our investment to attract the capital to make the improvements needed for our water system."
Over the past 15 years, Tennessee American has invested $121 million to upgrade its water intakes, purification and distribution system, including an ongoing $6.7 million upgrade to its Citico water treatment plant on the Tennessee River, according to information in the company's 108-page filing delivered to the TRA in Nashville on Friday.
Watson said water bills represent only 6 percent of the average total of all utilities paid by Chattanooga homeowners. Tennessee American rates have risen less than the general inflation rate since 1995, although the company has filed rate increases for nearly twice as much as what regulators have allowed the company to charge.
Water rates also have risen less than recent increases for stormwater, sewer and electricity service, Watson said, "and water is still a bargain at less than a penny a gallon."
Chattanooga boosted stormwater fees 220 percent in the past year and EPB has raised electricity prices by nearly 30 percent since March because of higher TVA fuel cost adjustments. The city's sewer bills, which are added on water bills and now exceed the cost of water, have or will increase six times from April 2008 to April 2011.
Tim Spires, president of the Chattanooga Manufacturers Association, said such utility increases are hard for businesses to absorb in the current recession when most manufacturers are unable to pass along higher costs to their customers.
"It's a difficult time right now for our manufacturers, and we're certainly concerned about any rate increase," he said. "It's important for us to keep our area businesses competitive to stay in this community and also to help bring other businesses to this area."
Spires said the amount and frequency of rate filings by the water company "make it tough on us." But he said CMA members need to review Friday's rate request before deciding whether to fight the increase.
In 2008, the manufacturers group and the city intervened to oppose the water company's rate request. Richard Beeland, communications director for Mayor Ron Littlefield, said the city is reviewing information about the rate filing given to officials Friday afternoon.
"There are reasons for the proposed increase, but we're going to have to sort through it and make sure that this is justified," Beeland said.
The TRA, the state agency that regulates private utilities, must decide upon the rate filing within six months. TRA directors will conduct a hearing on the filing, which will include a review by the Consumer Advocate of the state Attorney General's Office.
The rate request, if fully approved, would generate nearly $10 million more in annual revenues for Tennessee American - or more than six times the amount granted the company by the TRA in 2008.
Tennessee American has appealed the last rate increase and asked the Tennessee Court of Appeals to overrule the 2-1 decision by the TRA in 2008 when the utility was granted less than 21 percent of what it requested.
In Friday's rate filing, Tennessee American is asking for an 11.5 percent return on its equity.
Tennessee American, a subsidiary of American Water Works Co., is the largest private water utility in Tennessee and typically delivers about 39 million gallons of water a day throughout the Chattanooga region. Rates are higher on Lookout Mountain, Suck Creek and parts of North Georgia because of extra pumping costs to deliver the water to those communities.
Tennessee American also sells water on a wholesale basis to the Town of Signal Mountain, the Walden's Ridge Utility District, the city of Fort Oglethorpe and the Catoosa County Utility District. Wholesale water rates also will increase to those water systems, but the consumer rates for water on Signal Mountain and parts of North Georgia will be set by those cities and utilities, Watson said.
Contact Dave Flessner at dflessner@timesfreepress.com or 423-757-6340.