Home » Kentucky American Water seeks recovery for investment of more than $100M in infrastructure upgrades

Kentucky American Water seeks recovery for investment of more than $100M in infrastructure upgrades

LEXINGTON, Ky. — Kentucky American Water announced today that it has filed an application with the Kentucky Public Service Commission (PSC) to adjust its rates for water service in the communities it serves.

Kentucky American Water’s ongoing infrastructure investments, which will exceed $100 million in system improvements, are a key reason the rate increase is needed.  These investments are necessary to maintain and enhance service, water quality, system reliability, and fire protection capabilities for customers while still keeping the cost of water service for most residential customers at about a penny per gallon, usually their most affordable utility bill. The company last filed for new rates through a general rate case filing in January 2016.

“Water systems around the country, including some here in the Commonwealth of Kentucky, are struggling due to deferred investments in aging waterlines, treatment plants, pumps and other facilities.  Kentucky American Water, on the other hand, continues to make proactive investments in aging infrastructure that are necessary to provide quality, reliable water service to the customers we serve throughout the region,” said Kentucky American Water President Nick Rowe.  “In fact, we have invested approximately $220 million in system improvements in the last decade alone. The level of service these investments support is critical for a community’s quality of life and economic vitality, and such water system improvement projects support jobs in our region, too.”

The American Society of Civil Engineers’ latest Report Card for America’s Infrastructure, issued every four years since 2001, gave the nation’s water systems a ‘D’ grade in 2017.  This is similar to the last few reports and heightens the sense of urgency for water utilities to take actions that will address this serious infrastructure issue.

“We have approached infrastructure replacement in as proactive a way as possible,” Rowe continued, “but more investment is still required in order to address the continual need for system renewal.”

Among the major capital projects included in Kentucky American Water’s rate adjustment request are:

  • Jacobson-Hays Booster Station pressure zone project, which helped enhance system pressure for approximately 10,000 customers in southeastern Fayette County.
  • The replacement of older, high-service pumps at the Kentucky River Station I water treatment facility in Lexington, the system’s largest treatment plant, to improve operational and energy efficiency.
  • The rehabilitation of a valve house at the Kentucky River Station I facility to create a more efficient structure and safer environment for employees.
  • Chemical storage and feed improvements to be conducted at the Kentucky River Station I and Richmond Road Station water treatment facilities to enhance the reliability of these plants and enhance safety.
  • Water main extension and improvement projects along Athens-Boonesboro Road in Fayette and Clark counties to enhance water pressure, reliability and quality.
  • The construction of a new maintenance garage in Owenton to provide better and more efficient storage space for equipment and materials.
  • The replacement of 9.5 miles of aging water pipes in the region since the last rate increase took effect in 2016.

“In addition to focusing on these and other capital improvements, we are committed to containing operational and maintenance expenses as much as possible, too, in order to keep rates affordable for our customers,” Rowe said. “We have done this by implementing efficiencies and leveraging technology throughout our operations. We will continue to work toward becoming even more efficient without sacrificing the safety of our teams or the level of service we provide.

“We strive to balance the need for infrastructure investment with our commitment to providing affordable water service to our customers,” Rowe added. “Given the tremendous amount of system upgrades we have completed since 2010, and the recognition we have received for providing quality service, we are especially pleased that if this request is granted in full we will have contained the increase for the average residential customer’s monthly water bill to about $7 since 2011, and our commitment to quality, reliable, affordable service continues.”

Also included in this filing is a request for the utility to implement a Qualified Infrastructure Program charge that would allow the company to replace aging water pipes and other water system assets at a quicker rate.  This approach would also permit the company to upgrade a greater amount of assets before they potentially become more problematic to operations and more costly to replace. In addition, the case incorporates corporate and property tax rate changes that have occurred since the company’s last rate case filing.

Kentucky American Water’s rates are based on the cost of providing water service as reviewed and approved by the PSC.  If approved, this rate request would result in the water bill of the average residential customer using 3,869 gallons per month to increase from $32.06 (the rate approved by the PSC in August 2018 to reflect the reduced federal corporate income tax rate) to $39.62. (The average monthly residential bill prior to August 2018 was $35.76.)

No rates will change until the PSC completes a comprehensive review of the request and determines a rate adjustment is reasonable and justified, which generally takes about 10 months. Public hearings and opportunities for public comment are part of the process and are coordinated by the PSC.