FRANKFORT, Ky. (WTVQ) – The Kentucky Public Service Commission has granted Martin County Water District a permanent rate increase, while also ordering the district to contract with an outside party to manage the troubled utility.
In an order issued Monday, the PSC told Martin County Water that a failure to comply with the terms of the order could prompt the commission to either force a merger with another water system or seek appointment of a receiver to operate the utility, removing all local control.
The rate increase granted today will add another $3.30 to the average monthly bill for Martin County Water residential customers, bringing it to $54.37. The PSC in March granted Martin County Water an emergency rate increase that brought the average bill to $51.07, an increase of $11.17, from the previous $39.90 for a customer using 4,000 gallons per month.
Included in the total bill is a temporary monthly surcharge of $4.19 that goes into a separate account and may be spent by Martin County Water only with PSC permission to pay off a portion of the utility’s debt of about $1.1 million.
The order also authorizes a separate temporary monthly surcharge of $3.16 per month that would take effect only if Martin County Water obtains outside management and submits and receives PSC approval for a plan to repair its crumbling water system. The plan must be submitted within a year from today.
With both surcharges in place, Martin County Water residential customers would see a total increase since March of $17.53 per month, or about 44 percent.
The PSC noted in the order that even with the emergency increase granted in March, Martin County Water’s financial condition “has not improved and remains critical” and the utility is still “struggling to maintain services to the ratepayers.”
The PSC left in place the stringent financial controls and reporting mandates it imposed on Martin County Water when it granted the emergency rate increase in March, including a requirement that Martin County Water receive prior PSC approval for all disbursements of funds collected through the debt service surcharge.
However, the debt service surcharge will terminate on Jan. 30, 2019, unless Martin County Water complies with provisions in the order related to obtaining outside management services. Those provisions, all with a Jan. 30, 2019 deadline, include:
- Issuing a request for proposals to qualified management entities, including seven identified by the PSC. They include the municipal water systems of the cities of Paintsville and Prestonsburg.
- Presenting the PSC with each RFP and all responses received.
- Analyzing the responses, with the assistance of Martin County Water’s current outside consultant, selecting a preferred proposal, and submitting to the PSC a detailed written analysis of the responses to the RFP and the reasons for selecting preferred proposal.
Within a year of today, Martin County Water must submit to the PSC a detailed plan for retaining and compensating an outside manager and for the repair, replacement and management of its distribution system. Without PSC approval of such a plan, the management and infrastructure surcharge will not take effect.
The combination of the base rate increase and the two surcharges would generate slightly less revenue than the increase originally sought by Martin County Water. It would have raised rates by about 49 percent. A PSC staff analysis determined that the slightly lower revenue would be adequate.
With the history of poor management and an unwillingness to raise rates and invest in the water system, Martin County Water’s current situation is “grim and desperate,” with “nothing less than access to safe and reliable drinking water at stake,” the PSC said.
Martin County Water requires management that is experienced in water utility operations, the ability to address the extreme circumstances in Martin County and “the skills to address the political and cultural norms that pressured the past management into the poor decisions that led Martin District to the current crisis,” the PSC said.
PSC Chairman Michael Schmitt wrote an 11-page concurring opinion in which he detailed the history of Martin County Water’s problems and the PSC’s past unsuccessful attempts to correct them. He noted that the PSC investigated Martin County Water in 2002 and again in 2006, ordering corrective actions that went largely unimplemented.
Martin County has had chronic problems with water loss through leaks, theft and other problems in its system, Schmitt said. In some years, more than 60 percent of all the water the utility produced or purchased disappeared before reaching a customer’s meter, he noted.
Beginning in January, the PSC held six hearings in which evidence was presented in the rate case. Those included three hearings called in the PSC’s ongoing investigation of the operational capability of Martin County Water.
The only other party to the rate case is Martin County Concerned Citizens, Inc., which represents the utility’s ratepayers. It is also a party to the investigation case.