The Tennessee Regulatory
Agency announced Monday that it will only approve a 4.37 percent water rate increase, one-fifth of the 20.58 percent requested by the Tennessee American Water Company. The increase brings $1.6 million in new revenue to the water company.

Based on an initial review of the TRA decision, the average monthly water bill for customers in Chattanooga using 4,300 gallons of water will increase 72 cents a month increasing the bill from $16.54 to $17.26, officials said.

We are disappointed with the outcome of this decision and we do not believe the decision is in the best long-term interest of our customers or the water system,” said John Watson, president of Tennessee American Water.

“The TRA decision does not provide sufficient revenue to cover the company’s cost of service. This includes the increased operating costs and expenses related to approximately $21.4 million in capital improvements that have been made since March 2008 and those scheduled to be made through August 2009.”

The TRA decision approved about 21 percent of the $7.6 million in revenue requested by Tennessee American Water.

The company will finalize the increases for its four groups of customers in the next few days and all customers will receive a communication from the company informing them of the amount of the increase before the new rates go into effect on Oct. 1.

“We believe the expenses in this rate adjustment request were reasonable and justified to provide high-quality water service, but the TRA didn’t agree,” said Mr. Watson. “This decision is inconsistent with the evidence and past orders by the TRA.”

Mr. Watson said that an initial review of the TRA order indicates that revenue provided for areas such as customer service, billing and engineering were placed at levels below what was actually spent last year. In addition, the order did not provide funding for five projected jobs at the water company.

“Tennessee American Water will never compromise the quality of water we serve our customers; however, the company will have to make some tough decisions about how it operates since the amount of revenue provided by the TRA is below our projected costs,” said Mr. Watson.

“We are concerned that the TRA has not allowed the company to recover necessary expenses. That will lower any potential return to our investors to the point where it may be harder for Tennessee American Water to attract the capital it needs to continue the investments that ensure the long-term reliability of the water system.”

Mr. Watson also said the TRA rejected most revenue “weather normalization” adjustments, typically used by the TRA in the past, which adjusts historical revenues that were dramatically impacted by the very hot, dry weather in 2007.

“It appears that the TRA based our expected revenue going forward on one of the hottest years on record,” said Watson. “If we have a normal year next year, we won’t reach those revenues.”

The city of Chattanooga is implementing an increase in the cost of sewer service on Oct. 1 and the sewer charges are collected for the city on Tennessee American Water’s monthly bills.

Mr. Watson said he wanted customers to know that the two increases are not related. “Many customers believe their sewer charges are directly related to their water rates and that is not the case,” said Mr. Watson.

“It’s unfortunate that the city’s increase and our increase will occur at the same time, and we encourage customers to call if they have questions.”

The decision was hailed by a group called Fight the Hike that had fought the rate increase.

Randy Baker, chairman, said, "The people of our fine city and county have spoken and voiced their immense displeasure with the growing business plan of TAWC coming back year after year asking for totally unsubstantiated rate increases.

"We are pleased that the TRA did a thorough analysis of the facts and determined that a 35.1 percent increase in little over a year was unreasonable. I truly hope this helps other communities across the country in their stance against this corporate irresponsibility and that it sends the message to American Water that they are not immune to the economic realities that should compel them to govern their business in a responsible manner and not just assume
unsuspecting customers will finance their growth and profits.

"When one business monopolizes a service - just like with Comcast cable - we get helplessly hammered with consistent rate increases. I want to thank our citizens, the city and the county, the Chattanooga Manufacturers Association and the many others that supported us including the Chattanooga area chapters of the Urban League and NAACP, River City Company, the Chattanooga Association of Realtors and area hospitals. They collectively represent a huge employer base
that would be adversely affected."

Tennessee-American has asked for a $7.645 million rate increase, saying it was needed to help recover operating and infrastructure costs.