MIDDLESBORO — Representatives of the Water Service Corporation of Kentucky (WSC) were cross-examined by the Kentucky Public Service Commission (PSC) in an evidentiary hearing held Wednesday in Frankfort. Assistant Attorney General David Spenard, as well as officials with the PSC, took testimony at the hearing under oath from various key figures in the corporation.
The hearing was webcast on the PSC’s website and can still be viewed there. It was a follow-up to a public hearings that took place in Middlesboro and Clinton, Ky., on August 12 and 13 regarding the 50 percent rate increase proposed by the WSC for water bills in those areas.
Spenard questioned one of the witnesses, Director of Governmental Affairs for Utilities, Inc., John D. Williams, regarding the reported problems with a new billing and accounting system dubbed Project Phoenix that Utilities, Inc. installed. Utilities, Inc., owns WSC among many other utility companies. Project Phoenix was cited as one of the main reasons for the 50 percent rate increase.
Williams said that Project Phoenix was a necessity for the whole company, but he added that there had been problems reported in the new billing system.
“There were glitches,” said Williams during testimony.
Spenard said he had reports of customers receiving multiple bills in one month. He noted one example of a Clinton woman receiving two bills over $2,000 each.
“I know there were a lot of issues that came up and had to be resolved by personnel. I believe they’re continuing to resolve the problem,” said Williams. He said there was a significant increase in phone calls after the system was put in place, but he believes they have since decreased.
The PSC also questioned Williams to clarify what stake the insurance giant AIG, who used federal bailout money to pay out bonuses, had in Utilities, Inc.
Williams said that Utilities, Inc., is owned by Highstar Capital, which is a private equity fund containing approximately 70 investors. Williams said AIG has a “small percent interest” and has no direct relationship with Utilities, Inc.
When asked by the PSC what percent interest AIG had in the company, Williams said he had heard 12 percent, though he didn’t know for sure.
A member of the PSC brought up a complaint made by a Middlesboro resident during the hearing last week. He had suggested that the cost for Project Phoenix could be recouped in 10 months with the 50 percent rate increase.
Lena Georgiev, manager of regulatory accounting for Utilities, Inc., said that there is a “misconception” about Project Phoenix. She the said recovery would take over eight years.
Spenard questioned WSC's Regional Director Martin Lashua about an expense report he had reviewed. According to a credit card receipt, Utilities, Inc.’s Vice-President / Chief Operating Officer Lisa Sparrow had dined at Del Francisco’s restaurant in Orlando, Florida, and spent $766.38 on her dinner, along with a $150 tip. Spenard asked Lashua how this expense related to water service in Kentucky, and he replied that it did not. Sparrow later commented via e-mail on the expense saying it was a recognition dinner for over 20 employees. But that information was not cited during the evidentiary hearing.
The webcast, along with the Water Service Corp. of Kentucky’s full application, can be found online at psc.ky.gov.