The Southern Water and Sewer District can move forward with plans to replace 5,600 water meters in its system, following orders in which the Kentucky Public Service Commission approved new rates and a temporary water surcharge for the meter replacement project.
In the order, the PSC determined that Southern Water needs about $3.6 million annually to operate and it agreed with PSC staff who suggested lowering the district’s current flat rate and implementing a surcharge to pay for the meters.
The PSC reduced the flat rate of $58.82 to $49.46 per month for residential customers and added a $5.25 surcharge for the meters, for a total bill of $54.71 per month. After new meters are installed, residential customers will be billed for the water they use, the PSC ordered.
The new rates at that time will total $55.32 for customers who use 4,000 gallons of water per month, the order says. After meters are installed, customers whose monthly water usage is less than 4,000 gallons will receive a refund based on how much they paid under the flat rate, the PSC reported.
“There is a financial urgency to replacing the meters as soon as possible,” the PSC stated in the order. “Due to the large number of zero read meters, the Commission determined that instituting a flat rate on an interim basis for residential customers was the only equitable way to ensure that all of Southern District’s customers received fair, just and reasonable treatment. However, each residential customers will be moved from the flat rate to volumetric rate when a new meter is installed at that customer’s location. Thus, the sooner new meters are installed, the sooner Southern District customers are moved from a flat rate to a volumetric rate.”
The PSC reported that the meter replacement surcharge will remain in effect for 60 months or “until the total cost of the meter replacement has been collected.”
Southern Water Commission Chairperson Jeff Prater said he is satisfied with the order.
“It’s a little bit less than what our recommendation was, but I think it will be adequate and definitely would offer a little bit of relief to the customers. Any kind of decrease would be helpful to them,” he said.
The PSC also granted the district a Certificate of Public Convenience and Necessity to install the radio-read meters, a project that is expected to cost nearly $1.3 million — the amount the district’s commission approved spending this year when it selected RG3, a company that proposed providing and installing the meters.
“Southern District has not finalized financing for the meters but has applied for a loan from Government Capital Corporation,” the PSC said in the order, noting that Southern Water will seek PSC approval for financing.
Earlier this year, state officials reported that Southern Water was selected to receive a $1.5 million Abandoned Mine Lands grant for the meter installation project, but the PSC reported the district won’t receive the funding until next year.
In the order issued Thursday, the PSC reduced Southern’s test-year expenses by about $462,000 because of Southern’s excess water loss. The PSC reported the district lost nearly 63 percent of the water it bought and produced in 2018.
“Southern District’s high water loss amount is a direct result of years of willful mismanagement and neglect by the previous manager, Dean Hall, who resigned in April 2019, and previous Board of Commissioners ... all of whom resigned in February 2019,” the PSC order states. “During their tenure, Mr. Hall and the then-Board failed to test meters, which are at least 15 years old, and failed to take any action to address the aging infrastructure.”
Prater said officials believe the work to change all meters in the district will take about three months, but the project will likely take longer because it’s contingent on further PSC approval of a loan, as well as winter weather, which he said could complicate and slow down installation.
“The biggest need that Southern had at this time was, we needed the surcharge that allowed that separate revenue stream to obtain financing to change the meters out,” Prater said. “Because everything that we do, going forward, is going to be based off of getting the meters changed out, getting all of our customers back on a volumetric rate and then beginning to analyze that meter data and working on water loss.”
He said under management of UMG, Southern Water is working to correct its past mistakes and is planning to improve in the future.
“The current board and the UMG Management Group is working very hard on behalf of the customers of Southern Water,” Prater said. “Things have not moved as quickly as we thought they would. We would ask that people be patient because we have made a lot of progress and we do feel like we’ve begun to turn things around and we can get Southern Water back on a very solid situation and be able to address the long term needs, which is, obviously, reducing water loss. We are very hopeful now that we’ll be able to turn things around and, if the customers can be patients, we feel like the end result will be very good for them.”
He said he understands why customers have voiced frustration about the flat rate at Southern Water.
“I understand people’s frustrations and there’s not no easy answers. There’s a lot of work to be done, and it’s going to take time to be able to address some long-term problems,” he said. “Obviously, we’ve started the process and we’re putting plans into place that will take the district forward for years into the future in trying to address the water losses.”
He said replacing the old meters “is the linchpin of what we’re going to do” to move the district forward.