MIDDLESBORO — A request by the Water Service Corporation to increase the city’s water rate was approved by the Kentucky Public Service Commission (PSC) on Monday. Water rates will increase by 29 percent, which averages $5.12 more per month for a 5,000 gallon residential bill, according to a press release by the PSC, an independent agency that regulates Kentucky utilities.

The Water Service Corporation, which is owned by Utilities, Inc., had originally requested a 51 percent increase in order to pay for “additional revenue to pay for system improvements and modernization of its customer service and billing systems,” according to the company’s application. Much of the rate increase was needed to pay for “Kentucky customers’ share of company-wide computer system improvements,” according to the press release.

The PSC said that “Water Service has failed to meet its burden of proof that the indirect cost allocations from (the parent company) are reasonable, are directly related to providing water service, or benefit the ratepayers” in Kentucky. The PSC also rejected the company’s proposed fee for connecting new service and ordered it to more fully disclose its procedures and fees for payment by credit or debit cards. Other fee changes proposed by Water Service were accepted by the PSC.

State Representative Rick Nelson said he felt the increase was still “way too high.”

“I think that these utilities will ask for a ridiculous amount knowing they won’t get that,” said Nelson.

He added that he felt the evidence they presented at the public hearing “indicated they were asking for way too much money.”

Nelson also said the increase would be an added strain to not only citizens, but businesses as well.

Middlesboro resident Romell Johnson, who’s been outspoken on the rate increase, said that with the city’s current economic condition, she is disappointed by the increase.

“I still feel like that is a high rate,” said Johnson, a paralegal at Cline Law Firm. “I am a little disappointed that the PSC did give them that much of a rate increase. But I’m thankful that it’s not 51 percent.”

Johnson filed an appeal, along with others, to the PSC when the rate hike was first proposed by the Water Service Corp. Those appeals were not considered when the Kentucky Attorney General’s office decided to file its own appeal.

Johnson said the increase will not only affect water rates, but give permission to other utility companies to increase their rates as well.

“The PSC sent a message to all utilities and persons who provide services that it’s okay, it’s okay to take a bigger percentage. If you let one utility have that much, then everyone else thinks it’s okay as well,” said Johnson.

The city’s economy could also be greatly affected by this increase, speculated Johnson, and possibly even change the free access to the city’s swimming pool.

Johnson said she doubted the rate would ever decrease.

“If someone gives it to you, you’re going to keep it,” said Johnson, adding that they might continue to ask for more.

Utilities, Inc. is owned partly by the American International Group, Inc. (AIG), who came under fire in 2008 for using federal bailout money to pay its own employees retention payments of $165 million. AIG has a 12 percent investment in Highstar Capital, an investment fund manager, who then owns 100 percent of Utilities, Inc, according to a spokesman for Utilities, Inc.

Stephen Woodward is a Staff Writer for the Daily News. He may be contacted at swoodward@middlesborodailynews.com.