Report Recommends Giving Customers Living Outside Of Cities Ways To Ensure Fair Water And Sewer Rates

Monday, February 24, 2014

A new report by a state commission recommends ways to ensure fair water and sewer rates for non-city customers of city utilities.  The report is the result of complaints by residents of Piney Flats in Sullivan County who receive water and sewer service from Johnson City that they, like all non-resident customers of the city, are charged rates double those charged city residents without justification.  A bill by their state representative, Timothy Hill, that would have capped their rates at 150% of rates charged city residents was sent to the Tennessee Advisory Commission on Intergovernmental Relations for study.

The commission’s report points out the unintended consequence of rate caps, which have a tendency to become standard rates, and recommends instead giving outside customers representation on city utility boards or an appeal process or both.  Echoing a 2008 report by the state’s Water and Wastewater Finance Board (WWFB), the Commission said that rates should be both reasonable and justified and that whether a customer lives inside or outside the city is not enough on its own to justify a rate difference.

The commission’s executive director, Lynnisse Roehrich-Patrick, said that this is not an isolated issue.  “Water and sewer rates are often much higher for non-resident city customers than for city residents, although they may be comparable to rates paid by utility district customers located outside cities in more rural areas.  The crux of the matter seems to be that non-resident city customers don’t have the same ability to complain to someone who either answers to them at election time or is independent of the utility.”

Unlike city residents, non-resident customers have no recourse to elected officials when they believe their rates are unfair.  And while utility district customers can take rate complaints to a state board, city utility customers cannot.  City residents who feel their rates are unjustified can complain to those they elect, who either set rates themselves or appoint those who do.  Likewise, utility district customers can complain to their boards, which are either elected directly by the customers or appointed by the county mayor or executive for whom all county residents vote.

Customers of utility districts can appeal rate decisions to the Utility Management Review Board (UMRB) housed in the Comptroller’s Office, but city water utilities are regulated by the WWFB, also housed in the Comptroller’s Office, which does not have the UMRB’s authority to handle rate complaints.  Investor-owned utilities are regulated by the Tennessee Regulatory Authority and cannot raise rates without their approval.

Of the 199 cities that provide water service outside their city limits, 176 charge rate differentials ranging from 4% to 176% more for water service; 23 charge the same rates inside and outside the city.  Thirteen have outside water rates that are exactly double; 29 have water rates that are exactly one and one-half times their inside rates.  Rates for sewer service follow a similar pattern.  Although utilities commonly use rate studies to determine what to charge their customers, the difficulty of figuring out what it costs to serve customers in different parts of their service area may account for some of these seemingly arbitrary rate differentials.  The commission did not recommend separate cost studies for these areas.

The commission’s concerns about rate caps stem from the experience of other states.  For example, Florida caps water rates for non-resident city customers at one and one-half times the rate charged residents.  Outside rates cannot exceed one and one-quarter times inside rates without a public hearing.  Rate consultants there estimate that about half of Florida’s utilities have set their outside rate at exactly that 125% threshold.  Wyoming gives utilities that receive state grants or loans the option of setting rates for outside customers at a maximum of 125% of the rate charged customers inside the city or the actual cost of providing water service.  Those that don’t receive grants or loans can charge up to double the rates paid by city residents.  Most of Wyoming’s utilities charge at or near the 125% cap.  Colorado has had a similar experience with caps imposed on the interest rates charged by payday lenders.

The full report is available on TACIR’s web site at http://www.tn.gov/tacir/pubs_by_date.html.  For more information, contact Cliff Lippard at cliff.lippard@tn.gov.  

The Tennessee Advisory Commission on Intergovernmental Relations (TACIR) serves as a forum for the discussion and resolution of intergovernmental problems and provides high quality research support to state and local government officials to improve the overall quality of government in Tennessee and to improve the effectiveness of the intergovernmental system to better serve the citizens of Tennessee.


Scam Phone Calls Continue; IRS Identifies Five Easy Ways To Spot Suspicious Calls

The Internal Revenue Service issued a consumer alert today providing taxpayers with additional tips to protect themselves from telephone scam artists calling and pretending to be with the IRS.   These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. They ... (click for more)

CBL & Associates Properties To Pay Common And Preferred Stock Dividends

CBL & Associates Properties, Inc. Thursday announced that its Board of Directors has declared a quarterly cash dividend for the company’s Common Stock of $0.245 per share for the quarter ending Sept. 30. The dividend is payable on Oct. 15 to shareholders of record as of Sept. 30. The Board also declared a quarterly cash dividend of $0.4609375 per depositary share for the ... (click for more)

Bradley, 24, Charged In Death Of Boy, 3; Child Had Numerous Injuries After Left With Boyfriend; Mother Was In Workhouse

Justin Dale Bradley has been charged with criminal homicide in the death of a three-year-old child, who was rushed to the hospital on Wednesday and later died. Police said Dakota James Arndt had numerous injuries over his body. Authorities said Bradley, 24, is the boyfriend of the child's mother, Brianna Kwekel, who was in the Workhouse at the time. Ms. Kwekel was serving 48 ... (click for more)

Helen Burns Sharp Asks Recovery Of Legal Fees In Successful Black Creek TIF Lawsuit

Helen Burns Sharp, citizen activist who sued to try to stop a $9 million Black Creek Tax Increment Financing (TIF) and won, is seeking to have her legal expenses paid by the city and the developers. Ms. Sharp said in a court filing that her legal bills to attorney John Konvalinka are $74,427 thus far. Chancellor Frank Brown ruled in favor of Ms. Sharp, saying the Sunshine ... (click for more)

Decimating The Chattanooga Public Library

Corinne Hill claims that the library is just undergoing a normal weeding process for eliminating books.  She has bragged that she's responsible for the elimination of over 100,000 books - with more to go. "Normal" weeding is not rampant throwing away.  Yes, books go to the Friends for their sale - where they get $2 for a $75 book and thousands wind up being recycled ... (click for more)

The Many Lessons I Learned From Helen McDonald Exum

Helen McDonald Exum was my friend and mentor. As I think of her passing I can only imagine the celebration that is happening in heaven as the news of her arrival is being told. I am sure that there is a party that not only has she organized but that there is not a detail that has been left to chance. I am sure that it is the grandest of events, for you see, she has been planing ... (click for more)