Lexington Herald Leader Opines That Lexingtonians Are "Reaping What We Sow On Water Bill Hike".

Reaping what we sow on water bill hike
Mayor's OK of utility's expansion meant added ratepayer burden

Mayor Jim Newberry has a conveniently short memory — or a whole lot of nerve — to criticize Kentucky American Water's rate request.

The soaring cost of water is a direct result of a plan Newberry supported, despite pleas from council members and the Public Service Commission for the city to explore cheaper alternatives.

Two years ago, Newberry refused to act to soften what he now denounces as "a hardship on many Lexington families."

The request for a 37-percent rate increase, on the heels of last year's 18-percent increase, is the inevitable consequence of the water company's decision to spend $160 million building a treatment plant in Owen County and 31-mile pipeline to pump the water to Lexington.

Newberry enabled this costly decision by stonewalling pleas from council members, the PSC and some lawmakers to negotiate a better deal.

In mid-2007, a sizable group on the council tried to explore teaming up with neighboring municipalities to tap into Louisville Water Co.'s excess capacity. Without the mayor's support, that effort could go nowhere. Newberry insisted that decisions about water should be made by the PSC in Frankfort; Lexington sat out a decision critical to its future.

When the PSC called the city on its "perplexing silence" and urged it to lower the project's cost through a public-private venture, Newberry finally said that he supported doing it Kentucky American's way.

Campaigning for mayor in 2006, he had said the city should own its water infrastructure when it could be acquired without condemnation. Handed an invitation to reduce costs by owning the infrastructure, Newberry shrank from leading.

Facing that vacuum, the PSC approved the project in early 2008. One way or another, Lexington was going to have to pay to ensure a more reliable water supply; it's too bad consumers got stuck with probably the costliest plan possible.

The city should now join the attorney general in trying to soften the shock of this increase by insisting the company's shareholders initially bear more of the project's cost.

Kentucky American always builds a cushion into its rate requests and usually gets less than it had asked for. Eventually, though, water customers will have to pay for the new treatment plant and pipeline.

You can't blame the utility, which is only doing what corporations do: maximize profits for shareholders. Regulated monopolies earn a return on equity, creating an incentive for large capital investments such as the one that's nearing completion in Owen County. This expensive project for consumers will be profitable and risk-free for Kentucky American.

Another factor in why water infrastructure is cheaper when built by governments is governments' access to cheaper financing. All that's water, ahem, over the dam. A series of bad decisions has saddled ratepayers with a considerable excess of water capacity — enough to water their lawns 24-7 if they can afford it.

Those stung by rising water bills who voted against city ownership of the utility in 2006 should also blame themselves. The referendum's defeat worked out well for some. Warren P. Rogers, head of the Coalition Against a Government Takeover which campaigned against public ownership, heads a company that's a contractor on the Owen County project for which Lexington residents and businesses will be paying for a very long time.