TRA has implemented this rate design on a three-year trial basis. The TRA approved Chattanooga Gas’ request to implement the rate design, referred to as decoupling, begins June 1.
Decoupling is intended to allow the utility to promote energy efficiency without harming its financial stability. Under a traditional regulated environment, utilities recover fixed costs volumetrically, which some argue creates a disincentive for promoting energy efficiency.
Decoupling shifts some of the fixed costs related to providing service to monthly base charges while reducing volumetric charges.
Customers will see a base rate increase of $3.00 per month beginning June 1. However, this increase in base charges is expected to be offset through reduced volumetric charges, so that a typical residential bill is only expected to increase by one tenth of a percent, or 60 cents per year.
The approved rate adjustment is lower than the amount requested by the company due primarily to the TRA’s reduction of the company’s return on equity (ROE). TRA reduced the company’s previously authorized ROE from 10.2% to 10.05%.
The recent approval delivers on the condition of approximately $275,000 to be spent by the company over a three-year period to promote energy efficiency and provide programmable thermostats.