The NewStandard ceased publishing on April 27, 2007.

Kentucky Voters Could Reclaim Local Water Supply

by Shreema Mehta

Nov. 7, 2006 – Voters in a Kentucky county today could approve a referendum that would make their privatized water system public.

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Citizens who vote "yes" on the referendum could empower the Lexington-Fayette Urban County government to purchase the water company that serves more than 310,000 people in the area. The ballot measure calls on the county to purchase Kentucky American Water using the most effective means possible, including eminent domain.

The company is a subsidiary of American Water, which in turn is part of the German conglomerate RWE AG.

If a municipal authority replaces a private company in managing the local water supply, the profits that went to international shareholders could instead be invested into the community. That is what Foster Ockerman Jr., general counsel of Bluegrass For Local Ownership of Water (FLOW), an organization that supports the referendum, told The NewStandard his group wants to see happen.

Ockerman also said public acquisition of the water system would put local residents in charge of the water supply. Right now, he said, "the decisions are made outside Kentucky." If the county acquires the utility, it would be run by a board of directors "who are customers and who live here," he said.

The company and its supporters say a government takeover offers a solution to a nonexistent problem. "Kentucky American Water has a proven track record of providing its customers with quality water and service at fair rates," states a campaign website set up by parent company American Water.

But critics of water privatization point out the company has been pushing to increase rates and profit margins.

In 2004, Kentucky American submitted a request to increase its rate of return on investments to 11.2 percent. The company also requested passing on consolidation costs of its parent company’s branches in Illinois and New Jersey and the costs of a new compensation plan for its management and technical employees.

The Kentucky Public Service Commission, which regulates water companies, granted a 10 percent rate of return and denied the other requests.

The referendum comes after an aborted attempt by Lexington-Fayette County to condemn Kentucky American Water and take over the water system last year. The Lexington-Fayette Urban County Council voted to end condemnation proceedings of the company. In exchange, Kentucky American agreed to give the deeds to a park and golf course it owns to the city.

Kentucky American officials told the Lexington Herald-Leader that although RWE AG is selling Kentucky American’s parent company, American Water, it refused to sell the local company by itself.

According to the Water Science and Technology Board, which conducts research for the federal government, about 12 percent of the water systems that serve more than 10,000 people apiece are privately owned.

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The NewStandard ceased publishing on April 27, 2007.


Shreema Mehta is a staff journalist.

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