Fayette County

Lexington council considers strong resolution aimed at water company

Members of Lexington's Urban County Council are considering asking the mayor to take whatever steps are necessary, including legal action, to force Kentucky American Water Company to appear before council to answer questions about its proposed rate increase.

The resolution forwarded at Tuesday's work session also said the council had "legitimate questions" about progress on a $160 million water treatment plant and pipeline, as well as Kentucky American's marketing plan to get neighboring communities to buy water from the new treatment plant.

Council voted 9-5 to put the resolution on its agenda for Thursday night.

Kentucky American has filed a request with the state Public Service Commission asking for a rate increase of almost 37 percent, which follows an 18 percent increased approved by the PSC last year.

The increase is based almost entirely on the cost of the new water treatment plant and pipeline.

In March, Kentucky American rejected council's request to come in and talk about its rate hike.

The utility said its request was pending before the PSC and that the city would have multiple opportunities "to ask as many questions as it desires" as the case unfolds.

But Tuesday's resolution, introduced by Vice Mayor Jim Gray, said Kentucky American operates in Fayette County under a 1995 franchise agreement that creates reciprocal obligations between the company and local government to designate representatives responsible to answer requests for information related to water service.

The company's refusal to respond to council's request is a violation of its duty to answer requests for information, both explicit in the franchise agreement and implied as part of each party's legal obligation of "good faith and fair dealing," the resolution stated.

The measure quickly got caught up in the mayor's race in which Gray is a candidate.

Sixth district councilman Kevin Stinnett said the resolution "stinks of politics." He reminded council that Kentucky Utilities also has a request before the PSC for a rate increase "which would actually be three times the dollar amount of what Kentucky American's would be to its rate payers."

"But I don't see us bringing them before council," Stinnett said. "It's not this body that should be taking legal action to get someone to appear in front of us. It sets a bad precedent."

Gray responded that Kentucky American appeared before council in 2007 "to advocate for the building of the plant."

"Why can't they appear to update us on it?" Gray asked.

City attorney David Barberie indicated that the wording of the franchise agreement was short, and did not spell out whether a water company representative had to appear in person to answer questions.

Councilman Ed Lane said he thought Gray's efforts were turning the rate request into a political issue, and as a result had "discouraged Kentucky American from even coming down here and speaking to council."

However, councilman Tom Blues, who supported the resolution, said it did not seem out of line to insist the water company come to council to explain a 38 percent rate increase. "It does happen to be an election year, but it is also a rate increase year," Blues said. "It's unfortunate these two things collide, but it's important we get answers to these questions."

Gray said he wished council had endorsed hiring a University of Kentucky consultant two years ago, when it had the chance, to examine Kentucky American's proposal and a competing one by the Louisville Water Co.

"This is not about politics. This is about policy," Gray said. "This is about where does Kentucky American stand today in the execution of its business plan."

Gray said he was asking similar questions "long before this campaign."

However, as council voted on Gray's resolution, the Gray campaign sent out a press release headlined, "Kentucky American Water is contractually bound to answer questions from the council."

Kentucky American spokeswoman Susan Lancho said of the council resolution: "Right now, this is just a proposal. It's not formally been considered by council yet. If and when it passes, we would comment at that time."

Of the franchise agreement, she said, "We're not bound by that to have someone come before council."

Voting in favor of the resolution were Peggy Henson, Julian Beard, Chuck Ellinger, Jim Gray, Andrea James, Linda Gorton, Tom Blues, Diane Lawless and Cheryl Feigel. Opposed were George Myers, Ed Lane, Kevin Stinnett, Jay McChord and Doug Martin.

Law commissioner Logan Askew said he would research legal basis of whether the mayor, on behalf of council, could legally compel Kentucky-American to appear before council. He will report at Thursday's council meeting.

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