PSC investigating Floyd utility transfer

FRANKFORT, Ky. — In 2017, the Kentucky Public Service Commission approved the transfer of Southern Water District’s entire sewer system and a portion of its water system formerly owned by Sandy Valley Water District to Prestonsburg City’s Utilities.

Three years later, the PSC says the deal is still not final, and now it wants to know why. The regulator launched an investigation into the matter on July 20.

Under the terms of the transfer, Prestonsburg agreed to pay $2.1 million in cash and assumed debt to Southern, in exchange for the sewer and water systems.

There are no allegations of wrongdoing listed in the PSC’s order launching the investigation. However, the regulatory agency says it wants to find out if there has been a change in factual or legal circumstances that could cause the PSC to modify its order approving the transfer.

In a response filed July 30, Prestonsburg City Utilities disputes the characterization that the entire deal is still incomplete. It says the sewer system transfer is complete, but the transfer of the water system has been held up.

The investigation order notes that much of the reason for that delay is because USDA Rural Development had not yet approved the transfer. Rural Development wanted an appraisal conducted first, then questioned whether the appraisal was accurate.

According to the order, Prestonsburg and Southern submitted an appraisal of $4.1 million, but Rural Development determined that the appraisal only covered the water system. The agency also questioned whether the valuation was unduly excessive.

A subsequent appraisal valued just the affected water lines at $1.5 million.

The order also notes that Prestonsburg took over operation and maintenance of the sewer system, but Southern continued to collect and keep the sewer bill payments.

In its response, Prestonsburg says its agreed to forgive $137,500 in unpaid sewer fees in an amendment to the original purchase agreement.