BY ROGER SMITH
MOUNTAIN CITIZEN
INEZ — The Kentucky Public Service Commission will question Martin County Water District officials Tuesday about customer surcharge collections, a possible rate adjustment, the district’s long-troubled raw water intake and the status of millions of dollars in grant funding.
The PSC has scheduled its monthly informal conference in Case No. 2020-00154 for 2-3 p.m. Sept. 8 by video conference.
The PSC has monitored Martin County Water District’s management and operations in the case since 2020. The commission holds regular informal conferences to review the district’s finances, management, infrastructure projects and other operational issues.
The Sept. 8 agenda expands that scrutiny. In addition to capital projects and grant funding, PSC staff is asking for a detailed accounting of the district’s debt surcharge and Management/Infrastructure surcharge for the past six months and an update on any water district board discussion concerning a rate adjustment.
PSC staff also wants an update on the raw water intake project — the system used to draw untreated water from the Tug Fork for treatment at the Inez Water Treatment Plant — and potential funding from the U.S. Army Corps of Engineers. The commission also wants the status of any active proceedings with the Kentucky Division of Water and the district’s plan to use grant funding to pay its debts, including money owed to Alliance Water Resources, the company that manages the district’s operations.
The commission will also hear from new Martin County Water District General Manager Robbie Nichols about his qualifications, duties and goals for the position.
The meeting comes as the district is moving forward with numerous infrastructure projects and the administration of approximately $26 million in broader funding while continuing to deal with a raw water intake project that remains unfinished years after millions of dollars were committed to it.
Raw water intake remains unfinished
The raw water intake is expected to be a central issue Tuesday.
Martin County Concerned Citizens formally asked the PSC in July to make the intake a separate item for discussion during each monthly informal conference, citing the cost of the temporary diesel pumping system, repeated changes in the project’s scope and uncertainty about what work remains.
Attorney Mary Cromer of Appalachian Citizens’ Law Center submitted the July 24 request on behalf of MCCC.
“Because the raw water intake is not functional, the district’s customers are paying as much as $30,000 per month (or more) for a diesel pump to perform the function of the RWI,” MCCC stated in its filing.
The temporary system withdraws water from the Tug Fork and pumps it into the district’s system because the permanent intake cannot currently perform that job.
MCCC cited more than $21,000 in diesel expenses for June 2026 and more than $8,000 per month for pump rental.
According to the filing, the temporary diesel pumping arrangement has been in place since July 2023.
The actual cumulative cost of the temporary pumping system since 2023 is not stated in the filings reviewed by the Mountain Citizen.
The water district’s raw water intake problems date back years.
MCCC said more than $5.3 million in State Revolving Fund and Abandoned Mine Lands funding was provided in 2018-19 for a project that was to replace the district’s existing raw water intake, provide a system to bypass the reservoir when appropriate and make repairs to the water treatment plant’s clarifiers.
The existing intake structure had become buried in sediment in the Tug Fork and was no longer functional. According to MCCC’s filing, that intake still has not been recovered from the river bottom.
The original project was intended to provide a second intake structure for greater reliability during low river levels and protection during flood events. It also included piping, pump and control upgrades.
The reservoir bypass portion was intended to allow the district to send water directly from the river to the treatment plant during periods when water quality in the reservoir deteriorates because of high levels of organic material.
MCCC told the PSC the project has encountered repeated problems since work began in 2021.
Those problems included bids exceeding available funding, problems with both pumps, electrical issues and repeated reductions in the project’s scope because of budget constraints.
After the district purchased two new pumps, the smaller pump flooded and was undersized, while the larger pump was rendered inoperable after being damaged during delivery. MCCC also cited problems with the variable-frequency drive and violations of ASME and the National Electrical Code.
The water district also sued Big Sandy Area Development District over the raw water intake. The district later withdrew that lawsuit.
MCCC said the repeated changes have left questions about what the project will ultimately provide.
“Because the project’s scope has changed so many times during the last six years, it is unclear what a finished RWI project will be,” the organization stated.
The group also raised concerns about whether the intake will be protected from future flooding.
“Critically, it is unclear whether the new RWI, when it is finally put in service, will have a mechanism for quickly moving it away from floodwaters as the river rises,” MCCC stated.
