Water rates will go up 7.5 percent under a settlement agreement between the city, Kentucky American Water Company and groups representing rate payers.
That increase is roughly half the 15.23 percent rate Kentucky American Water Company had originally proposed.
How much water bills will go up will depend on usage and the type of customer — residential verses business. As of April 30, the average residential bill using 4,136 gallons of water per month was $34.41. If the increase is approved, that bill will be $37.38, or an increase of $2.97 a month.
Under the settlement, base water rates — a flat fee customers pay regardless of usage — will not increase. The water company had originally requested a 17 percent increase in its base water rates.
The settlement agreement also includes a slight increase for the city’s monthly use of fire hydrants. The city’s monthly fee is now $41.60. The water company had originally proposed an increase to $48. The two sides agreed to a compromise of $44.80 a month.
Susan Straub, a spokeswoman for the city, said the city agreed to the settlement because it felt that it was the best deal for rate payers.
“The city initially opposed the rate increase,” Straub said. “We are supporting this settlement because we think it is the best deal we can get.”
The settlement is between the water company, the city, the state attorney general’s office, and the Community Action Council. The attorney general’s office and Community Action represent rate payers in the rate increase case. The attorney general has supported the settlement, Straub said.
The water company had originally proposed to increase its annual revenues by $13.5 million. By cutting its rate increase in half, its revenues will only increase by approximately $6.5 million, the attorney general’s office said.
“After several rounds of negotiation, my office reached a settlement with Kentucky American Water,” said Attorney General Andy Beshear. “In the settlement, we were able to save customers $7 million to significantly reduce the impact to monthly bills, and to secure other conditions we believe will further reduce these costs/increases in the future.”
Kentucky American had also requested a surcharge for infrastructure costs that would be added to all bills. The water company agreed to drop the surcharge as part of the settlement agreement, Beshear’s office said.
Susan Lancho, a spokeswoman for Kentucky American Water, said the company filed for the rate increase in January because it was seeking to recover $79 million in infrastructure improvements. If approved by the commission as expected, the 7.5 percent will be the the fifth and smallest rate increase the company has received since 2007.
Kentucky American Water serves 11 Central Kentucky counties including Fayette.
“The new $15 million filtration building (on Richmond Road) is among those improvements,” Lancho said. “We were not asking for an increase in operational expenses. Those have remained flat since 2012 as we have sought ways to offset any increases in operational costs through efficiencies.”
The Urban County Council approved the settlement Tuesday night. The Public Service Commission, which regulates rates of private utility companies, still must sign off on the settlement. The commission is scheduled to discuss the settlement at its next meeting on July 13, commission officials said.
The commission also has final say on when the water rates will take effect. The settlement agreement has recommended the new rates should take effect Aug. 28.