Kentucky-American’s history and promise

About 130 years ago three Lexington businessmen established the city’s water system. Local government had declined to build a waterworks because it feared that the tax increase needed would drive citizens away from the city and discourage others from moving here. But the businessmen persevered because they knew that even though a waterworks came at a price, the cost was well worth it for safe, clean drinking water, much-needed fire protection and the long-term prosperity of the community.

Lexington’s water system has been investor-owned ever since. In the 1920s it joined what would later become American Water, which today is the largest and most geographically diverse publicly traded U.S. water and wastewater utility company. In the early 1970s we changed our name from Lexington Water Company to Kentucky-American Water Company to better reflect our service area, which had already grown beyond Fayette County’s borders.

Our company’s focus remains to provide quality water service to customers for a reasonable price. The rates our customers pay reflect the true cost of providing water service, and are regulated through a rigorous, transparent process by the Public Service Commission. The dollars our shareholders invest in our company allow us to make improvements in our systems to keep them operating well. American Water invests about $20 million in capital improvements in Kentucky each year, and across American Water’s footprint, the company invests $850 million to $1.2 billion in a year. This is not the trend among water systems throughout the U.S. On the contrary, many communities haven’t invested in their water systems as needed because of political pressure to keep customers’ rates artificially low.

Why is this a problem?

The American Water Works Association, a national trade association, estimates that $1 trillion will be needed over the coming decades to make necessary replacements of water pipes and other water infrastructure. This news comes as federal grant programs for such projects are drying up. In addition to that vexing problem, consider that the American Society of Civil Engineers estimates $300 billion will be needed over the next 20 years for capital investment in our nation’s wastewater and storm water systems, with numerous cities currently bound by EPA consent decrees mandating that they improve these systems.

Our disciplined approach to infrastructure investment, such as the water treatment plant and transmission project we completed in 2010, ensures quality and adequate water supply and quality service for our customers, and is critical for our region’s economic development. However, we don’t forget that keeping water service affordable is also important. That’s why we work hard to keep operational expenses as flat as possible without sacrificing quality service.

We, and therefore our customers, also benefit from our company being a subsidiary of American Water, which serves 15 million people in 47 states, including 11 military installations. This structure enables us to have better buying power for supplies and equipment – savings that are passed on to the customer -- as well as access to nationally recognized expertise. Because of our expertise and the capital investment we are willing to make, many communities around the country have chosen American Water as their water service provider. These acquisitions are paid for with shareholder dollars and in a state like Kentucky, where each water customer class pays the same rate regardless of their location, growing our footprint means the cost of doing business can be spread out over a larger pool of customers, further aiding in the affordability of our services.

We understand that some folks don’t embrace any kind of private utility model for philosophical reasons. But when you look at the facts – the condition and performance of our systems, the affordability of the services we provide, the quality of our service, our environmental compliance record, our employees’ experience and expertise, and our long-standing record of being an engaged, good corporate citizen – we are clearly living up to what our founders intended 130 years ago, and the communities we serve benefit from it every day.

Susan Lancho is Kentucky American Water’s external affairs manager.

At issue: Nov. 15 editorial, “Water rate increases keep coming”

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