17 percent water rate increase goes before the public

A settlement has been reached, but not yet approved, that would raise the rates of Kentucky American Water's residential customers by 17 percent.

That's less that the 31 percent the company asked for last fall, but it comes with a warning that a much larger increase could be on the way as early as next year.

In testimony filed with the Public Service Commission, Kentucky American says the proposed settlement provides less money to pay for a controversial new $162 million treatment plant and pipeline that is expected to be completed in 2010.

The company said it would be back to ask for that money after the project comes on line.

The settlement would raise the average residential customer's bill by $3.80 a month, to $26.74.

It was negotiated by representatives of the utility, the state attorney general's office, which represents customers; the Community Action Council, representing low-income water customers; and the city of Lexington, where most Kentucky American customers live.

The settlement must be approved by the PSC, which held a hearing at Bryan Station High School on Tuesday to hear what the public had to say.

Only five people spoke, and all opposed even the lower settlement increase.

Jim McWilliams, a Franklin County resident who opposes the new plant and pipeline, suggested a new rate structure for the utility that would provide poor people cheap water and make up the difference by charging more to "water wasters."

Don Pratt, a Lexington resident, warned the PSC that if Kentucky American got a 17 percent increase, "they're going to be coming back for more and more and more."

Kentucky American's original rate request would have brought in an additional $18.5 million a year, $7.9 million of which would have gone to the plant on the Kentucky River north of Frankfort and the 31-mile pipeline to bring water to Lexington.

The settlement would bring in an additional $10.3 million a year, $1.5 million of which would go toward the project. The plant and pipeline project is designed to meet Lexington's water supply needs through 2030. It is about 40 percent complete. The company has said it expects the project to eventually add $8 to $10 a month to the average customer's monthly bill.

When the rate increase request was filed last year, Kentucky American said it wanted part of that money now to prevent the "rate shock" of asking for enough for the entire project later.

In the settlement agreement, the attorney general, the city of Lexington and the Community Action Council agreed that they would not object to the next rate increase on the grounds of "rate shock" for the project.

The PSC regulates water, gas, sewer, electricity and telecommunications utilities. It is led by three commissioners who are appointed by the governor. The commissioners are David Armstrong, the chairman, who is a former Louisville mayor; Jim Gardner, the vice chairman, a former Lexington councilman and Fayette County school board member; and John W. Clay, a Lexington resident and former executive director and chairman of the state's Alcohol Beverage Control Board.