Water Company Surcharge Is Approved

Monday, April 14, 2014

The Tennessee Regulatory Authority has approved Tennessee-American Water Company's request for a surcharge that the company says collectively covers approximately $7.5 million in local water infrastructure improvements that the company has made or will make in 2014. 

The October 4, 2013, filing was the first of its kind by Tennessee American Water and was the result of implementation of new state legislation passed by the Tennessee General Assembly. The new law "encourages the TRA to consider alternative rate mechanisms to ensure continued reliability and quality of service, as well as to promote local economic development."

Deron Allen, president of Tennessee American Water, said, "Similar alternative rate mechanisms are being used in other states to encourage ongoing infrastructure replacement (pipes, pumps, hydrants, etc.) at necessary levels while holding down the overall costs for the filing and administration of general rate cases with state commissions. The goal of the new riders and an expense tracker is to allow Tennessee American Water to continue making necessary investments in the local water system’s infrastructure with minimal impact to customers’ rates.

“Our goal is to keep the local water system strong and viable today and for generations to come. Ignoring the infrastructure needs of our water system, over time, would be a dis-service to our customers and community.”

The average total impact for a residential customer in Chattanooga would be approximately 23 cents per month for all three riders. However, for 2014 bills, customers will actually see a decrease of 2 cents as a result of decreased fee tracker expenses in 2013. 

Mr. Allen said, "Communities across the country are facing challenges of operating aging water infrastructure and the need to increase rates to fund critical improvements.  According to the American Society of Civil Engineers 2013 Report Card, communities throughout Tennessee collectively will need to spend approximately $3.5 billion during the next 20 years to renew and replace their water infrastructure needs."

The initial filing was made in October 2013, and it was reviewed by the TRA, the Tennessee Attorney General Consumer Advocate Protection Division, and others before a decision on the proposed surcharge was made.

A look at the components of the infrastructure funding mechanism:

 ·         The Qualified Infrastructure Improvement Program Rider is an incremental surcharge to a customer’s bill to cover the replacement of water mains, fire hydrants, water meters, production plant structures and equipment, etc. 

·         The Economic Development Investment Rider is an incremental surcharge to a customer’s bill to cover the capital investment and operational expenses related specifically to economic development.  Examples include water main construction to new development areas or projects that may add jobs to the area.

·         The Safety and Environmental Compliance Rider is an incremental surcharge to a customer’s bill to cover the capital investment and operational expenses related specifically to safety and environmental compliance. 

·         The Purchased Power, Chemical, Purchased Water, Waste Disposal and TRA Inspection Fee tracker allows these expenses to be trued up for increases or decreases within a given year.

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