A proposal by Princeton Water & Wastewater Commission to raise the cost of water to its wholesale customers could trickle down to rural residents of Caldwell and Lyon counties.

Princeton Water is seeking a rate increase for the water it sells to both Lyon County and Caldwell County water districts, its only two wholesale customers. The adjustment is needed, commission officials say, to update its rate structure, offset rising costs to treat and distribute potable water and bring its wholesale costs in line with what its own residential and business customers are paying.

"We are trying to make this fair for everyone," said James Noel, Princeton Water and Wastewater superintendent.

Princeton Water is asking both water districts to pay a monthly customer service charge per meter of $6, a 50% increase in the current cost. The utility is also seeking a bump in the usage charge of 68.29 cents per 100 cubic feet of water (about 750 gallons), raising the cost per 100 cubic feet by 30% to $2.97, the same as what its own direct customers are currently paying beyond minimum charges. In cost per 1,000 gallons, a unit of measure typically used by the water districts to charge customers, the increase amounts to about 90 cents.

Both Caldwell County and Lyon County water districts have objected to the increase. On Dec. 13, each filed a formal protest with the Kentucky Public Service Commission requesting a "formal proceeding to investigate the reasonableness of the proposed rate." The PSC, which regulates Kentucky utilities and must approve most rate adjustments, will conduct its inquiry based upon data and materials supplied by the three utilities and will offer public comment before issuing a ruling, which is likely to come by late spring. The PSC can deny the adjustment or approve it in whole or in part.

Tracy B. Musgove, Princeton Water director of finance, points out that based on the rates charged by the rural utilities, if each passed along 100% of their increased cost to purchase from Princeton Water to their own customers, the 90 cents per 1,000 gallons would represent a much small percentage than the 30% wholesale increase. In fact, based upon current minimum monthly charges, the increase represents about a 7.2% increase to Lyon County Water District customers and 3.6% to Caldwell County Water District customers.

Musgove said the last wholesale increase from Princeton Water was Sept. 1, 2014. In a Nov. 20 letter to PSC Executive Direcdtor Gwen R. Pinson, Musgove said that since that rate increase, "Current data indicates the cost to produce and distribute 1,000 gallons of water has risen to $5.03, much higher than the $3.95 we are requesting our wholesale customers pay."

"The water districts' rates have been so low, the gap is growing between the largest and smallest users," Musgove said of the cost to those who consume the water it produces. "We feel this is more equitable."

Princeton Water directly serves about 3,000 residential, business and industrial customers with about 90 miles of lines, mostly within the city of Princeton and along its distribution line from its water plant on Lake Barkley. It serves another 5,800 or so secondary users in Caldwell and Lyon counties as customers of the two rural water districts.

The proposed rate increase will not affect those directly served by the Princeton utility, as those customers last saw a rate adjustment in August of last year. If approved by the PSC, the wholesale increase will likely affect customers of Caldwell County and Lyon County water districts.

"It is not mandatory for the wholesale customers to apply for a pass-through increase … although it is generally recommended that they do so in the interest of financial stability," PSC Public Information Officer Andrew Melnykovych said.

Princeton Water is also seeking from the PSC to recover from the water districts an estimated $100,000 in its costs for legal fees and other expenses associated with the formal investigation that became necessary when the water districts protested the adjustment.

Caldwell County Water District serves about 2,100 customers outside of Princeton and Fredonia, which buys its water from the city of Eddyville. The water district maintains about 410 miles of lines. It does not produce water and purchases a small amount of wholesale water from South Hopkins Water District in addition to Princeton Water.

Lyon County Water District utilizes 312 miles of distribution lines to serve roughly 2,700 customers. It does not produce its own water, and buys primarily from Princeton Water and the city of Kuttawa. It also purchases from the city of Eddyville, Barkley Lake Water District in Trigg County and Crittenden-Livingston Water District.