Loudon utility rate hikes to fund water treatment facility upgrade

By Hugh G. Willett knoxnews.com
Loudon Utility Board customers will have to absorb at least two rate increases to help pay for upgrades to the utility's water treatment facility.

According to Loudon City Manager Lynn Mills, the first of two 7.5 percent rate hikes for LUB customers went into effect January 31. A second 7.5 percent rate hike will go into effect in 2012.

Loudon is under a Tennessee Department of Environment and Conservation order to increase wastewater treatment capacity since residential peak usage increased nearly 80 percent of system capacity during the 2008-09 drought, Mills said. TDEC requires treatment capacity be upgraded whenever it reaches 80 percent, he noted.

The two rate increases, as well as two $5 million state revolving fund loans, should pay for a major part of the project, according to Mills. Although the exact cost has not yet been determined, the project has been estimated at up to $17 million.

A meeting to discuss the loans and the possible impact on rates will be held at 6 p.m. April 18 at the LUB headquarters on Alma Street in Loudon.

"Some bond money may also be required," Mills said. "Once we get the bids in we'll know how much additional funding will be needed."

LUB currently is waiting on a TVA permit to begin construction of the upgrades, which should take a least a year to complete. The upgrades should provide enough treatment capacity for the next 20 years, Mill said.

According to Mills, the requirements for treatment capacity are based on water system capacity, not actual water use. Temporary spikes in water usage can push the system close to 80 percent of capacity, he said.

In Lenoir City, the Lenoir City Utilities Board is facing a $12 million upgrade to its water treatment facility. LCUB initially raised water rates to help pay for the expansion of the treatment plant but later reversed the increases.

A Jan. 31 letter from state Comptroller Justin Wilson to LCUB management questioned the utility's ability to continue to pay the debt service on the loans for the treatment plant without either cutting costs or raising rates.

LCUB General Manager Shannon Littleton disagreed with Wilson's assessment. The Lenoir City utility expects to be able to meet debt payments without major operations cuts, Littleton said.