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PO Box 1070, Frankfort, KY 40602  Phone 502.875.2428, Fax 502.875.2845

CAWS Appeals PSC Order Granting Kentucky-American Certificate For New Water Treatment Plant and Pipeline  Posted: June 24, 2008
COMMONWEALTH OF KENTUCKY
FRANKLIN CIRCUIT COURT
CIVIL ACTION NO. 08-CI-1055
DIVISION I

CITIZENS FOR ALTERNATIVE WATER SOLUTIONS, PLAINTIFF

V. COMPLAINT AND PETITION FOR REVIEW

KENTUCKY PUBLIC SERVICE COMMISSION

KENTUCKY AMERICAN WATER COMPANY

LOUISVILLE WATER COMPANY

ATTORNEY GENERAL JACK CONWAY

LEXINGTON-FAYETTE URBAN COUNTY GOVERNMENT

KENTUCKY INDUSTRIAL UTILITY CUSTOMERS, INC.

BLUEGRASS WATER SUPPLY COMMISSION

KENTUCKY RIVER AUTHORITY DEFENDANTS

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INTRODUCTION

This complaint and petition for review seeks judicial review pursuant to KRS 278.410(1) of a June 5, 2008 Order of the Public Service Commission (Commission) denying the Petition of Citizens for Alternative Water Solutions (“CAWS”) for Rehearing of an Order of April 25, 2008 in the case of In the Matter of: The Application of Kentucky-American Water Company For a Certificate of Convenience And Necessity Authorizing The Construction Of Kentucky River Station II, Associated Facilities And Transmission Main, PSC Case No. 2007-00134. This complaint and petition for review further seeks judicial review of that April 25, 2008 Order. The Motion For Rehearing had been filed by Intervenors CAWS, seeking a rehearing by the Commission of its April 25, 2008 Order granting the application of Kentucky-American Water Company for a Certificate of Public Convenience and Necessity (“Certificate”) to construct a water treatment plant adjacent to Pool 3 of the Kentucky River and Associated Facilities and a transmission main.

For the reasons stated below, Petitioner CAWS urges this Court to vacate and set aside the Commission’s April 25, 2008 Order granting the Certificate on the ground that it is unlawful and unreasonable, and is otherwise contrary to law.

GROUNDS UPON WHICH REVIEW IS SOUGHT AND ASSIGNMENT OF ERRORS

1. This complaint and petition for review is filed pursuant to the provisions of KRS 278.410, which provides in relevant part that: (1) Any party to a commission proceeding . . . may, within thirty (30) days after service of the order, or within twenty (20) days after its application for rehearing has been denied by failure of the commission to act, or within twenty (20) days after service of the final order on rehearing when a rehearing has been granted, bring an action against the commission in the Franklin Circuit Court to vacate or set aside the order or determination on the ground that it is unlawful or unreasonable. Service of a commission order is complete three (3) days after the date the order is mailed. Notice of the institution of such action shall be given to all parties of record before the commission.

2. The final Order from which this complaint and petition for review is taken was entered on June 5, 2008. A copy of that Order is attached to this complaint and petition for review and is incorporated herein by reference, as is the underlying April 25, 2008 Order.

3. This appeal is timely filed within the meaning of KRS 278.410(1), since it is filed within the statutory period provided by that statute, having been filed within the twenty (20) day period following the three (3) day period prescribed by statute after which service of the Order is deemed to be complete.

4. This court has jurisdiction to hear this petition for review pursuant to KRS 278.410(1). The June 5, 2008 Commission Order is a final and appealable order, and it is an “order of the Commission” within the meaning of that statute.

5. Petitioner CAWS was an Intervenor in the underlying administrative process from which this appeal is taken.

6. CAWS is a non-profit corporation in good standing, organized under the laws of the Commonwealth of Kentucky, with its principal office at 2390 Sullivan Lane in Frankfort, Kentucky 40601, and dedicated to development of environmentally sound, fiscally responsible and socially just solutions to Central Kentucky’s water needs. According to the mission statement adopted by the Board of CAWS, the organization supports “the search for solutions that will have the least overall impacts on the communities and cultural and ecological resources of the region.”

7. CAWS interest includes both property interests, and interests in assuring safe and dependable water supplies at a reasonable cost to ratepayers. CAWS membership includes, but is not limited to, individuals who are ratepayers of Kentucky-American Water Company, and numerous individuals whose properties lie in the direct path of Kentucky-American’s route for the transmission main from the proposed Kentucky River Station II.

CAWS, on behalf of its members, is a “person” whose interests as property owners and ratepayers are or may be adversely affected by the Commission’s June 5, 2008 Order denying the request for rehearing of the April 25, 2008 Order, and by the granting of the Certificate to KAWC.

8. As a party granted the status of full Intervenor in Case 2007-00134 by the Commission by May 11, 2007, CAWS is among those parties authorized by KRS 278.410(1) to maintain an action seeking review of the June 5, 2008 and April 25, 2008 Orders.

9. The Commission, an agency of the Commonwealth of Kentucky, is named as respondent as directed by KRS 278.410(1), and the Commission Chair and Executive Director will be served in addition to service on the Attorney General as directed by Kentucky Rule of Civil Procedure 4.04(6).

