The Kentucky Court of Appeals on Friday rejected arguments by a citizen group that the state Public Service Commission should never have allowed Kentucky American Water to build a water treatment plant and pipeline that became operational last year.
Citizens for Alternative Water Solutions, which sued the PSC, Kentucky American and others, had alleged the future demand for water would be less than what Kentucky American projected.
Last year, Franklin Circuit Judge Phillip Shepherd rejected the group's arguments, prompting its members to appeal to the higher court.
"I'm disappointed both for my clients and even more so for the ratepayers of Lexington, who for a generation or more will be saddled with the costs for the plant, the need for which relied on inadequate conservation measures and demand that was four times what historic demand would really project," said Tom FitzGerald, the group's attorney. "The real losers in all of this are the ratepayers of Kentucky American."
The PSC in December approved a 29 percent increase in rates for Kentucky American. The vast majority of that increase is intended to pay for the $164 million treatment plant on the Kentucky River north of Frankfort and a pipeline to carry the water to Lexington.
Had the citizen group prevailed in the case, the courts might have required Kentucky American's shareholders rather than ratepayers to pay for the project.
An alternative plan had been floated by Louisville Water Co., which had offered a pipeline to bring treated Ohio River water from its plants in Jefferson County.
In granting approval for the Kentucky American project, the PSC said the Louisville proposal "never evolved beyond a series of concepts."
The Court of Appeals in its order said it unanimously agreed with the circuit court "that more than ample evidence supported the commission's decision and that the commission committed no error of law."
PSC spokesman Andrew Melnykovych said the commission "is gratified that the Court of Appeals has upheld the Franklin Circuit Court's determination that the PSC made the proper decision in this case."
Susan Lancho, a spokeswoman for Kentucky American, echoed that sentiment, saying, "There was an exhaustive process, exhaustive evaluation and analysis, and we're very pleased with the decision and believe it's the correct decision."
FitzGerald said he planned to discuss the results with the group, "and we will determine at that point whether to seek further judicial review."