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PSC cuts water company increase by 85%

(CPSC served up turkey to Water Servicelinton – November 23, 2011) - The Kentucky Public Service Commission served up turkey to Water Service Corp. of Kentucky and a Thanksgiving blessing to customers in Clinton and Middlesboro. Issuing an order that takes effect today, a press release from the PSC announced its decision in the most recent water rate increase requested by the company. 

“Water Service will be allowed to increase annual revenue from its Kentucky operations by $68,898 (about 3 percent). The company had sought an increase of $448,723 (22 percent). The PSC cut the requested amount by 85 percent.”

The original request would have raised Clinton customer bills for 5,000 gallons of water by $8.31. The PSC will allow the rate to increase by only $1.15 per 5000 gallons of water. For Middlesboro residents, the original request would have raised their bills by $4.99. Under the order, that rate will only increase by 70 cents for 5,000 gallons of water.

The 7300 customers in the only two areas serviced by Water Services, Inc. received a 29% increase in November 2009. The company’s request for 51% in that case was significantly cut back by the PSC. Water Services Inc. filed again for an increase in late 2010, this time asking for a 22% raise.

At issue were the charges that the parent company, Utilities, Inc., headquartered in Illinois, could charge its subsidiary for administrative and computer related expenses. A management and computerization system called “Project Phoenix” costing millions of dollars had been implemented by the parent company. It was a portion of those costs that the water company sought to recoup.

The PSC mostly disallowed those costs, citing a “lack of independent review.” The regulatory agency could not find the request to be reasonable.

Hickman County Fiscal Court intervened in the rate case because the largest user of water in the Clinton system is the Hickman County Detention Center. The Fiscal Court argued that a 22% raise in water rates would be a substantial burden on county government. The detention facility has struggled in recent years with low prisoner populations and a million dollar bond debt.

When reached by phone, County Judge Greg Pruitt said that while “zero would have been nice, 3% is a victory for ratepayers.”

(The order, the case file and videos of the public meetings and evidentiary hearing are available on the PSC website, psc.ky.gov. The case number is 2010-00476.)

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