What does the Consumer Advocate Division do?
The Consumer Advocate is a group of attorneys, accountants, financial analysts, and support staff within the Office of the Tennessee Attorney General. It is entirely separate, distinct, and unrelated to the Consumer Services Division of Tennessee Public Utilities Commission (“TPUC” or the “Commission”). There is virtually no overlap between the functions of the two groups.
The General Assembly established the Consumer Advocate in 1994 to represent and provide a voice for the interests of Tennessee consumers of investor-owned-utility services (or “public utilities” as defined in Tennessee law) before the Tennessee Public Utilities Commission or any other administrative, legislative, or judicial body. The relevant public utilities regulated by TPUC include electric, natural gas, water, and sewer companies, with a very limited regulation of certain non-rate aspects of telecom service.
Virtually all companies regulated by TPUC are government-sanctioned monopolies. These companies are given a grant of an exclusive right to serve a geographic area by TPUC. The idea behind this grant of exclusive authority is that it is wasteful and counterproductive to have duplicative sets of electric lines, water pipes, or gas pipelines.
The creation of monopoly providers of essential services like utilities, however, creates a need for regulation. In a competitive environment, competition provides a form of regulation. If consumers are displeased by the prices or conduct of a particular business, they may take their money to the business’s competitors—thereby keeping prices in check and helping to avoid abusive practices by businesses. But monopolies eliminate all competition, necessitating a governmental entity to step in to ensure the monopoly providers do not abuse the consumer. This is especially true when the monopoly at issue is over essential services like water, gas, and electric.
In Tennessee, TPUC is the government entity that regulates public utilities. But even with a regulator in place, there remains significant imbalance between consumers and utilities. When public utilities appear before TPUC, they are well-represented by law firms of their choice; moreover, the fees of the law firms are considered a legitimate business expense that can be recovered in the rates consumers pay. For an individual consumer, it does not make sense to hire an expensive attorney to represent the individual’s interests to TPUC when the proposed rate increase to the individual may be only several dollars or less a month. For a public utility, however, a rate increase of a dollar per customer, per month may mean a total increase of millions on an annual basis. Thus, public utilities have a substantial advantage over individual consumers because legal expenses incurred by a public utility (and likely ultimately paid by consumers) can be cost effective.
To address this imbalance and give consumers a legitimate voice in proceedings at TPUC the consumers would not otherwise have, the Legislature (and legislatures throughout the country) created the Consumer Advocate. The Consumer Advocate is currently located within the Office of the Attorney General and has been for nearly thirty years. When the Consumer Advocate wishes to represent consumers at TPUC, it must receive approval from the Attorney General and file a Petition to Intervene.
The most important cases at TPUC for the Consumer Advocate (and the individual consumers the Advocate represents) are cases where a utility seeks to raise rates. Traditionally, when a company sought to raise rates, it filed what is known as a “rate case,” where all of a company’s expenses and revenues are examined, and a rate is set that is intended to allow a company to earn a fair rate of return in future years. More recently, companies are using “alternative ratemaking mechanisms,” which allow a company to recover expenses and/or investments on an annual basis, with a “true-up” of revenues and expenses every year.
In virtually all major rate cases and alternative ratemaking mechanism cases for at least the last ten years, the Consumer Advocate was the sole representative for consumers (with the exception in some cases of the participation by a coalition of large industrial consumers). No one at TPUC sought to be a party to a vast majority of those cases—not TPUC Legal Staff, TPUC’s Utility Division, or TPUC’s Division of Consumer Services. No one at TPUC or otherwise duplicated what the Consumer Advocate did. This of course is not surprising because the main function of TPUC in rate cases is to hear the evidence and make an independent decision, much like a court.
The work of the Consumer Advocate benefits residential, commercial, and industrial consumers. On the commercial and industrial side, firms pay attention to utility rates as important costs of doing business. Reasonable utility rates and utilities that provide reliable and sustainable services will continue to attract new business investment to Tennessee, while unreasonable rates would deter it. Thus, the Consumer Advocate’s activity encourages economic growth and helps Tennessee maintain its advantage as the state competes for business investments.
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TRA (Tennessee Regulatory Authority) was established in 1996. In 2017, Governor Bill Haslam signed legislation officially renaming TRA as the Tennessee Public Utility Commission (TPUC) to better align Tennessee with regulatory industry standards. If you have a TPUC regulated utility, and you still have billing or service-related questions that your provider has not answered, or just an inquiry in general, please call TPUC at (800) 342-8359 / (615) 741-2904 or visit their website.