KY water utilities penalize ratepayers with disconnections, late fees, report finds
Costly water bills in Kentucky are driving up utility disconnections even when the amount due is $50 or less, and most regulated water systems tack on additional punitive charges that compound affordability problems, according to a new public-interest law report.
The Appalachian Citizens’ Law Center analyzed tens of thousands of drinking water disconnections across 114 utilities regulated by the Kentucky Public Service Commission between 2023 and 2024.
Nearly two-thirds of Kentucky households where water was shut off during that time owed $50 or less, and a majority of regulated water companies, public water districts and associations penalize customers for late payments and charge for turning water service off or back on, the report found.
ACLC’s report only reflects regulated water systems that submitted required annual filings on monthly disconnections. It excludes nearly 400 smaller municipal water systems that are not regulated by the PSC and aren’t required to report disconnections.
But the report estimates that Kentucky’s annual water service disconnection rate sits somewhere around 9%, a “concerningly high” average compared to limited state and federal survey data that suggests a national average of about 5%, said ACLC Director of Policy Rebecca Shelton.
Water utility debts “get compounded by disconnection fees, reconnection fees, late fees, and so you’re making it very difficult for folks who are already struggling to get back on track,” she said.
On average, drinking water costs are rising nationwide. A 2024 U.S. Environmental Protection Agency assessment estimated that between 12.1 and 19.2 million American households lack access to affordable water.
The ACLC conducted a 2023 study of drinking water affordability in Kentucky and found that community water rates outpace median household income levels in about 4.5% of Kentucky’s census tracts. For marginalized, low-income Kentuckians, nearly 70% of census tract water rates are too expensive.
The latest research on water service disconnection rates highlights a small, often overlooked component of Kentuckian’s monthly utility bills that stings the most for those already struggling to make ends meet. Disconnecting someone from the water main and penalizing them for nonpayment can create a revolving cycle that prevents the customer from digging out of a financial hole and overloads the utility with bad debt that the remaining ratepayers have to shoulder the next time it adjusts rates.
“If your customers aren’t able to pay for water, you’re just going to lose revenue streams, and so there definitely is a component of customer affordability that affects the system sustainability,” Shelton said. “This isn’t working. Our rates are going up, fewer people are able to pay; this is not sort of a sustainable spiral for the system.”
During 2023 and 2024, between $7 million to $8.5 million in customer assistance funding would have been needed to prevent disconnections for the 114 water systems studied.
The federal government has proven that it had the capacity to meet much of Kentucky’s water bill customer assistance gap in funding under COVID-19 emergency assistance programs that earmarked about $18 million across a two-year period in 2021 and 2022, Shelton told the Herald-Leader Wednesday.
Funding under the federal Low-Income Household Water Affordability Program has since expired, but it provided a model for bailing ratepayers out, she added. The Kentucky PSC issued a temporary moratorium on disconnections and late fees in response to the COVID-19 pandemic and later found that it had no meaningful impact on when ratepayers paid their bills. That suggests punitive measures don’t have the intended effect of steering customer behaviors.
Plus, the ACLC data found large discrepancies between how much utilities charge their customers for punitive fees. The law center recommended that the PSC investigate “why some water systems can afford to reconnect customers for as little as $4 but others charge over $100.”
The ACLC report recommends municipal water systems, under-accounted for in the research, voluntarily report disconnections. That would take individual action on behalf of hundreds of small municipalities across the commonwealth, as broad home-rule powers grant those cities the authority to exercise almost all authority or perform most government functions within their city limits.
Gov. Andy Beshear expanded Kentucky’s moratorium on utility disconnections to include municipalities through executive orders that relied on pandemic-related emergency declarations.
The law center report recommends that Kentucky lawmakers fund their own customer assistance program to supplement re-approved federal low-income water bill funds and that the PSC be given express authority to establish equitable rate designs and management programs that create payment schedules and even forgive some debts.
The researchers said the Kentucky General Assembly should ban late fees for regulated utilities, especially among low-income customers. Disconnection fees should be capped at $100 and customers should be barred from disconnection during days or times when they are unlikely to be reconnected for expended periods, such as holidays and weekends.
“There is definitely more that the PSC can do, and there are some big, big data gaps in what we’ve been able to explore,” Shelton said. “We need to develop a clearer sense of what these utilities are doing — what their current practices are — and, from there, then we could start developing, you know, better models.”
