The Kentucky Public Service Commission (PSC) granted Knott County Water and Sewer District a rate adjustment increases water service rates by 45 percent immediately and another 15 percent a year from now.

"We have a lot more facility costs that people in more flat areas don't have to deal with," said Jared Salmons the general manager of Knott County Water Sewer District.

PSC stated the size of the increase is due to the fact that Knott County Water has not applied for a comprehensive rate adjustment since 2003, despite years of deteriorating finances.

A typical residential customer who uses 3,500 gallons per month, the first phase of the rate change will increase the monthly bill by $12.19, from $26.70 to $38.89. The second increase, a year from now, will add an additional $5.84 to the monthly bill, bringing the total to $44.73.

"We don't wanna be in the situation we've seen some eastern Kentucky water districts fall into that we want to be ahead of the game and I guess the Public Service Commission felt like we needed to take a little more of that upfront," said Salmons.

PSC also found the five members, then on the district's board of commissioners, secretly and illegally granted themselves full health insurance benefits in 2017.

"It was taken directly out of the finances of the water district," said Knott County Judge Executive Jeff Dobson.

This cost the district more than $133,000 the last three years.

In testimony before the PSC, the board members acknowledged the decision to grant health benefits was made in a closed session. However, no vote was taken in any subsequent open session, and no written record of the decision was produced - all violations of state law.

PSC inquired about the health insurance benefits, but Knott County Water did not disclose the information to the public during the rate case. PSC denied the request.

According to PSC, three of the remaining board members are subject to removal from office. This removal would require a separate PSC proceeding.

PSC ordered the health benefits to be discontinued immediately, sparing ratepayers from any further costs.

"They didn't allow for the health benefits to be part of the study, so they weren't included in the cost of service to the customer," said Salmons.

In July 2019, Knott County Water applied for an increase in water rates, including both retail and to its five wholesale customers. Knott County Water has nearly 3,000 retail customers.

PSC found there would be an annual retail revenue of $677,000 needed to meet the utility's needs, including adequate revenue to set aside funds for future infrastructure repairs and replacement. Wholesale rates would need to be increased. However, sewer rates are not affected.

The wholesale costumers include Letcher County Water, Perry County Water, City of Hindman, Southern Water, and Phoenix Properties. They will only see a nine percent increase.

PSC said stretching out the increase over more than two years while lessening the burden on customers was not possible due to the utility's dire financial condition. A longer phase-in would worsen the situation, according to PSC.