DUD and City Officials Still Blaming Each Other For Water Rate Increases

February 4, 2014
Dwayne Page

Many DeKalb Utility District customers are not happy with the big rate increases in their water bills this month and a lot of them are blaming the City of Smithville

City officials claim the DUD is directing any complaints they get to the city. But while the city did increase rates to the DUD by $2.95 per thousand gallons effective January 1st, the DUD raised rates to its own customers by $4.30 per thousand gallons.

"We had quite a few calls last week from DUD customers. They were told to call city hall if they had any questions on their rate. I explained to several of them that the City of Smithville does not dictate the rates of DUD customers," said Secretary-Treasurer Hunter Hendrixson during Monday night's monthly city council meeting.

"Just to clarify, we do not set their (DUD customers) rates," added Alderman Danny Washer.

"We went up $2.95 per thousand gallons and they went up $4.30 per thousand gallons to their customers. If anybody (DUD customer) wants to question their increase they'll have to go to DUD," said Hendrixson.

The DUD board typically meets on the first Thursday of the month at 3:00 p.m. at their office in Smithville.

Meanwhile, city officials extended an invitation for DUD board members to attend last night's city council meeting to discuss their concerns about the new DUD water rate of $5.00 per thousand gallons but neither of the board members could make it.

In a reply to the invitation, DUD officials said they were unable to attend. "I sent a letter last week to the Board of DeKalb Utility District to meet with us if they wanted to discuss or address the board on their water rate increase that the city gave after the contract expired December 31. I got a letter today thanking us for the invitation. However they regret to inform that their board or officials will not be able to attend tonight's meeting", said Hendrixson.

"I guess they are not that concerned about the rate hike, I don't know. However they (DUD officials) have yet to personally come before the board and address their rate hike that they have been very public about," added Hendrixson.

In a letter to subscribers Tuesday, January 14, Board of Directors and Management of the DeKalb Utility District announced that rates to customers who receive water purchased by the DUD from the city would be increased by 42% or $4.30 per thousand gallons effective with the January billing.

DUD officials said the increase was necessary to help offset the 144% rate increase the City imposed on the DUD effective January 1.

Meanwhile, as the city and DUD await a Chancellor's ruling on a judicial review of last April's decision by the state's Utility Management Review Board, city officials point out that DUD ratepayers could petition the UMRB for an ouster proceeding against DUD board members if they believe they have been wronged by the DUD's decision to build a water treatment facility.

In a court brief defending the UMRB's ruling to dismiss the petitioner's complaint against the DUD, Deputy Attorney General Scott Jackson with the Tennessee Attorney General's Office wrote that their course of action was not the proper remedy."The Utility District Law of 1937 provides an express remedy in instances when ratepayers believe a utility district has acted improperly and they want a determination that the district has acted "wrongly". Under Tennessee Code Annotated (the Ouster Provision), ratepayers may petition the UMRB to remove board members in the event they believe that board of commissioners engaged in misconduct or failed to fulfill their fiduciary duty to the customers in the operation, or oversight of the district. Such a petition requires 20% of the customers of a district to request a removal. Thus, if the ratepayers truly believe the DUD acted "wrongly" as claimed here by the ratepayers in their petition, the proper recourse is a hearing under the Ouster Provision."

"Further, the Utility District Law of 1937 expressly provides that a utility may be sued. If the ratepayers truly believe that a public utility has taken action against their best interest, they can also file a lawsuit against the utility district in the appropriate court".

Last April, the Utility Management Review Board held a hearing in Smithville to review the rates to customers charged by the DeKalb Utility District at that time and rates to be charged associated with the construction of a new water treatment plant. Ratepayers and the City of Smithville, referred to as the petitioners, also wanted the UMRB to block the DUD's decision to build a water treatment plant. DUD officials contend it is in the best interest for DUD to have its own water plant and that the result would be lower rates to DUD customers over a period of time.

The UMRB, at the April hearing, found DUD's rates at the time to be reasonable and refused to intervene in DUD's business decision to build the water plant. By not reviewing "services provided" as well as "rates charged" as requested, the petitioners contend that the UMRB violated statutory provisions and or followed an illegal procedure in arriving at its decision. Attorneys for the UMRB and DUD said the Utility Management Review Board had no authority to stop the water plant project nor to force the DUD into a contractual relationship with the city.

The petitioners later filed an appeal to the Davidson County Chancery Court for a judicial review of the UMRB's decision, hoping to win a reversal. Chancellor Ellen Hobbs Lyle held a hearing last week in Nashville with all the parties involved and said she would issue her decision within thirty days.

Attorneys for the DUD and the State Attorney General's Office for the UMRB essentially make the same arguments for the UMRB's decision to be upheld.

DUD's attorney Dewey Branstetter, Jr. wrote in his court brief that "The UMRB correctly dismissed the petition created through the efforts of the City of Smithville and filed by the Ratepayers of the DeKalb Utility District. The petitioners have not and cannot meet the burden required for this court to overturn the decision of the UMRB, to remand this case back to the UMRB, or to do anything except affirm the UMRB Order."

"The UMRB correctly decided to limit its review to the rates charged by the DUD and not to examine the business decision of the DUD to construct its own water treatment plant. While there was significant testimony about the water treatment plant, and even though the proof was overwhelming that the decision by the DUD to build its own plant was in the best interest of the customers of the DUD, the UMRB correctly decided that it was not its duty to examine that decision."

The petitioners also contend that the UMRB failed to consider the capital expenditures associated with the new water treatment plant and how that would affect future rates. The UMRB's ruling that DUD rates were reasonable was not supported by the material evidence presented at the hearing, according to the Petitioners.

In his court brief, Branstetter wrote that "the decision of the UMRB was supported by material evidence in the record. The transcript from the hearing and the exhibits introduced at the hearing show that the rates charged by the DUD are reasonable and that the rates proposed to be charged if the water treatment plant is built will also be reasonable. There was no proof introduced by the petitioners that would support a decision that the rates of DUD are not reasonable,"

Lastly, the petitioners argue that the UMRB did not conduct an "Open Hearing" to allow anyone an opportunity to speak and that the case should be remanded to the UMRB to hold another hearing to consider testimony and opinions of the ratepayers that desire to give public comment as part of the proceedings. Although the forum was open for the public to attend, it was conducted like a court hearing, with witnesses called to testify and be cross examined.

Branstetter wrote that this argument by the Petitioners is also without merit. "The UMRB proceeding was a contested case hearing under the Uniform Rules of Procedure for Hearing Contested Cases before State Administrative Agencies. It was not an open hearing under the Rules of the Comptroller of the Treasury for the Utility Management Review Board. As such, the Petitioners cannot legitimately argue that because the UMRB didn't have "open microphone night" that the case should be remanded back to the UMRB for unfettered public comment."

In the brief, Branstetter wrote that the ratepayers and the City of Smithville were represented by counsel. If their counsel had chosen to call any additional ratepayers to testify, they certainly had the right to do so. Any of the ratepayers in attendance who desired to give testimony could have been called by the counsel representing their interest, but the Petitioners failed to even attempt to call any ratepayer witnesses other than the two designate representatives, Randy Rhody and Hunter Hendrixson. The Petitioners should not now be allowed to complain that they were not given an opportunity to have an open forum when their counsel had the full ability to call any witnesses they so desired. If counsel for the Petitioners failed to call any witnesses and now assert that they were somehow prejudiced by not doing so, then it is their own fault for not calling other individuals to testify".

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