Local sewer rates are expected to increase by more than 61 percent and water bills by almost one-fourth due to requirements by the Public Service Commission
The Columbia-Adair Utilities District board discussed their options and decided they were few before passing resolutions to increase rates during a special called meeting last week.
The board enlisted Holly Nicholas, funding specialist with Kentucky Engineering Group, to compile information for a rate filing that PSC is requiring. She reported the projected rates to the board and explained how those rates were determined.
Nicholas said rates must be determined using calculations set by PSC. She started with the 2020 annual report but made adjustments to revenue affected by Covid-19.
The main difference in the PSC calculations and how the district normal- ly sets rates is that PSC requires a list of deprecia- tion expense.
“They want you to base your rate on operating expense, your debt, and depreciation expense,” Nicholas said. “That’s really different than what we do when we do a Rural Development project. When we do a rate study for Rural Development, they do not allow you to put depreciation into those calculations.”
The district’s annual depreciation in water operations is $1.4 million. For sewer, it’s about $500,000.
Even if the district were able to eliminate the depreciation factor in the rate, sewer bills would still need to increase around 8 percent.
Nicholas said she believed it would be “unconscionable, really, to put that kind of rate increase on your custom- ers all at once.”
She talked with sev- eral professionals in the industry, including an employee at PSC, to see if the district could phase in the rates to cover the depreciation.
“The answer came back from staff at PSC that they have allowed that before,” she said.
Nicholas recommended they ask to phase in the sewer rate increase over a six-year period and the water rate increase over a three- year period.
Nicholas noted that there have been changes to the three-member board that oversees PSC. Two vacancies have occurred in recent months and one position remains vacant.
“I have no idea how the new commissioners are going to look at the depreciation issue.”
The district has bypassed PSC’s scrutiny by adjusting rates as it financed new projects, which eliminates a com- prehensive PSC review.
In a ruling dated Sept. 4, 2020, the PCS wrote that the “Adair District has managed to avoid Commission review of its financial records and operational structure for more than 35 years.”
It’s that ruling that requires the district to file a rate adjustment application and the deadline of one year is now here.
Stone: craziest things I’ve ever heard of
Lenny Stone, CAUD manager, was vocal during the meeting and during an interview with his opposition to the PSC requirement.
“I guess our customers are going to have to bear those rates if they don’t allow us to change them,” Stone told the board. “In my opinion, this is the craziest thing I’ve ever heard of…Our customers don’t need to be doing this.”
Stone said he and board member David Jones met with former Kentucky Rural Development Director Hilda Legg, an Adair County native, and met with Sen. Max Wise and County Judge Executive Gale Cowan.
“As of right now, there is nothing we can do,” he said. “I don’t like it. I don’t think it’s fair…It wasn’t six months ago that these same customers were begging for help to pay their bills because of the pandemic. These same customers are going to be looking at a 60 percent rate increase possibly.”
Stone said the forced rate increase has nothing to do with the board’s debt, but is actually the opposite.
“This has to do with the amount of infrastructure we have. It feels like to me that we are being punished because we have done a really good job to get water out to all of our customers,” Stone said. “This is water lines, sewer lines, tanks, meters, pump stations – everything that makes this system work.”
First year increases
The projected rate increase for water ser- vices totals a 23.84 per- cent increase. Nicholas factored the increase over a three-year period, with a first-year increase of 5.34 percent.
On sewer, 8.19 per- cent would be required for operating costs, with a total increase of 61.57 percent.
She included all of the operating cost increase in the first year as well as a portion of the depreciation factor, with a first- year increase of 17.09 percent. An additional 8.9 percent would be added each year during the following five years.
The board voted to pass two resolutions outlining the first year increases, with members voting by roll call. Chairman Wid Harris and members David Jones and Junior Brown commented that they did not agree with the PSC requirement, but voted yes. Richard Grant made no comments before making the motion and voting yes. Joe Pyles did not attend the meeting.
“I feel like as a board member that PSC has put me in a position that I really have no choice,” Jones said. “I don’t agree with what they are ask- ingustodobutIalso understand that if I vote against it, I will probably be removed by PSC and (a replacement) would be hand-picked by PSC. I don’t think that is good for our district and our consumers.”
Jones asked that a let- ter be attached with the resolutions to request that PSC lower the rate requirement. Harris and Brown agreed with Jones.