8/11/2008

City of Chattanooga Appeals Water Rate Increase

Chattanooga, Tennessee – The City of Chattanooga has appealed the decision of the Tennessee Regulatory Authority granting a 12.20% rate increase to Tennessee American Water Company in the rate case filed by TAWC in 2006.  The rate increase, which was put into place in May, 2007, increased water rates by $4,079,865.

“The City of Chattanooga has great respect for the TRA, but believes that the Authority did not correctly apply the provisions of Tennessee law that place the burden on TAWC to prove that it is prudently managing its system and that the costs it seeks to pass on to ratepayers are just and reasonable,” stated Mike McMahan, Chattanooga Assistant City Attorney.

The City of Chattanooga intervened in the 2006 TAWC rate case to oppose TAWC’s request for a rate increase of more than 19.67%.  The City’s opposition focused on the very large increases in administrative fees that TAWC pays to its parent, American Water Works Company, and to other related companies.  The City pointed out that the management fees sought by TAWC had more than tripled since 1996, from some $1,300,000 to more than $4,064,000 in TAWC’s 2006 rate filing.

In the 2006 case, the TRA decided in May, 2007 to permit TAWC to increase its rates by $4,079,865, or 12.20%.  However, the formal order granting the rate increase was not entered until June 10, 2008, nearly three months after TAWC filed another rate case seeking an increase of another 20.3%.  Under Tennessee law, parties to the 2006 case had 60 days from the entry of the final order in a rate case to file an appeal.  The City’s appeal was filed within that time period.