Mayor Jim Newberry says Lexington's water supply has been a problem for decades, but Kentucky American Water wants to charge too much for a new treatment plant that is weeks away from producing more.
"Anyone who would look at this rate increase with an objective eye would conclude it is excessive," he told the state's Public Service Commission on Wednesday.
Vice Mayor Jim Gray says Lexington doesn't need the plant and is being asked to bail out the utility's bad business decision.
"I question whether these massive costs should have been incurred at all," he said.
Sign Up and Save
Get six months of free digital access to the Lexington Herald-Leader
The two men, who are vying for the mayor's job in the Nov. 2 election, were the leadoff speakers at a lightly attended PSC meeting held to gather local opinions on a proposed 37 percent rate hike request. If approved, the average monthly residential water bill would rise from $25.44 to $34.88.
After the meeting, Newberry took sharp exception to what Gray had said about Lexington not needing to augment its water supply.
"That's an unbelievable statement, and it reflects a woeful lack of understanding of a really critical issue for our community," he said.
He noted that studies have consistently found that a more reliable supply is needed.
Gray suggested that those studies were based on projections of industrial water needs that are out of date.
Kentucky American Water is nearing completion of a $164 million project that includes a new treatment plant on the Kentucky River north of Frankfort, and a 30-mile pipeline to carry the water to Lexington. Water could begin flowing in early September.
The PSC, which gave the go-ahead to build the plant in 2008, must approve any rate increases to pay for it.
A small portion of an 18 percent rate increase approved by the PSC last year went toward the plant costs, as would 90 percent of the increase now being considered.
Before Kentucky American got permission to build the project, it spelled out that the average residential bill would increase by $8 to $10 a month. The company says that, even if it gets the full rate hike it's asking for, the increase will still be in that range.
Newberry said there was no inconsistency in supporting the project and opposing the rate increase.
The mayor said Kentucky American is entitled "to a reasonable return on their investment," but what the company has asked for is "unreasonable," he said, especially on top of last year's increase.
Gray, in his comments to the commissioners, said Lexington officials had been sold on the project on the basis of it being a regional treatment plant, with towns around Lexington sharing the costs.
"The burden of this rate increase will not be shared by others but will be directly on the backs of Lexington citizens," he said.
Kentucky American spokeswoman Susan Lancho said that although most of the utility's customers live in Lexington, the rest are spread among nine other counties.
In answers to questions posed by a city attorney in the PSC proceeding, Kentucky American officials have said that the plant, which is designed to treat 20 million gallons of water a day, is smaller than it would have been if Winchester, Nicholasville and other members of a group called the Bluegrass Water Supply Commission had come up with their proposed share before construction started. Talks with other towns are continuing, they said, but adding them now would mean adding capacity.
Gray insisted that the larger plant being touted a couple of years ago would have been a better deal.
"The cost of the infrastructure, the beginning cost, is where the premium is," he said. "To generate 25 million gallons a day instead of 20 million is an incrementally additional cost per gallon."
Only three other people spoke at Wednesday's meeting.
Paul Cook, who represented the Lexington chapter of the AARP, read a letter signed by 25 members of the group.
It said the increased cost of water and other utilities makes it difficult for senior citizens to stay in their homes. He said the PSC should consider a sliding rate scale that would give a break to people who use less water or have lower incomes.
A formal hearing on the Kentucky American case will begin Aug. 10 in Frankfort. It is expected to last several days.
A decision from the PSC is expected in the fall.