Loudon Rates To Increase But Not Tellico Village

Village POA exempt from LUB rate hike

 Vicky Newman News Herald

Loudon Utility Board water customers will face rate increases beginning Jan.1, 2011. Those increases may not be applied to Tellico Village POA customers, however, because the contract wording does not authorize the increase.

The LUB Monday approved rate increases of 7.5 percent for the next three years. The rate hike is needed to generate revenues to repay the cost for a planned water plant expansion. The increase is expected to generate an additional $345,000 per year by the year 2013, when expansion should be completed. Along with additional funds generated by increased capacity needs by one of LUB's industrial customers, the board expects to generate the $900,000 necessary to cover the expansion debt service.

LUB  Manager Lynn Mills said the increase, for Loudon customers, will translate to an additional 88 cents per thousand gallons water in the first year, 92 cents per thousand gallons the second year, and $1.02 per thousand the third year.

The increase will not apply to TVPOA because of one word in the contract - "new," Mills said. He told LUB members he had consulted with attorneys, and the attorney's opinion was that the project did not meet the requirements of the contract. "I do not feel the capacity expansion would fall under the category of 'new 'regulatory requirement and be accepted by the TVPOA as justification for a rate increase," Mills said.

The POA contract states: "If, as a result of any new federal or state regulatory requirement promulgated after July 1, 2002, LUB incurs an increased cost in providing treated water to its customers the price may be increased by the direct amount needed to meet the new regulatory requirement."

The contract is a 20-year contract that is in effect until Dec.31, 2022.

While the water plant expansion is required by the state and federal regulating authorities, it is not a new requirement. The EPA requires expansion when a system reaches 80 percent of its capacity. The water plant expansion will take the department's capacity from 12 million gallons a day to 20 million. In addition, it will involve installment of a new intake pipe in a different area of the Tennessee River, which will provide better quality and quantity of water.

Mills said last summer, the water plant treated 11 million gallons a day on some days, and federal regulations  require that at least 20 percent of  capacity is kept in reserve in case of emergency.

LUB member John Hutton made the motion to approve the increase in order to get the loan. When the matter came to vote, board member Michael Cartwright said, "Put me down for a 'no', if you're not going to raise Tellico Village rates along with this."

Jack Randolph, LUB board president, said he never felt a 20-year contract should have been signed. "I agree with you (Cartwright), but there is nothing we can do a about it," Randolph said. "We should have never got into a contract like that." He suggested that the board seek negotiation on the rate.

Cartwright said, "I say we vote to raise theirs too, and then if they want to go into mediation..."

However, the motion was on the table, and the vote to approve the increased passed with only Cartwright dissenting.

John Cherry, TVPOA public relations director, said Tellico Village maintains its own public works department. Village water is purchased from two sources -  TAS (Tellico Area Services) and LUB, which supplies water to 80 percent of Village homes.

"Our water and sewer departments work closely with LUB to get the chemistry from the two suppliers as close as possible," Cherry said.  The contract agreement included language to help keep costs between suppliers equitable, Cherry said, but also to allow for any increases mandated by new federal or state requirements.