Opponents warn system remains fragile

BY LISA STAYTON
MOUNTAIN CITIZEN

INEZ — Martin County Water District is asking the Kentucky Public Service Commission (PSC) to close a long-running oversight case and lift monitoring requirements imposed more than six years ago, arguing that the utility has made significant financial and operational progress under outside management.

The request, filed Dec. 3 in PSC Case No. 2020-00154, seeks to end state supervision that began after regulators found the district had been operating in what the Commission described as a “constant state of emergency,” marked by “decades of poor choices” and an “ongoing inability to manage and operate the utility in an effective and organized business-like manner.”

Since January 2020, the PSC has required Martin County Water District to submit regular financial and operational reports and participate in monthly conferences with commission staff, a level of scrutiny rarely applied for such an extended period. The district now argues that oversight was never intended to last indefinitely and that conditions have improved enough for the case to be closed.

But filings submitted in response, including a formal opposition from Martin County Concerned Citizens, a public comment from a sitting board member, and sworn responses to PSC staff questions, reveal sharp disagreement over whether the system is stable enough to stand on its own.

PSC intervention

The current monitoring case grew out of earlier PSC investigations dating back nearly a decade, stemming from a complaint filed by then-Mountain Citizen editor Gary Ball. In a 2019 order cited repeatedly in the district’s own motion, the Commission described a system plagued by extreme water loss, financial disorder and chronic emergency conditions.

Those findings led the PSC to require the district to contract with Alliance Water Resources Inc., a private utility management firm, to stabilize operations. In November 2019 and again in July 2020, the Commission formally imposed reporting requirements “to monitor the condition of Martin District, including its cooperation with and improvement under Alliance.”

Those orders did not include benchmarks or an expiration date.

In its motion to lift the order, the district argues that the absence of an endpoint should not mean indefinite oversight.

“This Case has been ongoing for more than five years,” the filing states, adding that the Commission “surely did not intend to monitor Martin District indefinitely.”

District claims progress

In support of its request, Martin County Water District points to compliance with reporting requirements, annual audits, board training and improved recordkeeping. It also notes that the PSC removed one reporting requirement earlier this year, eliminating a monthly vendor disclosure.

Operationally, the district highlights reductions in water loss, stating that unaccounted-for water has dropped “from 71% to as low as 45%.” The district attributes the reduction to meter replacements, leak repairs and line replacement projects, while acknowledging that “there is still a lot more work to be done.”

Financially, the district reports increased revenue, rising from $2.52 million in 2020 to $3.16 million in 2024, with $3.32 million reported so far in 2025. It also cites new revenue from a joint operating agreement with Prestonsburg City Utility Commission.

The district says it is not seeking a rate increase, asserting it has “the second highest water rates in the Commonwealth” while serving “one of the poorest counties in the State.”

Problems that persist

At the same time, the district acknowledges ongoing strain.

The filing states that the district has incurred more than $800,000 in unbudgeted costs since November 2023 because a raw water intake project administered by the Big Sandy Area Development District was not completed. As a result, the district continues to rely on diesel pumps to supply raw water.

The district also acknowledges it is behind on payments to Alliance Water Resources, stating that “Martin District’s only aged account is with Alliance,” and that it is paying the firm “approximately one and a half (1.5) months in arrears plus interest.”

Those admissions prompted further scrutiny from PSC staff.

PSC demands specifics

After the district filed the motion to close the case, PSC staff issued a “second” request for information, requiring the district to provide detailed answers regarding its finances, water-loss strategy and outstanding obligations.

In its sworn response, the district disclosed for the first time the precise amount owed to Alliance. An aged accounts receivable report shows that as of Dec. 1, 2025, Martin County Water District owed Alliance Water Resources $434,342.44.

The district told regulators it has “been steadily paying down the amount due to Alliance over the past year.” It said its 2026 budget includes “an additional $150,000 reserved for paying down this debt.” The district stated that the plan relies on additional revenue, potential grant funding, expected FEMA reimbursement for winter storm costs and possible recovery through litigation tied to the failed raw water intake project.

PSC staff also asked how water loss surcharge funds were being used. The district responded that “the fund was only used to pay Alliance” and for no other purpose, submitting bank records showing regular deposits followed by payments to the management firm.

Water loss plan

In response to staff questions, the district laid out its current water loss reduction strategy.

The district said it maintains a dedicated “Water Loss team” that monitors tank levels daily and reads zone meters weekly to detect leaks. According to the response, crews are finding “anywhere from 12–45 leaks a month — all of which are promptly repaired.”

The district said its 2026 budget includes “an additional $50,000 towards repair expenses” and that its meter replacement project is expected to be completed by March 2026, with large commercial meters still awaiting parts.

The response also cited water line replacement projects in Coldwater, Otto Brown, Old Highway 3 and along Route 40 East as efforts expected to further reduce losses.

Alliance backs ending monitoring

Included in the district’s response was a letter from Alliance Water Resources President Tim Geraghty supporting the request to lift PSC monitoring.

“Alliance Water Resources, Inc. supports the Martin County Water District’s request of the Kentucky Public Service Commission to end the monitoring requirements outlined in the Commission’s Order dated July 22, 2020,” the letter states.

Citizens group urges PSC to keep case open

The district’s request drew formal opposition from Martin County Concerned Citizens (MCCC), represented by the Appalachian Citizens’ Law Center.

“While the district should celebrate the improvements that have been made since Alliance took over in 2020, it is not yet time to turn the system back over for the county to run,” the MCCC wrote, describing the system’s condition as “perilous.”

The filing warns that water loss remains high, the raw water intake remains unfinished, and the system continues to rely on costly diesel pumping. It also raises concern that the push to close the PSC case is tied to plans to terminate the Alliance contract.

“What appears clear from those developments is that the request to close this matter is done in furtherance of a plan to terminate the contract with Alliance,” MCCC stated.

The organization asked the PSC to require Commission approval of any future termination plan and to continue monitoring the district’s finances and operations.

McCoy warns of backsliding

Those concerns were echoed by Nina McCoy, a water board member and president of Martin County Concerned Citizens, in a public comment filed with the PSC.

McCoy said she voted earlier this year in a water board meeting to authorize filing the motion, but believed at the time that Alliance would remain in place.

“I did not consider my vote one that would terminate our work with Alliance as a water management company,” she wrote.

She said later discussions about transitioning operations back to the district “confirmed my worst fears.”

“There may come a time when we are ready for a county-run system, but we are just not there yet,” McCoy added.

While crediting Alliance with improvements, McCoy challenged the district’s assertion that it has moved far beyond crisis. Referring to the petition’s language, she wrote, “This, I now consider a stretch.”

“The people of Martin County have only just begun to heal from the trauma of the drumbeat of over 20 years of living with the fear of having a water system balancing on the brink of total collapse,” McCoy wrote.

Decision ahead

The PSC has not yet ruled on the district’s request.