Kentucky approves another rate increase for embattled Eastern Kentucky water district

After months of deliberation, Kentucky regulators approved a permanent rate increase Monday for an Eastern Kentucky water district plagued with long outages, financial mismanagement and reports of poor water quality.

Customers of the Martin County Water District, dubbed the “worst water district in the state of Kentucky” by a state regulatory official, will soon see their bills go up by an average of $3.30 a month. That increase will come on top of increases implemented earlier this year, which hiked bills by about $11 a month.

As a result, the average customer’s monthly bill will be $54.37, and that could increase another $3.16 a month within the next year, according to the Kentucky Public Service Commission, which regulates most Kentucky utilities.

If that happens, the average customer’s water bill will have gone up 44 percent since March in one of Kentucky’s poorest counties.

Customer Barbara Pauley said that’s too much for water she doesn’t think is clean enough to cook with or drink.

“That’s too high for water,” Pauley said Monday evening. “It’s not even fit to take a shower in.”

Pauley is one of many Martin County residents who refuse to drink the water. She, like many others, has experienced days-long water outages caused by the district’s crumbling infrastructure. In October, Pauley’s water was shut off for about four days straight.

PSC Chairman Michael Schmitt said in a news release about the rate increase that years of financial mismanagement made the large rate hike a necessity.

“For too long, county officials and Martin District board members have deliberately allowed the utility’s assets to deteriorate in order to keep rates artificially low,” Schmitt said. “In the near term, the best hope of obtaining a reliable supply of clean water for the people of Martin County must be found in professional utility management and, unfortunately, in a significant increase in customer rates.”

The PSC’s order makes permanent the increase approved in March and adds an another increase of about $3.30 to the average residential bill.

The order also allows the district to issue a new surcharge of $3.16 a month. The district could use that money to obtain a management company, and to make infrastructure and maintenance repairs. That surcharge, though, can only be implemented once the PSC approves the district’s plan for repairs, and once the district secures a management company.

The district has one year to submit that management and infrastructure plan to the PSC.

A $4.19 surcharge approved in March — the money from which is put in a separate account and can be used only to pay off the district’s $1.1 million in debt — is also impacted by the new order. If the district fails to extend an offer to outside management to help run the district, that surcharge will be discontinued and the district must refund any remaining money from the account.

The order emphasizes the district’s failure to hire a general manager, saying it needs management that can “perform in the extreme circumstances that exist in Martin District 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.”

Joe Hammond, the district’s previous general manager, abruptly retired in February amid the height of the district’s financial crisis.

Both surcharges, and the significant revenue that come with them, are contingent on the district’s ability and willingness to find qualified management from an outside utility.

“Martin District’s current commissioners will either comply with the requirements of the rate increase and will proceed with contracted management or the (PSC) will be forced to pursue even more extraordinary means through appointment of a receiver who can implement the changes needed to provide safe, clean and reliable water service,” the PSC said in its order.

The PSC identified seven outside utilities that it could ask to manage its day-to-day operations, including the municipal water systems for the cities of Prestonsburg and Paintsville.

The district first officially applied for a rate increase in January, not long after the district shut off water to thousands of residents for days at a time.

Since then, the district has been in a state of nearly constant crisis. On multiple occasions, officials have told the PSC the district was just weeks away from financial collapse.

All the while, residents have dealt with ongoing outages that have lasted days at a time, leaving customers struggling to bathe, wash dishes, cook and clean.

One couple, Jessica and Tim Taylor, who have five children and live near the Pike County line, went at least one week without water in October.

Financially, the district has struggled to keep afloat. It has accrued a debt of more than $1 million to vendors and other contractors that it can’t afford to pay. At times, officials have said the district has been barely able to meet payroll.

Its crumbling infrastructure has left the district with a staggering water loss rate of 64 percent — meaning most of the water it pays to produce never reaches customers.

While the district got approval for about $5 million in grant money earlier this year to improve its infrastructure, it has not yet received any of that money.

Martin County Water Board Treasurer Jimmy Kerr declined to comment Monday evening, saying he needed more time to read the PSC order before commenting.

Nina McCoy, chairwoman of the Martin County Concerned Citizens group, which has been involved in the rate case and has advocated for accountability and transparency within the water district, also declined to comment for the same reason.

Pauley said she hopes the watchful eye of outside management will help keep the district in line, but she still does not trust the district to spend the money appropriately.

The last rate increase, approved in March, did nothing to help customers like her, she said.

“They haven’t done anything, nothing at all, to help the water get any better,” Pauley said. “I don’t think it’s a good idea.”

Will Wright is a corps member with Report for America, an initiative of The GroundTruth Project. Reach him at 859-270-9760, @HLWright