Franklin County

Mayor presents petition at rate hearing for Kentucky American Water

FRANKFORT — A hearing on Kentucky American Water's request for a nearly 38 percent rate increase got under way Tuesday with the mayor of Lexington presenting a petition, with several thousand names, opposing the increase.

Mayor Jim Newberry was followed by an attorney for a social services agency handing over hundreds of "personal stories" from low-income people who already are having a hard time making ends meet, and one personal plea from a woman who lives near the almost-completed water supply project that is driving the request for more money.

Then, as such hearings before the state Public Service Commission usually do, this one moved on to complex testimony by financial experts delivered to a room dominated by lawyers.

It will be sometime this fall before the utility's customers will learn how much more it will cost them to take a shower.

Kentucky American says 90 percent of the increased revenue it is seeking will help pay for a $164 million plant nearing completion on the Kentucky River north of Frankfort and a 31-mile pipeline to carry the water to Lexington.

The utility says the project will meet the needs of its customers until 2030. That could put an end to water-use restrictions during mild droughts. The last such restriction, curbing outdoor water use to alternate days, was in 2007.

Chris Schimmoeller, a Franklin County resident who is a member of a citizens group that tried to block the Kentucky American project in court, asked the PSC to place restrictions on the utility, such as not being able to charge for water from the new treatment plant when there is adequate water coming from a plant closer to Lexington.

"This is about Kentucky American Water building an empire on the backs of ratepayers," Schimmoeller said.

Newberry appeared briefly at the beginning of the hearing to present 4,310 names of people who signed a petition on the city's Web site.

Newberry, who is seeking re-election Nov. 2, has said he supports the plant and pipeline project but not the amount of rate increase the utility wants.

Vice Mayor Jim Gray, who is challenging Newberry, has questioned whether the project was necessary. Gray did not attend Tuesday's hearing.

Iris Skidmore, an attorney for Community Action Council, said some of the 753 clients who wrote their stories for the PSC can't afford prescription medicine after they pay their utility bills. Some of the letters were in Spanish, she said.

If granted in full, Kentucky American's revenue would go up 37.7 percent. The average residential bill would rise 37 percent, from $25.44 a month to $34.88.

A consultant hired by the state attorney general's office, which represents ratepayers before the PSC, is expected to testify that Kentucky American is entitled to only a 20 percent increase.

Historically, the PSC grants the utility between 50 and 60 percent of what it seeks.

Last year, the utility asked for a 32.5 percent increase. In an agreement worked out with the attorney general and others, it settled for 18 percent.

That settlement was unusual because it was approved by the PSC in a rare 2-to-1 vote. PSC vice chairman James Gardner, a former member of the Urban County Council and the Fayette County school board, voted against the settlement, saying Kentucky American had failed to prove that the increase was reasonable.

In the settlement agreement, the attorney general, the city of Lexington and the Community Action Council said they would not object to the next rate increase request on the grounds of "rate shock," or too large an increase too quickly.

The PSC pointedly did not endorse that part of the 2009 settlement.

"Kentucky American should be prepared to address ... questions from us related to the possible balancing of shareholder and ratepayer interests to prevent the occurrence of 'rate shock,'" the commission said at the time.

The current hearing is expected to continue Wednesday and might spill into Thursday.

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