Cities that own pay less for water

By Marty Solomon

Public utilities have special privileges because they are guaranteed a reasonable profit by the Kentucky Public Service Commission. That's a tremendous benefit in a world where many businesses have folded and others are in bankruptcy. So what should public utilities do to earn this unique right? They should be good corporate citizens.

Kentucky Utilities is such an example.

KU does everything in its power to help customers reduce electricity consumption and save money. KU will replace your thermostats with programmable models, pay you cash to allow them to idle your air conditioner a couple of minutes each hour or configure a second refrigerator to recycle. It sends out tips on saving electricity, encourages the purchase of efficient appliances and will send you energy-saving compact fluorescent light bulbs and provide an energy audit.

Then there is Kentucky American Water.

Most customers probably think they have been subjected to unreasonable rate increase requests, which have totaled 100 percent over the past five-plus years. In 2008, Kentucky American was told that average family water use was declining because of new plumbing regulations, smaller average family size and outsourcing of American manufacturing, yet the utility continued to push to build a new $164 million treatment plant.

Three engineering studies concluded that such a plan was not the best alternative. Nevertheless, it was built and will sit virtually idle while water use declines and customers pay for the white elephant.

Worse, in an unbelievable act of chutzpah, Kentucky American now admits that water use is declining and asked for its latest increase to shore up sagging profitability and pay off the bonds that built the new plant. How utterly ironic.

While Kentucky American needs to maximize profitability and rates to satisfy stockholders, a city-owned water company, like the Louisville Water Co., tries to keep rates as low as possible to satisfy voters.

Because a city-owned, non-profit utility can borrow money cheaper than a corporation, because it is pressured by voters to keep rates low and because it doesn't need to make a profit, it is a no-brainer that a Lexington municipal water company would keep rates lower than Kentucky American. Just look at Louisville's rates, which have consistently been significantly less than Lexington's.

Therefore, I ask citizens to demand that Lexington purchase the water company. Back in 2006 the voters rejected such a plan but since then many have been disillusioned by Kentucky American's rapid, frequent, elephantine rate increase requests.

The entire purchase can be accomplished by issuing bonds whose interest rate may never be lower than today and which would save water customers millions in the future.

Kentucky American's franchise is up for renewal in little more than a year. Please lobby your council members and the mayor to do what is best for our community before our pockets are drained dry and water is too expensive to drink.

Marty Solomon, a retired University of Kentucky professor, can be reached at mbsolomon@aol.com