10. Kentucky American Water Company, Louisville Water Company, Office of Attorney General, Lexington-Fayette Urban County Government, Kentucky Industrial Utility Customers, Inc., Bluegrass Water Supply Commission, and the Kentucky River Authority, are all parties of record in the underlying administrative proceeding, and are likewise named as Defendants and service will be effected on each party in the manner directed by the Civil Rules. Additionally, courtesy copies of this complaint and petition for review will be mailed to counsel of record in the underlying administrative proceeding.

11. K.R.S. 278.410(1) provides for judicial review of an order or determination of the Commission “to vacate or set aside the order or determination on the ground that it is unlawful or unreasonable.” The Commission’s June 5, 2008 and April 25 Orders are unlawful and unreasonable. Among the reasons that the June 5, 2008 and April 25, 2008 Orders are unlawful and unreasonable are:

a. The Commission acted arbitrarily and unreasonably, in a manner repugnant to the constitutional protections against “arbitrary” governmental action, and in a manner in conflict with statutory authority, in according unfair weight to the proposed KAWC alternative over other alternatives, based on actions taken by KAWC to implement the KAWC preferred alternative prior to issuance of the CPCN. The Commission improperly relied on the efforts by KAWC to obtain permits and easements, and on KAWC’s preliminary engineering design work, as the primary basis for rejecting other alternatives. This improper reliance on the actions taken by an applicant to advance a preferred alternative prior to Commission review and approval, has the effect of fatally skewing the evaluation of alternatives in a manner that prejudices the fair consideration of other alternatives, which will always be “more conceptual” or “less advanced.” The Commission’s according of substantial weight to the current status of the KAWC alternative relative to other alternatives, is fundamentally inconsistent with the Commission’s obligation to fairly evaluate all alternatives prior to approval of any alternative, and constitutes arbitrary government action in contravention of Kentucky Constitution Section 2;

b. The Commission acted unlawfully and unreasonably in summarily rejecting the CAWS suggestion that incremental expansion of available water through aggressive leak detection and conservation, coupled with access to treated water from the City of Versailles, was a viable alternative to the proposed Pool 3 Project.

Illustrative of this failure, the Commission noted that Versailles’ ability to deliver treated water during times of drought may be limited due to withdrawal restrictions. However, the Commission failed to consider, or to require KAWC to engage the Division of Water, in discussion as to whether and to what extent the limits on Versailles’ water withdrawal could be temporarily modified, despite the Commission’s acknowledgement and reliance on the ability of KAWC to do so as a basis for rejecting the LWC challenge to the sufficiency of the KAWC withdrawal permit at Pool 3.

Additionally, the Commission failed to fully and fairly evaluate the possibility of scaling the available supply to match demand as an alternative to imposing on a generation of ratepayers the costs of capacity beyond that needed to meet reasonable current and near-term demand;

c. The Commission acted unlawfully and unreasonably in failing to fully consider the infeasibility of the Pool 3 project in light of the refusal by some 15% of the remaining private landowners to grant an easement and the doubtful power of KAWC to condemn private lands in order to install a transmission line for the Pool 3 Project. The Commission did so despite having relied on the KAWC acquisition of a fraction of the 104 needed private land easements as one of the bases for approving the KAWC request;

d. The Commission acted unlawfully and unreasonably in approving the KAWC application in part on the characterization of the KAWC alternative as a regional solution; when the evidence in the record indicates that the supposed partnership in the Pool 3 Project is illusory and that the participation of the BWSC members in the project is unaffordable absent significant public subsidy to spend down the cost of the water;

e. The Commission acted unlawfully and unreasonably by according any weight to the impact of the various alternatives on the Kentucky River Authority’s budget, as a factor in determining whether to approve the requested Certificate;

f. The Commission acted unlawfully and unreasonably in categorically and without sufficient basis dismissing the testimony of Dr. Martin Solomon concerning future growth in demand. The Commission failed to provide any reasonable basis for summarily rejecting the use of actual data tracking the incremental growth of consumption of water under both average and peak demand conditions, and failed to independently assess and reconcile the wide divergence between historical trends and projected future demand;

g. The Commission acted unlawfully and unreasonably in concluding that the differences in cost of the KAWC and Louisville Water Company (LWC) proposals were not materially significant in net present value, when the evidence indicates that the Pool 3 project would be at least 15% more expensive; and

h. The Commission’s Order was otherwise arbitrary, capricious, and was unlawful and unreasonable.

CONCLUSION AND REQUEST FOR RELIEF

Wherefore, for the reasons stated above, Plaintiff respectfully requests that this Court:

1. Accept jurisdiction over this complaint and petition to review the Commission’s June 5, 2008 and April 25, 2008 Orders;

2. Determine and declare that the Commission acted unlawfully and unreasonably in approving the Certificate of Public Convenience and Necessity for construction of a water treatment plant adjacent to Pool 3 of the Kentucky River and Associated Facilities and a transmission main;

3. Vacate and set aside the June 5, 2008 and April 25, 2008 Orders as being unlawful and unreasonable; and

4. For any and all other relief to which Plaintiff may appear entitled.

Respectfully submitted,

Tom FitzGerald
P.O. Box 1070
Frankfort, Ky. 40602
(502) 875-2428

Counsel for Plaintiff
Citizens for Alternative Water Solutions


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