Courier-Journal (KY)

BY PATRICK HOWINGTON • This e-mail address is being protected from spambots. You need JavaScript enabled to view it • JULY 25, 2010

Area utility rates have risen more steeply than Louisvillians' paychecks over the past 10 years — in some cases much more.

And while the spotlight this year has been on LG&E's request to raise electric rates by up to 12 percent, water and sewer rate increases have outpaced LG&E since 2000.

Louisville Water Co. residential rates have risen 68 percent in that period, from $12.98 a month to $21.81 for a typical household. Metropolitan Sewer District rates have climbed nearly twice as much — 128 percent — from $14.68 in 2000 to $33.44.

As for LG&E, its bills for gas service for a typical home have risen 54 percent since July 2000, while the utility's electric bills have gone up 34 percent.

At the same time, job losses, short-term layoffs and frozen Social Security increases have make it difficult for many to keep up.

“Every time you turn around, somebody's raising their rates. … At some point, older folks are going to run out of money,” said Don Frazier, 72, of Pleasure Ridge Park.

Indeed, overall incomes in the Louisville area haven't kept up. Average annual wages in Jefferson County rose 37 percent from 1999 to 2009, the most recent 10-year span available — from $32,087 to $43,991.

The utility increases also outstripped another yardstick, the U.S. inflation rate. Consumer prices have risen about 27 percent since 2000, according to federal government figures.

Frazier said he depends on a limited pension, Social Security and his wife's salary, none of which has risen nearly as much as the couple's utility bills. He said his wife's pay at a car dealership was frozen for several years until this year.

Social Security payments didn't go up this year because the Consumer Price Index declined last year.
“It's just every year they up it 6 percent,” Frazier said of local utilities. “Well, where does my 6 percent come to pay the bill?”

“The only thing that isn't increasing for me, and many others, are wages,” Chelsea Adams of Louisville said in a letter earlier this year urging the Kentucky Public Service Commission to deny LG&E its proposed rate increase.

LG&E initially sought to raise residential electric rates about 12 percent and residential gas rates 9 percent, but it lowered both requests by about 2 percentage points in an agreement with consumer and business groups last month. The PSC will have the final say.

Adams, who works in a law firm and attends the University of Louisville, said in an e-mail interview that her family turned up the thermostat at their Hikes Point home to reduce air-conditioning costs. Still, the June LG&E bill, with an average high temperature more than 5 degrees higher than a year earlier, was $173 — well above its highest level of $135 last summer.

With health-care costs also up, the amount the family can save each month has dwindled.
“We have tried cutting costs and eliminating unnecessary spending … but nothing seems to help,” she said. “The past few years have brought us closer and closer to living paycheck to paycheck.”

Utility rate hikes vary
The three utilities' rate increases have come at different intervals and in different ways.
The water company and MSD have had increases each year, and while the individual percentage increases have been modest — 3 percent to 6.5 percent for water, 4.9 to 6.9 percent for MSD — their cumulative effect has been sizable.

In 2007, MSD imposed a $6.95 surcharge — or a 33 percent increase to the typical residential bill — to pay for rehabilitation work required under an agreement with the Environmental Protection Agency to reduce the sewage leaking from its system.

While the Public Service Commission has the final say on LG&E rates, it doesn't regulate municipal utilities such as the water company and MSD.

Spokesmen for all three utilities said they've needed higher rates to rebuild aging underground pipes and other facilities, as well as meet stricter environmental standards. They said they also have had to invest in expansions to serve a growing population.

Some water and sewer lines in Louisville are more than 100 years old, and as they crumble, they must be replaced — expensive work because it involves tearing up streets and digging deep underground.
Louisville Water Co. spokesman Vince Guenthner said facilities also must be upgraded to meet new clean-water regulations.

For instance, the city-owned company is now overhauling its Crescent Hill treatment plant, which is more than 100 years old; the work includes renovating all the filters, coagulation basins and other treatment components.

Rates also have gone up because customers are using less water. New homes  are built with water-saving devices, and many water-intensive manufacturing plants have gone out of business in recent years. But the expense of maintaining pipes and treatment plants hasn't declined.

Guenthner said the water company has cut costs through steps such as a hiring freeze and putting off capital projects. And it is trying to sell water around a wider region, which could hold down future rate increases.

Even so, population growth and the need for infrastructure repairs are expected to cause American household water and sewer rates to double or quadruple by 2028, according to a recent report by the U.S. Conference of Mayors.

“Louisville is not alone” in its steep rise in sewer rates, said Adam Krantz, spokesman for the National Association of Clean Water Agencies. “The average rate increase over the last six or seven years has been double the rate of inflation.”

Bud Schardein, executive director of MSD, said the agency is raising sewer rates now partly to help pay its debt from major projects begun in the 1990s — including overdue work to eliminate 44,000 septic tanks and more than 300 small private treatment plants that routinely spilled raw sewage.
The agency built new sewage treatment plants, expanded others, and extended sewer lines to residential areas that were developed without them decades earlier.

Schardein said the agency also turned its focus to another of its responsibilities — flood control.
It built 11 flood-storage basins and began a program to rebuild aging pumping stations. Without such work, he said, “you're basically creating the Katrina scenario.”

Schardein said MSD has frozen salaries and cut its work force by about 200 since 2002. He said he regrets raising rates, but that the work is necessary and valuable.

“I think most people, when you ask them if they want cleaner waterways, they're going to tell you yes,” he said. “The balance is to find a way to do it without breaking an economy, and that's the trick.”

Some think rate hikes too steep
But Frazier and Michael De Witt, a retired firefighter, said they don't agree the utilities need higher rates to pay for rebuilding.

“I can't buy that,” De Witt said. “I think that the money that they have invested, and their insurances and everything, (should) cover things like that.”

“In any business, you should set aside funds for maintenance of your equipment and your infrastructure,” and shouldn't have to raise customers' bills for that purpose, Frazier said.

LG&E spokesman Chip Keeling said that as a regulated utility, LG&E can't stockpile money for eventual large projects or unexpected calamities like last year's ice storm.

Under rules designed to limit rates, LG&E can't seek to recover such costs until the work has been done and the costs calculated.

That's why LG&E only now is seeking to recover its ice-storm costs through the pending rate increase, along with its tab for projects such as replacing aging Louisville gas mains.
He and other utility spokesmen also note that despite the increases, Louisville utility bills are in line with, or lower than comparable cities.

“We definitely still have inexpensive energy for households and industry and commercial (businesses),” University of Louisville economist Paul Coomes said.

Reporter Patrick Howington can be reached at (502) 582-4229.