Mayor objects to Kentucky American Water rate hike request, says he's shopping for another supplier for city

A concrete vault at Coach Station and Leestown roads holds Midway's supply connection to Kentucky American Water Co.

Midway Mayor Grayson Vandegrift formally objected to Kentucky American Water Co.'s latest rate-increase request today, and announced that he is looking for another water supplier for the city.

"I am actively talking with other water providers, to look into switching water providers, so that we can provide the same quality at a better price, free of continuing rate increases," Vandegrift said in an email to the City Council, the Midway Messenger and The Woodford Sun.

Vandegrift told the Messenger that Midway and Kentucky American are in the 30th year of a 40-year contract that the city could leave early without penalty.

"I don't want to continue to basically watch the city be held hostage by Kentucky American's latest rates," he said, adding that he expects the company to seek increases from the state Public Service Commission every two years unless the PSC denies the current request, which would be the company's sixth in 12 years.

"I want to have a backup plan," the mayor said. "Even if they get half of what they're looking for, it's ridiculous." Kentucky American's plan calls for Midway to pay 21.5% more.

Getting a new wholesale water supplier would require a new supply line, which Vandegrift said would be expensive but could easily be financed by a long-term bond issue. "I think it's a lot more doable than people might realize," he said.

Georgetown Municipal Water and Sewer System map (adapted) shows
it serves a small part of Woodford County that is close to the Midway
city limits, south of the section of Elkhorn Creek that appears in red.

Vandegrift declined to name cities with which he has had discussions, but Frankfort and Georgetown are obvious possibilities. The PSC does not regulate rates of cities' water systems.

Midway did not pass along Kentucky American's 2017 increase of about 10% to the city's retail customers, but in his letter to the PSC, Vandegrift said, "We will not be able to absorb another rate increase. Additionally, the hard work and planning that went into lowering our rates by 25%, all while improving our ability to invest, will effectively be offset by another rate hike."

He asked the PSC to consider "the toll these continual rate increases take on the people who are footing the bill. I watch as people come in to Midway City Hall and literally pay their water and sewer bill with pennies." The PSC will hear the rate case starting tomorrow at 9 a.m.

Vandegrift said the company's dealings with Midway undercut one of its arguments for the rate increase, the need to repair its infrastructure. "KAW has made it no secret that they wish to purchase our aging system," which needs $10 million to $20 million in upgrades over the next 20 years, he wrote. "Why would a company that needs more money to fix infrastructure also want to purchase some that they know to be ready for investment? Why would a company want to take on more debt if it can’t meet its current obligations?"

Kentucky American also says it needs the rate hike to cover increased operating costs and bolster sagging rates of return for its shareholders.

The mayor's letter concluded, "I believe it’s time KAW be told in no uncertain terms that they can no longer run a business model predicated upon the concept that they can ask, and be given, a rate increase every two years. I urge you to protect the public from unnecessary tax increases, to help Kentucky American Water take a longer look at their operations and to adjust accordingly, as we all do, whether we’re an individual, a business owner, or a city. If we, a city of 1,800 people with limited resources can make it happen, so can a publicly traded company like Kentucky American Water."