At issue | March 1 column by Wayne T. Rutherford, "Elected PSC would respond to citizens"
You know you are going to be soaked when only two politically appointed people — with no qualifications except political pull, who are responsible to no one — set your electricity, water and natural gas rates.
Well that's exactly the way it is today.
The Kentucky Public Service Commission was created to ensure that commercial public utility rates and plans are reasonable. It consists of three commissioners, appointed by the governor, who hear investment plans and rate hike requests from commercial public utility companies. Only two commissioners are required to approve proposals.
Change is needed, but election of PSC commissioners is not the best avenue for reform. In fact, direct election of commissioners could easily inject more politics into their decisions. Candidates would need money for elections. Who would be more interested in having "their candidate" elected? The very companies that are regulated. Then, to whom would the commissioners be most indebted? Sounds ugly to me.
The PSC can be reconstituted to be less prone to political persuasion and to be more professional.
The legislature could create a PSC with five commissioners and a Professional Qualifications Board made up of college and university professors, each with an advanced degree in utility-related fields such as law, economics or accounting.
The board could recommend to the governor prospective candidates who would also be required to have advanced college degrees in those fields. The additional two commissioners could help prevent bad decisions. Politics would be minimized and the public would be much better served.
The Kentucky American Water case demonstrates how the present PSC does not adequately protect the public and reveals the political might of corporations.
To provide for future Bluegrass water needs, Kentucky American Water had the options of building a new water treatment plant on the Kentucky River or purchasing treated water from the Louisville Water Company. Four professional engineering studies showed that purchasing water from Louisville would cost millions of dollars less, yet KAW still wanted to build the more expensive plant.
Why? The PSC is required to ensure that public utilities make a reasonable profit. The more money a public utility invests, the higher rates it can generally charge, the higher rates customers will have to pay and the larger profits the company reaps.
Despite the engineering surveys, and that KAW estimates of future water needs were significantly exaggerated, two PSC commissioners approved the more expensive option, without ever asking whether the projected water needs were based on sound economic principles. KAW points to a study showing a new water treatment plant as the most cost effective, but that study omitted the latest Louisville proposal.
Lexington customers' residential water rates are 50 percent higher than in Louisville. It's a no-brainer that a city-owned utility, as in Louisville, receives voter pressure to keep rates low, whereas a corporate utility shoots for the highest rates possible to boost profits.
After the PSC decision, KAW filed for a 32-percent rate increase and received 18 percent. Less than a year later, it requested an additional 37 percent hike and received 29 percent, seemingly blowing the claim of "less costly" out of the water.