2023 Tennessee Code › Title 65 - PUBLIC UTILITIES AND CARRIERS (§§ 65-1-101 — 65-37-104) › Chapter 5 - REGULATION OF RATES (§§ 65-5-101 — 65-5-403) › Part 1 - PUBLIC UTILITIES (§§ 65-5-101 — 65-5-114) › Section 65-5-103 - Changes in utility rates, fares, schedules - Implementation of alternative regulatory methods to allow for public utility rate reviews and cost recovery in lieu of a general rate case proceeding

(a)
When any public utility shall increase any existing individual rates, joint rates, tolls, fares, charges, or schedules thereof, or change or alter any existing classification, the commission shall have power either upon written complaint, or upon its own initiative, to hear and determine whether the increase, change or alteration is just and reasonable. The burden of proof to show that the increase, change, or alteration is just and reasonable shall be upon the public utility making the same. In determining whether such increase, change or alteration is just and reasonable, the commission shall take into account the safety, adequacy and efficiency or lack thereof of the service or services furnished by the public utility. The commission shall have authority pending such hearing and determination to order the suspension, not exceeding three (3) months from the date of the increase, change, or alteration until the commission shall have approved the increase, change, or alteration; provided, that if the investigation cannot be completed within three (3) months, the commission shall have authority to extend the period of suspension for such further period as will reasonably enable it to complete its investigation of any such increase, change or alteration; and provided further, that the commission shall give the investigation preference over other matters pending before it and shall decide the matter as speedily as possible, and in any event not later than nine (9) months after the filing of the increase, change or alteration. It shall be the duty of the commission to approve any such increase, change or alteration upon being satisfied after full hearing that the same is just and reasonable.
(b)
(1)
If the investigation has not been concluded and a final order made at the expiration of six (6) months from the date filed of any such increase, change or alteration, the utility may place the proposed increase, change or alteration, or any portion thereof, in effect at any time thereafter prior to the final commission decision thereon upon notifying the commission, in writing, of its intention so to do; provided, that the commission may require the utility to file with the commission a bond in an amount equal to the proposed annual increase conditioned upon making any refund ordered by the commission as provided in subdivision (b)(2).
(2)
Where increased rates or charges are thus made effective, the interested utility shall maintain its records in such a manner as will enable it, or the commission, to determine the amounts to be refunded and to whom due, in the event a refund is subsequently ordered by the commission as provided in this subdivision (b)(2). Upon completion of the hearing and decision, the commission may order the utility to refund, to the persons in whose behalf such amounts were paid, such portion of such increase, change or alteration as shall have been collected under bond and subsequently disallowed by the commission. If the commission, at any time during the initial three (3) months' suspension period, finds that an emergency exists or that the utility's credit or operations will be materially impaired or damaged by the failure to permit the rates to become effective during the three-month period, the commission may permit all or a portion of the increase, change or alteration to become effective under such terms and conditions as the commission may by order prescribe. Any increase, change or alteration placed in effect under this subsection (b) under bond may be continued in effect by the utility, pending final determination of the proceeding by final order of the commission or, if the matter be appealed, by final order of the appellate court. Should the final order of the commission be appealed while increased rates or charges are being collected under bond, the court shall have power to order an increase or decrease in the amount of the bond as the court may determine to be proper. In the event that all or any portion of such rates or charges have not been placed into effect under bond before the commission, the court considering an appeal from an order of the commission shall have the power to permit the utility to place all or any part of the rates or charges into effect under bond.
(c)
In the event the commission, by order, directs any utility to make a refund, as provided in subsection (b), of all or any portion of such increase, change or alteration, the utility shall make the same within ninety (90) days after a final determination of the proceeding by final order of the commission or, if the matter be appealed, by final order of the appellate court, with lawful interest thereon.
(d)
(1)
(A)
The commission is authorized to implement alternative regulatory methods to allow for public utility rate reviews and cost recovery in lieu of a general rate case proceeding before the commission.
(B)
For all alternative regulatory methods, the commission is authorized to develop minimum filing requirements and procedural schedules; provided, however, that a final determination of the commission pursuant to any alternative regulatory method be made by the commission no later than one hundred twenty (120) days from the initial filing by the public utility.
(C)
If the commission denies an alternative regulatory method filed by a public utility, the commission shall set forth with specificity the reasons for its denial and the public utility shall have the right to refile, without prejudice, an amended plan or amendment within sixty (60) days of the issuance of a final order. The commission shall thereafter have sixty (60) days to approve or deny the amended plan or amendment.
(2)
(A)
A public utility may request and the commission may authorize a mechanism to recover the operational expenses, capital costs or both, if such expenses or costs are found by the commission to be in the public interest, related to any one (1) of the following:
(i)
Safety requirements imposed by the state or federal government;
(ii)
Ensuring the reliability of the public utility plant in service;
(iii)
Replacement of or upgrades to usage measurement devices; or
(iv)
Weather-related natural disasters.
