Customers of one of Kentucky’s most expensive water districts are getting a rate cut

Customers of an Eastern Kentucky water district with one of the highest rates in the state, and one of the worst financial track records, will see their bills lowered following an order issued Thursday by state regulators.

The order will lower monthly bills for Southern Water and Sewer District, which services 5,400 customers in Floyd and Knott counties, from $58.82 per month to $54.71, and lays out a process that could bring rates down even further in coming months.

Like many water districts in Eastern Kentucky, Southern has extraordinarily high rates of water loss and a crumbling infrastructure that left residents footing high monthly bills.

But, unlike the Martin County Water District, where customers are warning of additional rate hikes on the horizon, Thursday’s order from regulators at the state’s Public Service Commission could bring bills down while the district continues to upgrade its failing infrastructure.

“It’s been an overwhelming process, but this is a welcome situation,” said Southern board chairman Jeff Prater. “I believe it’s sort of a turning point to where we will be going in a new direction that’s better for everyone.”

The PSC placed much of the blame on “years of willful mismanagement and neglect” by Southern’s previous board — all members resigned in February of this year and were replaced — and on former general manager Dean Hall, who resigned in April.

Regulators allege that Hall and the previous board “failed to take any action to address aging infrastructure” and never followed through on promises to create a water loss reduction plan that could have staved off further infrastructural failures and subsequent rate hikes.

Throughout the past year, investigators found that Hall’s staff failed to test the district’s water meters, many of which were 15 years old, as required by regulatory law. Many of the meters were found to not accurately read how much water each customer was using. About 700 meters didn’t work at all.

In September, the district received approval for a $1.5 million grant from the federal Abandoned Mine Lands fund to replace those meters. That money likely won’t flow to the district for months, but Southern, which is operated by Utility Management Group, will begin installing new meters before the money arrives.

Officials said it will take about 90 days to install the new meters.

Customers’ new rates were reduced Thursday to a flat rate of $49.46 per month, along with a $5.25 monthly surcharge to pay for the new meters.

As new meters are installed, the customers who receive them will revert to a minimum bill of $10.45 per month with additional charges of $11.20 per 1,000 gallons for the first 2,000 gallons, and $8.61 for each subsequent 1,000 gallons.

The order comes about one month after a report from the Appalachian Citizens’ Law Center warned that water is becoming increasingly unaffordable for many residents in Eastern Kentucky, particularly in Martin County.

As infrastructure fails, major improvements will cost millions of dollars in many high-poverty districts.

According to the ACLC’s report, about 45 percent of Martin County households make less than $25,000 per year and struggle to afford the average $54 monthly water bill.

Further necessary improvements to the district, and an order from the PSC to obtain an outside management company, could lead to additional rate hikes in Martin County, possibly making it the most expensive in the state.

Customers there have complained of poor quality and irregular service — some residents have said they regularly go days without running water.

While Southern has remained less infamous, officials have warned of a coming crisis there as well. The district declared a state of emergency in March, warning that it was just weeks away from complete financial collapse.

Prater, the board chairman, hopes the PSC’s recent order signals a coming sea change in a district that has found itself in a strikingly similar position to Martin County.

“We are committed to doing what is best for the water district,” Prater said. “We have empathy for all the customers and the rates, but we really want to make sure we can solve the long term problems of the water district.”

Will Wright is a corps member with Report for America, a national service project made possible in Eastern Kentucky with support from the Galloway Family Foundation. Based in Pikeville, Wright joined the Herald-Leader in January 2018 and reports on Eastern Kentucky.
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