KRS 65.8921: Procedure for establishing or changing rates or charges for service.

(1) The rates and charges to be assessed by the commission to its member entities and

other parties shall be the verified cost of providing the services as prescribed in this

section, and shall be allocated based on usage and the cost of service. However, if

continuity of consumer service or the preservation of water quality is threatened by

special circumstances affecting a public wastewater utility, the commission may

establish special rates for that entity for a period not to exceed one (1) year so long

as b enefits to member entities are not jeopardized and nonmembers are not

adversely affected in any manner.

(2) The commission shall establish wholesale charges, rates, and terms for its services

to its member entities and to any other party to which it provid es service under

contract that are fair, just, and reasonable and shall be sufficient at all times to:

(a) Pay the cost of operation and maintenance of any facility that it may own or

lease to provide wastewater services contracted to its member entities o r other

parties;

(b) Pay the principal and interest on any bonds, loans, or other instruments or

obligations secured in the name of the commission; and

(c) Provide an adequate fund for renewals, replacements, and reserves.

(3) The commission's procedure fo r establishing or changing rates and charges levied

on member entities and other parties that contract for service shall be as follows:

(a) Every five (5) years, or more often if circumstances warrant, the commission

shall procure, pursuant to KRS 45A.343, 45A.345 to 45A.460, 45A.735,

45A.740, 45A.745, and 45A.750, the professional consulting services of an

independent accounting firm or individual accountant qualified and

experienced in conducting cost -of-service studies. The commission shall

invite the go verning body of each member entity to designate a special

representative to participate in the consultant selection process;

(b) The firm or individual selected in consultation with the commission's

designated engineers, operators, and other knowledgeable individuals shall

perform a cost-of-service study to:

1. Determine the actual or probable cost of operating and maintaining the

commission's respective wastewater facilities;

2. Determine the cost of servicing any associated debt obligations and

administrative costs;

3. Devise a comprehensive cost allocation plan and recommend that the

commission establish and levy specific rates for treatment services and

appropriate charges for other services to offset these costs; and

4. Devise and recommend a standard m ethod of formulary whereby the

commission may conduct regular financial analyses internally, based on

sound accounting policy, allowing for the application of inflation indices

and other equitable methods of determining service rates;

(c) The commission shall determine and set final rates and charges based on and

only after:

1. The cost -of-service study and recommendations of the consultant are

received;

2. Consultation with the governing bodies of member entities during the

cost-of-service study; and

3. For a rate increase greater than five percent (5%), a vote approving the

final rate by a majority of the legislative bodies of the member entities

that comprise the wastewater commission or, in the case of a special

district or government ag ency, by the fiscal court of the county that

contains the district or agency, which shall take action thirty (30) days

after notice of the proposed final rate. Each legislative body of a member

entity, or fiscal court in the case of a special district or g overnment

agency, shall have equal weight. Absent a majority vote, rates shall

remain provisional and must be reset by the wastewater commission;

(d) Initial rates and charges and any subsequent changes to rates and charges of

five percent (5%) or less sha ll be approved by the commission, but not more

than once in a twelve (12) month period. Increases above five percent (5%)

shall remain provisional until action by the legislative bodies pursuant to

paragraph (c) of this subsection; and

(e) The commission s hall provide not less than sixty (60) days' written notice to

the governing bodies of the member entities prior to the effective date of any

change in rates or charges for service, which shall remain provisional until

action by the legislative bodies of th e member entities pursuant to paragraph

(c) of this subsection.