(B)
The commission shall grant recovery and shall authorize a separate recovery mechanism or adjust rates to recover operational expenses, capital costs or both associated with the investment in such safety and reliability facilities, including the return on safety and reliability investments at the rate of return approved by the commission at the public utility's most recent general rate case pursuant to §
65-5-101
and subsection (a), upon a finding that such mechanism or adjustment is in the public interest.
(3)
(A)
A public utility may request and the commission may authorize a mechanism to recover the operational expenses, capital costs or both related to the expansion of infrastructure for the purpose of economic development, if such expenses or costs are found by the commission to be in the public interest. Expansion of economic development infrastructure may include, but is not limited to, the following:
(i)
Infrastructure and equipment associated with alternative motor vehicle transportation fuel;
(ii)
Infrastructure and equipment associated with combined heat and power installations in industrial or commercial sites; and
(iii)
Infrastructure that will provide opportunities for economic development benefits in the area to be directly served by the infrastructure.
(B)
The commission shall grant recovery and shall authorize a separate recovery mechanism or adjust rates to recover operational expenses, capital costs or both associated with the investment in such economic development facilities, including the return on such economic development investments at the rate of return approved by the commission at the public utility's most recent general rate case pursuant to §
65-5-101
and subsection (a), upon a finding that such mechanism or adjustment is in the public interest.
(4)
(A)
(i)
A public utility may request and the commission may authorize a mechanism to recover expenses associated with efforts to promote economic development in its service territory, if such expenses are found by the commission to be in the public interest.
(ii)
Efforts to promote economic development may include, but are not limited to, foregone revenues associated with economic development riders and rates.
(iii)
Expenses described in subdivision (d)(4)(A)(ii) may be reflected in cost of service and be subject to recovery through the annual review process in subdivision (d)(6).
(B)
Upon a finding that expenses to promote economic development have been incurred, the commission shall authorize a separate recovery mechanism or adjust rates to recover such expenses or grant recovery through the annual review process set forth in subdivision (d)(6), upon a finding that such mechanism or adjustment is in the public interest.
(5)
(A)
A public utility may request and the commission may authorize a mechanism to recover the operational expenses, capital costs or both related to other programs that are in the public interest.
(B)
A utility may request and the commission may authorize a mechanism to allow for and permit a more timely adjustment of rates resulting from changes in essential, nondiscretionary expenses, such as fuel and power and chemical expenses.
(C)
Upon a finding that such programs are in the public interest, the commission shall grant recovery and shall authorize a separate recovery mechanism or adjust rates to recover operational expenses, capital costs or both associated with the investment in other programs, including the rate of return approved by the commission at the public utility's most recent general rate case pursuant to §
65-5-101
and subsection (a).
(6)
(A)
A public utility may opt to file for an annual review of its rates based upon the methodology adopted in its most recent rate case pursuant to §
65-5-101
and subsection (a), if applicable.
(B)
In order for a public utility to be eligible to make an election to opt into an annual rate review, the public utility must have engaged in a general rate case pursuant to §
65-5-101
and subsection (a) within the last five (5) years; provided, however, that the commission may waive such requirement or increase the eligibility period upon a finding that doing such would be in the public interest.
(C)
Pursuant to the procedures set forth in subdivision (d)(1), the commission shall review the annual filing by the public utility within one hundred twenty (120) days of receipt and order the public utility to make the adjustments to its tariff rates to provide that the public utility earns the authorized return on equity established in the public utility's most recent general rate case pursuant to §
65-5-101
and subsection (a).
(D)
(i)
A public utility may terminate an approved annual review plan only by filing a general rate case pursuant to §
65-5-101
and subsection (a).
(ii)
The commission may terminate an approved annual review plan only after citing the public utility to appear and show cause why the commission should not take such action pursuant to the procedures in §
65-2-106
.
(iii)
The commission or the public utility may propose a modification to the approved annual review plan for consideration by the commission. The commission shall determine whether any proposed modification is in the public interest and should be approved within the time frame set forth in subdivision (d)(6)(C). If the commission denies a modification to the approved annual review plan, the commission shall set forth with specificity the reasons for its denial.
(7)
In addition to the alternative regulatory methods described in this subsection (d), a public utility may opt to file for other alternative regulatory methods. Upon a filing by a public utility for an alternative method not prescribed, the commission is empowered to adopt policies or procedures, that would permit a more timely review and revisions of the rates, tolls, fares, charges, schedules, classifications or rate structures of public utilities, and that would further streamline the regulatory process and reduce the cost and time associated with the ratemaking processes in §
65-5-101
and subsection (a).
(e)
For purposes of this section, "public utility" does not include a telecommunications carrier that elects market regulation pursuant to §
65-5-109
.
Amended by 2019 Tenn. Acts, ch. 95,s 1, eff. 3/28/2019.
Amended by 2013 Tenn. Acts, ch. 245,s 5, eff. 4/19/2013.
Acts 1919, ch. 49, § 5; Shan. Supp. § 3059a88; Code 1932, § 5451; Acts 1973, ch. 59, § 1; 1974, ch. 470, § 2; T.C.A. (orig. ed.), § 65-520; Acts 1983, ch. 347, § 1; 1995, ch. 305, § 23; T.C.A. §
65-5-203
.