Utility rates among lowest
by RICK NORTON, Associate Editor
Mar 25, 2013 | 1022 views | 0 0 comments | 9 9 recommendations | email to a friend | print
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Cleveland Utilities customers who flinch a little at the 5 percent water and wastewater rate hikes proposed today before the City Council might take solace in knowing their monthly bills remain among the lowest among jurisdictions east of Nashville — even with the increase.

Staff recommendations for the pair of rate surges were presented in detail late last week in called session of the Cleveland Board of Public Utilities in preparation for today’s municipal budget hearings at City Hall.

The sewer rate hike, whose revenue will help pay for a portion of the $30 million cost of SCOPE 10, will keep CU in good standing for a $10 million loan from the Tennessee Department of Environment and Conservation Clean Water State Revolving Fund (SRF) Loan Program. If awarded to CU, the SRF will forgive $451,200 in repayment as an incentive for the local utility to stay committed to Strategic Commitment to Protect the Environment, a 10-year initiative aimed at curtailing inflow and infiltration (I/I) into the existing sewer system that causes manhole overflows and isolated flooding during periods of heavy rain.

I/I has also been blamed for a limited number of sewer backups in the CU service area.

CU board members have already blessed the sewer rate hike and forwarded it to the City Council which also approved it. It is scheduled to take effect July 1 which is the start of Fiscal Year 2014.

Although it has not yet officially been approved by the CU board, the accompanying water rate hike was scheduled to be presented to City Council members for the first time today. Board members first received the staff recommendation late last week.

“We’re not asking for any approval on this today,” CU President and CEO Tom Wheeler told board members in a called session last Thursday. “We wanted to bring it [proposed budget document] to the board’s attention and to show you where we are.”

Wheeler last week said the rate hike proposals would be included in CU’s budget document presented to the Council. At a later date, it will be returned to the CU board for a vote.

The 5 percent water rate hike is comprised of a 3.81 percent internal adjustment and a 1.19 percent pass-thru increase by the Hiwassee Utilities Commission, a multijurisdictional filter plant that sells water to Cleveland Utilities.

In the detailed budget document for FY 2014, CU staff compared the local utility’s new water and sewer rates to others in the state’s eastern half.

At its current amount, the CU residential water rate of $20.06 for 5,000 gallons is ranked fourth lowest behind Bristol, $18.70 for 5,000 gallons; Dayton, $19.57; and Tullahoma Utilities, $19.65. At the new rate of $21.07 for 5,000 gallons, CU will exceed Johnson City, $20.18 per 5,000 gallons; and Maryville, $20.95.

These comparisons are based on CU’s “new” rate versus other utility systems’ “existing” rates, according to Ken Webb, CU senior vice president and CFO, and to Craig Mullinax, CU vice president of the Water Division. In all likelihood, most of the other systems will also enact rate hikes as well, CU officials agreed.

Even with the 5 percent rate hike, CU’s price of $21.07 per 5,000 gallons remains lower than the existing rates charged by the following utility systems: Sweetwater, $21.52; Jackson Energy Authority (located in West Tennessee), $21.84; Knoxville Utilities Board, $22.87; Athens Utility, $23; Murfreesboro, $25.12; Eastside Utility, $26.16; Tennessee American, $26.31; Ocoee Utility District, $30; Consolidated Utilities (Rutherford County), $41.09; and Hallsdale Power Utility District, $47.56.

Roughly the same favorable trend for CU pricing follows in larger water-use categories including Small Commercial (50,000 gallons), Small Commercial (500,000 gallons) and Large Commercial (5 million gallons per month).

At its current amount, the CU residential wastewater rate of $28.60 for 5,000 gallons is also ranked fourth lowest among those surveyed. Lower rates among existing prices are found in Sweetwater, $21.52; Bristol, $24.95; and Jackson Energy Authority, $27.31. At the proposed new rate of $29.67 per 5,000 gallons, CU would exceed Johnson City, $28.60 per 5,000 gallons; Maryville, $28.62; Chattanooga, $28.94; and Dayton, $29.40. However, like the water rates, these comparisons are based on other utility systems’ “existing” rates. Most are expected to increase as they enter their new fiscal years.

Even with the 5 percent rate hike in wastewater, CU’s price of $29.67 remains lower than the existing rates charged by the following utility systems: Tullahoma Utilities, $34.14; Murfreesboro, $35.86; Hamilton County Water & Wastewater Treatment Authority, $40.15; Athens Utility, $44.50; Hallsdale Powell Utility District, $53.76; and Knoxville Utilities Board, $65.25.

Like in water, CU continues the same favorable pricing trends among larger wastewater customers including Small and Large Commercial operations.

Webb reported the majority of the rate hikes will be used to support capital projects (system upgrades, expansions and new construction).

“Capital projects are what drives a lot of the numbers that we deal with at Cleveland Utilities,” Webb said. “That’s a very important part of the budget.”

Webb said the Electric Division is not proposing any internal rate hikes (this excludes any TVA pass-thru increases) for the coming year; however, he pointed to a developing trend that is being closely monitored.

“... The margin between sales and purchased power [from TVA], we continue to have some concerns about that,” he said. Webb described it as a “deterioration” between incoming Electric Division revenue and outgoing expense for purchased power.

A few capital projects included in the CU budget document include continuing work to prepare the new Spring Branch Industrial Park, located near Exist 20 on Interstate 75, for accepting businesses (both the Water and Electric divisions); constructing a new substation to support the industrial park (Electric Division); increasing the capacity of the Ocoee Substation to support future growth in the Durkee Road area (Electric Division); completing the relocation of lines and poles along Durkee Road and Benton Pike to make way for a road widening project by the Tennessee Department of Transportation (Water and Electric); and continuing a massive water line project to connect the Eldridge Drive water tank to the Hiwassee Utilities Commission plant near Charleston (Water Division).

Another Water Division project this year, according to Mullinax, will be a pilot initiative in which 1,500 automated meters (smart meters) will be installed. Over the past couple of years, the Electric Division has converted 30,000 customers to AMI technology. To date, only 19 electric customers are opting out of the AMI initiative and are paying a $10 per month opt-out fee in order to do so.

Like Mullinax did for the Water Division, Electric Division Vice President Bart Borden provided details on a variety of capital projects his group will launch this year and beyond. CU outlines many components of its budgets 10 years in advance, Webb explained.

In his detailed presentation, Webb credited the work of a variety of employees from all three divisions in assembling the FY 2014 budget proposal.

“Every employee is important to the successful operation of Cleveland Utilities and the vital role it plays in our community,” Webb said. “Our employees are dedicated to their work and have made a commitment to doing their part in providing reliable electric service, safe and clean drinking water, and wastewater services to the citizens of Cleveland and Bradley County.”

In last week’s board briefing, Wheeler described Cleveland Utilities as a “well-oiled machine running smoothly” that he wants to maintain at its current functioning level.

“Nothing in this community happens if we don’t have utilities functioning at the level they need to be,” he told board members. “There’s no commerce. There’s no schools. There’s no nothing.”

Wheeler said he would accent the same message to City Council members today.

“It’s important that we keep utilities running like ... a well-tuned machine, a well-tuned engine,” Wheeler stated. “I think we’ve got it running that way now, and I think we’ve planned for a future where we’ll continue to run like that.”