Water bills in Lexington will go up effective Aug. 28.
The state Public Service Commission has given its final approval to a rate increase for Kentucky American Water that will result in the average monthly bill going up by $3.60.
The increase will generate nearly $6.5 million, a little less than half of the $13.45 million that Kentucky American Water had requested. A residential customer using 5,000 gallons per month will likely see a monthly bill increase from $38.99 to $42.59, according to the state agency that regulates utilities in Kentucky.
That’s an increase of about 9.2 percent for residential customers. Overall, the rate increase for all customers — residential, business and industrial — is 7.2 percent.
The rate increase was announced in July when the city of Lexington, the state attorney general and groups representing rate payers reached a settlement. The Public Service Commission must sign off on settlement agreements.
But Tuesday’s order also said the water company, which serves 126,000 customers in 10 counties, overcharged customers by prorating some customer bills. The commission found the water company had prorated some customer bills where the days between monthly meter readings was more than 35 days.
Kentucky American did not say it was going to prorate bills on its tariff — a legal document that spells out the rates, charges and terms of service. All charges must be disclosed in the tariff.
Since January 2012, Kentucky American had prorated upward of 15,545 bills, resulting in unauthorized charges of nearly $45,000. The commission ordered the water company to refund money to customers but acknowledged it would be difficult to find former customers and the amount per bill was small. The commission ordered that any money owed to former customers be deposited in an account that will help poor customers pay water bills, called the Help To Others.
As part of the settlement, Kentucky American has already agreed to increase the amount that it gives to that account to $62,500 annually. It had previously contributed $60,000. Kentucky American must also give more detailed information about the calculation of taxes on its water bills, the commission ordered.
The company has said the rate increase was necessary to pay for capital improvements including a new water filtration facility on Richmond Road. The last water rate increase was in October 2013.