In other words, after years of work and millions of dollars committed to the broader project, the district still relies on a temporary diesel-powered system to perform one of the intake’s basic functions.
Army Corps pledges $202,000
The intake has seen movement in recent months.
During the PSC’s July 6 informal conference, Alliance Water Resources reported that it was working with the U.S. Army Corps of Engineers and that funding had been approved for a project intended to resolve the intake problems.
Alliance told PSC staff it hoped the funding would be enough to correct the problem and eliminate the district’s reliance on diesel pumps.
More details emerged at the Aug. 11 conference.
Alliance reported that the Army Corps had pledged $202,000 toward the raw water intake project.
The Corps had also approved a supervisory control and data acquisition, or SCADA, tie-in to be performed by Southern Flow. The system is expected to provide alarms, shutoffs and full control of the intake from the water treatment plant.
The district also reported that it was focusing on replacing the pumps with higher-powered equipment as part of an effort to move away from reliance on the diesel system.
The filings, however, do not spell out whether the $202,000 project will complete everything envisioned when the original multimillion-dollar raw water intake project was developed.
That was one of the issues MCCC raised in July.
“At this point, the project remains incomplete and the RWI is non-functional,” MCCC stated.
The organization said it understood that Army Corps funding and additional assistance from Big Sandy Area Development District might be available. However, questions remained about what work would be required to make the intake fully functional without continuing additional costs to water customers.
MCCC told the PSC that monthly informal conferences could give the public a clearer picture of the project’s progress.
“We believe that the monthly conference is a good opportunity for MCCC and the community we represent, as well as the PSC, to better understand the progress and outstanding issues with the RWI project,” the organization stated.
“Please consider adding this to the monthly agenda so that we can all keep track of what is happening with this crucial project,” MCCC added.
The Sept. 8 PSC agenda specifically calls for an update on the status of the raw water intake and potential Army Corps funding.
PSC wants surcharge accounting
Tuesday’s conference will also put a new focus on money collected directly from customers through two separate surcharges on water bills.
PSC staff has directed the district to provide a detailed accounting of its debt surcharge and Management/Infrastructure surcharge for the previous six months.
The notice does not state what prompted the request or identify any concerns with the surcharge accounts.
It also does not provide the amounts collected during that period.
The accounting could show how much the district collected from customers, how the money was spent and what balances remain.
PSC staff has also requested an update on the district’s plans for using grant funding to pay debt, including its arrearage to Alliance Water Resources.
That issue has been under discussion for several months.
During the June 18 informal conference, Alliance reported that the district was still waiting for disbursement of funding included in its Capital Improvement Plan.
Alliance said amounts budgeted in the plan would be assigned to specific projects once funding was received.
Alliance also told PSC staff that money budgeted for outstanding debts would cover the district’s 2015 E-bond, truck leases, a Kentucky Infrastructure Authority loan and the amount owed to Alliance.
At the July 6 conference, Alliance said KIA paperwork was still being processed and an administrator had not yet been selected. Alliance said some of the KIA funding would be used to pay debt owed to the company.
By Aug. 11, Alliance reported that FAHE had been selected to administer $26 million in funding.
The PSC memorandum describes the money as “$26 million it has currently received in funding,” although the document does not provide a breakdown showing how much has actually been disbursed, obligated or spent.
Tuesday’s conference is expected to provide another update on how the administration is using that funding.
Possible rate adjustment on agenda
PSC staff also wants to know whether the Martin County Water District Board of Commissioners has discussed a rate adjustment.
The Sept. 1 conference notice calls for an “update on Martin District board meeting discussion, if any, regarding the consideration of a rate adjustment.”
The notice does not say that the district has proposed an increase, that Alliance has recommended one or that a rate case has been filed.
The agenda item, however, places any possible discussion of changing customer rates directly before PSC staff at Tuesday’s conference.
The question comes as the commission simultaneously examines the district’s two customer surcharges, its debts and the use of millions of dollars in grant funding.
New GM takes over
Tuesday’s meeting will also mark the PSC’s introduction of Nichols as the district’s new local general manager.
Alliance has operated for several months without a permanent local general manager.
