At issue | April 23 Herald-Leader article, "Council opts not to take legal action against water utility"
Kentucky American Water's request for a rate increase has generated many questions about how the request will be handled. As an investor-owned utility, Kentucky American Water must seek approval for any rate change from the Kentucky Public Service Commission, a state government agency.
Many customers may not realize how comprehensive and transparent the review process at the PSC is. The process begins when a utility notifies the PSC that it intends to file a rate case with that regulatory body. Even before the actual application is filed, PSC staff issues the utility its initial list of questions, known as a data request.
The staff data request in Kentucky American Water's case included 32 questions, most with multiple subparts. The company's response covered approximately 2,000 pages, including many detailed spreadsheets. The actual rate case application is submitted on a form dictated by PSC rules. The form mandates disclosure of complete information fully justifying the requested rates. The application for the current rate case is contained in three volumes that stand nearly seven inches high.
After the formal case filing, the process becomes a legal matter, and interested parties may join the case.
Invariably the Kentucky attorney general's office, Lexington-Fayette Urban County Government and Community Action Council intervene in our cases and submit additional requests for detailed data from the company.
One such recent request in the company's current case included more than 450 questions.
Early in the case, the PSC issues a scheduling order that sets deadlines for procedural steps. Typically, this order allows multiple rounds of data requests from all intervenors and PSC staff (a process known as discovery), sets dates by which the parties must file witness testimony and schedules hearings, including a hearing that allows any customers to testify before the PSC's three commissioners.
Often this opportunity for public input is at a special hearing called for that purpose. In this case, the PSC has scheduled a hearing on Aug. 10 in Frankfort, but hearings in Lexington, Owenton or other areas may be added.
Opposition by intervenors is always spirited. The attorney general's office consistently assigns at least two of its best attorneys to our cases and employs expert witnesses. Other intervenors, including LFUCG, are permitted to submit testimony in opposition to the proposed increase.
Additional challenges to a rate case application come from the PSC staff, which consistently assigns its most experienced personnel to Kentucky American Water cases. Senior PSC attorneys have extensive training and experience in utility regulation, and they are typically assigned to our cases.
The engineers, accountants, economists and other experts on the PSC staff are likewise specially trained. PSC staff data requests and cross-examination of company witnesses are particularly penetrating. Moreover, they are the people who advise the PSC commissioners in their deliberations.
This whole process makes for a deliberate, thorough review of every rate case application.
Recently, there was an effort to compel Kentucky American Water to appear before the Urban County Council to answer questions about the rate request.
The company respectfully declined because the PSC process, which Kentucky American Water is compelled by state law to follow, has already established the extensive discovery schedule for all parties.
In fact, the council submitted questions to the company as part of this process. For the company to submit to additional questioning at a council session, at the very time it is engaged in a legal case with the same governmental body, undermines the integrity of the exhaustive regulatory regime under which we operate.
Undermining the PSC's authority is simply not in the best interest of our customers, who are afforded a much greater opportunity to make their concerns heard in the PSC process than they ever could have at a work session of the city council.
Kentucky American Water has entered into this line of regulated business willingly and welcomes the review of its rate cases in a setting that offers such a transparent, deliberative and disciplined review. We also invite anyone interested in observing or participating to attend or participate in the public hearings that the PSC will hold.