Ky. American pays fine for PSC violation

Kentucky American Water will pay a $10,000 fine for repeatedly violating a state Public Service Commission order on how it reported dividends paid to its former parent company.

In May, the utility offered to settle the issue with a fine between $25 and $2,500. The PSC rejected that offer. Under state law, the fine could have been as high as $25,000.

This time, Kentucky American suggested a fine of $5,000 to $10,000.

In announcing the $10,000 fine Wednesday, the PSC said it represents "a reasonable and appropriate resolution of this matter."

The issue traces its origins to 2002, when Kentucky American was seeking PSC approval to be acquired by the German company RWE AG.

The PSC agreed to allow the acquisition but told Kentucky American to get its approval before paying any dividends to its parent that exceeded 5 percent of Kentucky American's earnings for that quarter.

The German company no longer owns Kentucky American, having completed its divestiture late last year. But the violations occurred before that happened.

Kentucky American violated the rule in 2005 and got off with a warning. It violated it in the first two quarters of 2009, but the PSC didn't catch it until the company sought approval for the third quarter.

The utility argued it just made a mistake and should only pay a light fine. The PSC disagreed, saying Kentucky American had been "extremely lax and negligent in exercising proper management responsibility."

Kentucky American spokeswoman Susan Lancho said Wednesday the dividend payments that got the company in trouble were in line with payments that had been reported and approved.