EVIDENTIARY BRIEF
Mountain Water District (MWD) – Financial, Operational, and Regulatory Failures
Prepared by The Future of Eastern Kentucky (TFEK)
On Behalf of the Customers of Mountain Water District
For Submission to the Kentucky Attorney General’s Office of Rate Intervention & Kentucky Public Service Commission
---
I. Executive Summary
Mountain Water District (MWD) is seeking a 22.4% rate increase in Case 2025‑00372.
The evidence demonstrates:
- Structural insolvency
- Chronic water loss (43%)
- Negative retained earnings exceeding –$57 million
- Nearly $2 million in annual operating losses
- Failure to pursue state and federal grants
- Repeated federal drinking water violations
- Declining net plant value
- Long‑term managerial failure
- PSC oversight gaps
Under KRS 278.030, 278.040, and 278.280, MWD does not meet the statutory requirements for a rate increase.
---
II. Statutory Framework
KRS 278.030(1)
Rates must be “fair, just, and reasonable.”
KRS 278.030(2)
Utilities must provide “adequate, efficient, and reasonable service.”
KRS 278.040(3)
PSC must enforce compliance with all provisions of Chapter 278.
KRS 278.280(1)
PSC may require improvements necessary to ensure safe and reliable service.
KRS 367.150(8)
The Attorney General must represent consumers in utility matters.
MWD is in violation of these statutory standards.
---
III. Financial Evidence from the 2024 PSC Annual Report
1. Operating Losses
- Operating Revenues: $10,218,503
- Operating Expenses: $12,206,475
- Operating Income: –$1,987,972
- Net Income Before Contributions: –$1,818,776
MWD is losing nearly $2 million per year.
2. Retained Earnings
- Retained Earnings: –$57,131,494
This is not a temporary deficit — it is decades of accumulated losses.
3. Water Loss
- Total Water Produced/Purchased: 1,319,741,000 gallons
- Total Water Sold: 751,516,000 gallons
- Unaccounted‑for Water: 568,225,000 gallons
- Water Loss Rate: 43%
Industry standard is <15%.
MWD loses nearly half of all water it pumps or purchases.
4. Declining Net Plant Value
- Net Utility Plant decreased from $57,059,371 → $55,674,845
Depreciation is outpacing investment.
MWD is not replacing aging infrastructure.
5. Debt and Liabilities
- Current Liabilities: $15,260,998
- Long‑Term Debt: $8,390,883
- Inter‑company Payables: $3,616,009
- Notes Payable: $1,094,042
MWD is relying heavily on short‑term borrowing.
6. Customer Base
- Residential: 15,227
- Commercial: 1,203
- Industrial: 2
Customer growth is stagnant.
---
IV. Failure to Pursue State and Federal Grants
Despite qualifying for maximum assistance, MWD has not pursued:
- Kentucky Cleaner Water Program
- KIA State Revolving Funds
- USDA Rural Development
- FEMA mitigation
- EPA Emerging Contaminants
- ARC POWER
- CDBG
- EDA Public Works
These programs exist specifically to fix the problems MWD cites as justification for rate increases.
Failure to pursue them is managerial negligence, not a burden ratepayers must bear.
---
V. Federal and State Drinking Water Violations
EPA & EWG Findings
- 4 contaminants exceeding health‑based guidelines
- 14 total contaminants detected
- EPA “Serious Violation” status (April–June 2024)
Kentucky Division of Water
- Repeated Maximum Contaminant Level (MCL) exceedances
- Treatment technique failures
- Monitoring/reporting violations
A utility in repeated federal violation cannot meet KRS 278.030(2) or KRS 278.280(1).
---
VI. Historical Pattern of Admitted Failure
In Case 2014‑00342, MWD admitted:
- Chronic financial instability
- Excessive water loss
- Declining customers
- Aging infrastructure
- Rate increases alone would not fix the system
Twelve years later, every one of these failures remains.
---
VII. PSC Oversight Gaps
Despite:
- Chronic water loss
- Repeated federal violations
- Failure to pursue grants
- Failure to meet revenue targets
- Declining infrastructure
- Negative retained earnings
- Structural insolvency
The PSC has repeatedly approved rate increases without requiring corrective action.
This is not oversight — it is regulatory abdication.
---
VIII. Legal Conclusion
Under KRS 278.030, 278.040, and 278.280, Mountain Water District:
- Does not provide adequate, efficient, or reasonable service
- Does not meet statutory conditions for a rate increase
- Has not taken required corrective actions
- Has not pursued available funding
- Has not addressed federal violations
- Has not demonstrated financial responsibility
A rate increase under these conditions would be unlawful.
---
IX. Request for Attorney General Action
On behalf of the customers of Mountain Water District, TFEK requests that the Attorney General’s Office of Rate Intervention:
- Formally oppose the 22.4% rate increase
- Investigate MWD’s failure to pursue grants
- Investigate MWD’s federal drinking water violations
- Review PSC oversight practices
- Demand structural reform before any future rate adjustments
Ratepayers cannot continue subsidizing a decade of mismanagement.
---
Submitted by:
Ray Ratliff
The Future of Eastern Kentucky (TFEK)
On behalf of the customers of Mountain Water District
No comments:
Post a Comment