At the May 21 informal conference, Alliance confirmed that Colby May had been promoted to regional operations manager and was serving as acting general manager for Martin County Water District.
Alliance reported in June that it was still searching for a local general manager and May remained in the acting position.
At the Aug. 11 conference, Alliance told the PSC that it had hired Nichols as local general manager and that he would participate in the next informal conference.
PSC staff now wants an overview of Nichols’ qualifications, duties and goals.
Water board fills vacancies
The district’s management transition has occurred alongside substantial turnover on its Board of Commissioners.
At the May conference, the district confirmed that Timothy Thoma had resigned as chairman effective April 23.
The district also reported that Nina McCoy’s term on the board had expired and Norma McCormick had been appointed to that position.
By the June conference, Vernon Robinson had also resigned from the board, creating another vacancy.
At the July conference, Martin County Water District reported that the board was once again full following the appointments of Todd Dials and Randall Fraser.
The district again confirmed Aug. 11 that all board positions were filled.
Turkey tank project reduced to fit budget
The PSC’s recent informal conference records also show how the district has been adjusting projects when construction costs exceed available money.
One example is the Turkey Tank water-storage rehabilitation project.
During the June 18 conference, Alliance reported that the project had been bid but received only one bid, which exceeded the district’s budget.
The PSC subsequently placed changes in the cost and scope of the Turkey Tank rehabilitation project on its July conference agenda and asked for the request for proposals and the response.
At the July conference, Alliance said it was negotiating the project to bring it within budget.
By Aug. 11, Alliance reported that it had renegotiated the bid to a budget-compliant amount by removing a valve vault from the project.
The PSC memorandum does not explain the valve vault’s original purpose or the operational effect of its removal.
Other capital projects
Alliance also reported progress on several other projects during the Aug. 11 conference.
The Coldwater project was being evaluated and mapped by Nesbitt.
Bell Engineering was assisting with the 40 East and 40 West pump station generator replacement projects, which had been awarded to Southern Contractor of Kentucky.
Alliance also discussed zone meter replacements as part of the district’s continuing infrastructure work.
Meter replacement work had been progressing earlier in the summer.
At the June 18 conference, Alliance reported that all residential meters had been replaced, most commercial meters had been replaced and completion of zone meter replacements was expected in July.
Water treatment plant work planned
The district’s recently filed Infrastructure Replacement Plan also calls for work at the Inez Water Treatment Plant.
Alliance told the PSC in August that the plant appears in the plan for both improvements and eventual replacement.
According to the conference memorandum, initial repairs are necessary to address brown water problems involving the chemistry of the water before additional work can be undertaken later.
Alliance also told the commission that a “Master Plan” referenced in the Infrastructure Replacement Plan is funded and being compiled.
PSC staff directed the district and Alliance to file the completed Master Plan in the commission’s case record.
DOW seeking renewed meetings
Another issue expected to surface Tuesday involves the Kentucky Division of Water.
PSC staff included the Division of Water’s interest in reinstating monthly workgroup meetings on the July 6 conference agenda.
Alliance said during that meeting that it did not know whether the Division of Water would reinstate the meetings.
The issue remained unresolved in August.
PSC staff reported Aug. 11 that a Division of Water representative had again contacted the commission concerning the agency’s desire to re-establish workgroup meetings with Martin County Water District.
According to the PSC memorandum, the Division of Water representative had been unable to make contact with the Martin County judge/executive.
PSC staff passed the information to water district officials so they could help facilitate communication with the state agency.
The Sept. 8 agenda now calls for an update on the status of any active proceeding involving the Division of Water.
The notice does not identify the nature of any such proceeding.
Tuesday’s conference is part of the PSC’s continuing management and operations monitoring of Martin County Water District under KRS 278.250.
The commission began shifting the monthly conferences earlier in the month this summer so staff could review the district’s most recent board meeting packet rather than discussing information that was several weeks old.
During the June conference, PSC staff said future conferences would generally be scheduled for the first week of each month after the district files its latest board packet.
The Sept. 8 conference will focus on information contained in the district’s August board packet along with the financial, infrastructure and management issues specifically identified by PSC staff.
The PSC has not provided a public or media link to join Tuesday’s conference.