Tennessee-American’s latest double-digit rate hike request came just one year after the foreign-owned utility was granted a 12.3 percent increase by the Tennessee Regulatory Authority (TRA).
According to the state’s Consumer Advocate and Protection Division, our tap water from Tennessee-American Water Company is the most expensive among the state’s six largest cities.
Tennessee-American’s parent company, American Water, majority-owned by foreign-based RWE, has been systematically raising rates for many of its customers in the 32 states in which it owns water companies. In the first three months of this year, American Water reports that it filed rate applications in New Jersey, California, Virginia, Tennessee and Missouri for $231.1 million in increased annualized revenues. On May 30 of this year, American Water sought another $14.7 million in revenue in West Virginia.
According to American Water’s first quarter financial report, the company’s revenue increased 8.2 percent to $508.8 million. The rise in operating revenue, the company says is “due primarily to rate increases.”
Tennessee-American claims the proposed $7.645 million rate increase is to help recover operating and infrastructure costs. Tennessee-American must accept responsibility for its operating expenses, and customers should not be forced to bear the full cost of improvements.
Historically, the TRA approves a lower percentage increase than the water company requests. In May 2007, the regulatory agency that provides utility oversight approved a 12.3 percent increase in response to the water company’s requested 19.7 percent hike. Still, the 2007 increase was the single highest increase to date, and the proposed increase for 2008 represents the largest increase in the company’s 138-year history.
The filing by the Consumer Advocate’s division, which is part of the Tennessee attorney general’s office, also states that if Tennessee-American’s latest request for a 20.58 percent increase is approved, the water utility’s rates will have gone up nearly 45 percent since August 2003. The latest rate request is the company’s fourth in six years.
Tennessee-American has accumulated more than $1.2 million in legal and expert fees for the last two rate proceedings in Tennessee. These expenses alone would represent a four percent rate increase, which TWAC demands that ratepayers – not the utility’s owner – pay.
Earlier this month, Tennessee Attorney General Robert Cooper’s office agreed. A filing issued to the TRA by the State’s Advocate and Protection Division said the water company “has overstated its need for income in regulated revenue by more than $9.2 million, which means that water rates charged to Tennessee-American customers should actually be reduced by $1.6 million.” The State argues that Tennessee-American is asking for “more in customer rates than the company actually needs to meet its expenses and provide a fair return to its shareholders while providing quality water service to its customers.”
Direct Testimony And Exhibits Of Michael Gorman
Excerpt: City residents, thousands of whom are employees of CMA member companies and their service suppliers, and CMA member companies take water service from and are ratepayers of Tennessee-American Water Company (TAWC or Company). These entities represent customers of TAWC that would experience a significant increase in their cost of water if the more than twenty percent (20%) increase in rates proposed by TAWC were to be approved without modification by the Tennessee Regulatory Authority (TRA). Such an increase would not be just and reasonable.
Direct Testimonies of Mike Majoros and Glynn Stoffel
Excerpt: I conclude that Mr. Van den Berg did not address
whether all costs allocated to TAWC were incurred as a result of prudent or imprudent management decisions by the parent of the Petitioner, Tennessee American Water Company (“TAWC”) as the TRA ordered. I also conclude that the Authority should not rely on the BAH Report as a basis to determine the necessity or the reasonableness of AWWSC’s costs allocated and assigned to TAWC.
Contact the Tennessee Regulatory Authority and elected officials today. Discourage them from approving the proposed rate increase and demand that pattern of rate increases be stopped.