A ruling by Chancellor Ronald Thurman in Chancery Court Friday will require The City of Smithville to drop the $5.00 per 1,000 gallon water rate it recently  chose to charge DeKalb Utility District (DUD) to $2.67 per thousand gallons.
While city officials agreed not to disconnect DUD from the city water system until the feud between the utilities is resolved during the two-hour hearing in Cookeville, Thurman also granted a DUD motion for a temporary injunction prohibiting the city from charging the $5.00 rate.
He found that the city violated its own statute by not giving DUD proper notice before raising the rate, and set the rate at $2.67 per 1,000 gallons, the price a water study conducted last year found to be the city's actual cost to produce water.
The Chancellor’s ruling requires DUD to post an injunction bond of $75,000 to be held by the court until the case is settled. The bond will be posted as security to protect the city against loss in the event that it is proven later that the injunction was improperly granted.
The chancellor opined that the City of Smithville violated Section 18-502 of it’s own city code requiring the city to give DUD a 30 days notice before a rate change. Thurman found that the city gave only a 16 day notice before the Jan. 1 rate change, and that a proper explanation of how a $5.00 rate was chosen would likely be necessary.
City officials said the $5.00 per thousand gallon rate was decided upon because it is the rate that city customers are pay.
Thurman also found that the higher rate has caused irreparable harm to the DUD and its customers.
DUD attorneys claimed that 16 of the utility’s customers canceled their water service, and that one customer said she was forced to make adjustments in her family budget to pay the higher bills. DUD representatives also claimed that the utility’s  reputation and relationship with its customers has been damaged by the increase.
Attorneys for the city argued that the  authority to decide a water rate does not fall under Chancery Court jurisdiction.
They also maintained that DUD was fully aware that the water rate would change on Jan. 1, and in fact had a 10-year notice considering that the 10-year agreement was set to expire on that date.
The city attorneys also said DUD received proposals for a new contract in September, along with notice that if all the plans were rejected the city would begin charging the DUD the same rate as outside city customers after Jan. 1.
City representatives also contended that the $2.67 rate determined to be the city's cost of producing water last year was based on the assumption that the city would continue selling large quantities of water to DUD, and that the numbers would be different for a customer who purchases smaller quantities.
Attorneys for DUD, however, argued that the 144 percent increase represented by the $5.00 rate is unreasonable and conflicts with state code requiring utilities to “charge rates that reflect the actual cost of providing the services rendered,” and to “not operate for gain or profit or as a source of revenue to a governmental entity.”
DUD representatives also argued that the city is simply trying to get as much money from them as possible before they lose them as a customer when their new treatment plant is completed.
DUD attorneys included Dewey Branstetter, Jr. and Keith Blair, while The City of Smithville was represented by Kristin E. Berexa and Vester Parsley.