Public Service Commission orders rate application process.
By Eugenia Jones
McCreary County residents can anticipate seeing their water and sewer rates increase thanks to requirements by KY’s Public Service Commission.
According to a legal notice currently running in The McCreary County Voice, the McCreary County Water District (MCWD) is in the process of filing applications with the KY Public Service Commission to adjust its monthly rates for water and sewer service. According to the notice, MCWD is making the applications to comply with two KY Public Service Commission Orders.
“The Public Service Commission ordered us to go through a rate application,” MCWD Superintendent Stephen Whitaker explained. “In the rate application process, there is a review of all the water district’s financials. The rate application process determines what the rates should be, and the Public Service Commission reviews the application and decides to approve it.”
During MCWD’s rate application process, the method used by the Public Service Commission to establish rates for utility services determined local water rates should increase by approximately 8.70% and sewer rates by approximately 49.13%.
In response to an inquiry from The Voice, the Public Service Commission pointed us to a June 26, 2020 Order issued by the Commission in case no. 2020-00151 in which McCreary County Water District sought authorization from the Commission for the district to issue securities.
In the Commission’s June 26, 2020 Order, the Commission conditioned its approval on McCreary County filing an application with the year for an application for an adjustment of base rates. An excerpt from the case reads:
“The Commission also notes that its records reflect that McCreary District has not sought a general adjustment in rates by any other means than through financing approval or in conjunction with an application for a Certificate of Public Convenience and Necessity. The practical result of such policy is that McCreary District has managed to avoid Commission review of its financial records and operational structure for more than 40 years. While McCreary District has increased its rates as part of financing cases through the United States Department of Agriculture Rural Development (RD), the Commission’s review of records in a RD financing case is limited and very different from the comprehensive review of a utility’s total financial stability and operational viability that takes place in a traditional rate adjustment case or an alternative rate adjustment. The Commission recently noted that utilities intentionally use this practice to avoid a review of its financial records.”
However, Whitaker stated MCWD is financially sound, and due to a recent water rate increase in February and anticipated increased usage in the water and wastewater services in the near future, will propose smaller rate increases of up to 4.32% for water and 16.4% for sewer with increases spread out over three phases.
“We are petitioning the Public Service Commission to let us do a rate increase in phases,” Whitaker said. “By doing this we acknowledge their recommendation for a rate increase, but it gives us time to conduct studies showing we do not need as large of a rate increase as they currently recommend. It also gives us time to show increased revenue from new projects such as the Fibrotex expansion and an additional 200 new customers.”
If the Public Service Commission approves MCWD’s application for phased in lower rates, the water district hopes to gather enough data to support an overall smaller rate increase by 2022-23. At that time, the district will also have picked up new revenue from projects such as the Fibrotex expansion. With data and more revenue in hand, MCWD will ask the Commission for a new rate application. Hopefully, a second rate application at that time will result in the Commission recommending a lower rate increase.
“We hope to avoid the worst case scenario of dealing with the Commission’s current 49.13% increase for sewer,” Whitaker stated. “We have always tried to take care of our community whether in rates or improving access to water. That’s what we are trying to do now.”