Kentucky American Water to impose rate increase before PSC approval

jbrammer@herald-leader.comJuly 26, 2013 

FRANKFORT — Kentucky American Water has decided to implement its proposed rate increase immediately, but it would have to provide refunds with interest to its customers if the state later approves a smaller rate hike.

The company, which serves Lexington, asked the Kentucky Public Service Commission last December to increase its revenue by $12.3 million a year, or 14.6 percent. The commission, which oversees utility rates, has not made a final decision.

For a typical residential customer who uses 4,500 gallons and pays $32.75 a month, the increase would amount to $5.76 more each month — a 17.6 percent increase.

That equates to $1.27 a day, according to the Lexington-based company.

Company spokesman Charlie Boland said customers will see the rate increase on their next water bills.

Lexington Mayor Jim Gray strongly opposes the rate hike.

In an email message Friday shortly after the water company said it was proceeding with the rate hike, Gray said, "Kentucky American continues to make anti-Lexington decisions.

"The is the second time the company has jumped the gun on a rate increase in recent years. I renew my call to the PSC to say no to this latest increase, in its entirety. We are already paying 71 percent more than six years ago after three rate increases."

Earlier this year, Gray said the company had made poor business decisions in recent years and now wanted ratepayers to foot the bill. The Urban County Council also has voted to oppose the rate hike.

The Community Action Council, which helps low-income people in Central Kentucky and is an intervener in the case before the PSC, said it is "extremely disappointed" with Kentucky American.

Charlie Lanter, manager for program development for the council, said in a statement, "Today's decision obviously reflects confidence on the part of the company that the PSC will agree with its position and approve yet another increase.

"We are disappointed that the company's customers will be forced to advance them money that, hopefully, the company will be forced to return if the rate increase is denied."

Cheryl Norton, president of Kentucky American Water, said in a news release that the company needs to implement the increase now because of the high cost of infrastructure.

"Because current rates do not cover the immense amount of capital expenditures made since 2010, we must now implement rates to begin recovering those costs," she said.

"Should the ultimate rate increase allowed be less than we have requested, customers will be kept whole by prompt refunds with interest."

Kentucky American Water's last rate increase was in late 2010. Since then, the company said it has invested about $58 million in infrastructure system improvements.

State law allows a utility to implement a proposed rate hike before a commission decision if a review process has been completed.

That involves a public meeting, which was held May 28; commission meetings, which were conducted June 4 and 6, and a seven-month waiting period after filing for the rate hike.

PSC spokesman Andrew Melnykovych said he doesn't know when the commission will make its final decision.

The three-member commission has to make a decision within four months, Melnykovych said.

The company also wants permission to adjust its rates annually to cover the cost of infrastructure repairs and price fluctuations for water and chemicals. If that request were approved, the PSC would continue to conduct a limited review of the changes.

Kentucky American Water, a subsidiary of American Water, is the largest investor-owned water utility in the state. It provides water service to about 500,000 people.

Founded in 1886, American Water is the largest publicly traded U.S. water and wastewater utility company. With headquarters in Voorhees, N.J., the company employs about 6,700 to provide water to about 14 million people in more than 30 states and parts of Canada.

Jack Brammer: (502) 227-1198. Twitter: @BGPolitics. Blog: Bluegrasspolitics.bloginky.com.

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