Beech Grove Water rate adjustment case 2026-00059

COMMONWEALTH OF KENTUCKY BEFORE THE PUBLIC SERVICE COMMISSION In the Matter of:

O R D E R On March 3, 2026, Beech Grove Water System, Inc. (Beech Grove Water) tendered an application requesting approval to adjust its rates pursuant to the purchased water adjustment procedure set forth in KRS 278.012 and 807 KAR 5:068. On March 4, 1 2026, the Commission notified Beech Grove Water that its application was rejected for certain filing deficiencies. On March 11, 2026, Beech Grove Water submitted further 2 documentation to correct the filing deficiencies, and the application was deemed filed as of March 11, 2026. 3 LEGAL STANDARD In accordance with KRS 278.012, when a wholesale supplier selling water to a water association decreases its rates, the water association has the authority to decrease its rate commensurate with the wholesale supplier. The water association must file, within the statutory and regulatory deadlines, a copy of the notice from the wholesale supplier showing the decrease in the wholesale rate, and a statement of the volume of purchased

Application (tendered Mar. 3, 2026). 1 Deficiency Letter (issued Mar. 4, 2026). 2 Deficiency Cured Letter (issued Mar. 12, 2026). 3

ELECTRONIC PURCHASED WATER ) CASE NO. ADJUSTMENT FILING OF BEECH GROVE ) 2026-00059 WATER SYSTEM, INC. )

water used to calculate the rate adjustment. The Commission shall approve the filing by order after the above documents are filed. DISCUSSION AND FINDINGS Beech Grove Water purchases water from Henderson Water Utility (Henderson Utility) and Daviess County Water District (Daviess District). Henderson Utility notified Beech Grove Water that its wholesale rate would decrease by $0.3273 per 1,000 gallons from $3.0040 per 1,000 gallons to $2.6767 per 1,000 gallons, effective April 1, 2026. 4 Beech Grove Water proposes to decrease the water rates to its customers effective April 1, 2026, to reflect the decreased cost of purchased water from Henderson Utility. Daviess District did not propose any rate changes. Unaccounted-for Water Loss Commission regulation 807 KAR 5:066, Section 6(3), states that for ratemaking purposes a utility's unaccounted-for water loss shall not exceed 15 percent of the total water produced and purchased, excluding water consumed by a utility in its own operations. In its 2024 Annual Report, filed with the Commission, Beech Grove Water reported a water loss of 16.2965 percent. In its 2023 Annual Report filed with the 5 Commission, Beech Grove Water reported a water loss of 11.8603 percent. In its 2022 6 Annual Report filed with the Commission, Beech Grove Water reported a water loss of

TFS2026-00074 (Ky. PSC Feb. 27, 2026); Henderson Utility submitted the tariff on February 27, 42026, and the tariff was accepted for filing by the Commission by letter dated March 31, 2026, with an effective date of April 1, 2026. Annual Report of Beech Grove Water to the Public Service Commission for the Year Ended 5December 31, 2024 at 58. Annual Report of Beech Grove Water to the Public Service Commission for the Year Ended 6December 31, 2023 at 57.

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17.2894 percent. Beech Grove Water's three-year water loss average is 7 15.1487 percent. The approximate cost of Beech Grove Water's total water loss using 8 a three-year average is $34,669.45. 9

In Beech Grove Water's most recent rate case, the Commission approved a

monthly water loss reduction surcharge of $6.30 per customer for 48 months, or until $177,304 has been assessed, whichever occurs first, to help lower system losses to more acceptable levels. On September 30, 2022, Case No. 2022-00318 was established in 10 order for the Commission to monitor the progress of the water loss reduction surcharge plan established by Beech Grove Water. Beech Grove Water currently files a monthly 11 report in Case No. 2022-00318 to update the Commission regarding its water loss. Financial Condition and Rates Based on a review of Commission records, Beech Grove Water last sought an alternative rate adjustment in 2022. Beech Grove Water's rate increase in Case No. 12 2022-00054 was based on a 2020 test year, which became final on September 27, 2022, and resulted in an increase in revenue of $24,853, or 5.68 percent. A water loss 13

Annual Report of Beech Grove Water to the Public Service Commission for the Year Ended 7December 31, 2022 at 57. 17.2894%(2022) + 11.8603% (2023) + 16.2965% (2024) =45.4462 / 3 years = 15.1487%. 8 Total water cost at new wholesale rate of $237,798.87 times 15.1487% water loss equals 9$34,669.45. Case No. 2022-00054, Electronic Application of Beech Grove Water System, Inc. For a Rate 10Adjustment Pursuant to 807 KAR 5:076 (Ky. PSC Sept. 27, 2022), final Order at 20. Case No. 2022-00318, Electronic Beech Grove Water System, Inc. Unaccounted-For Water Loss 11Reduction Plan, Surcharge and Monitoring (Ky. PSC Sept. 30, 2022), opening Order. Case No. 2022-00054, Sept. 27, 2022 final Order. 12 Case No. 2022-00054, Sept. 27, 2022 final Order. 13

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surcharge of $6.30 per customer per month to be collected over 48 months was also approved. The surcharge is reported as contributed capital in the balance sheet and is 14 not a component of operating income presented below. Beech Grove Water's financial snapshot for 2020 through 2024 is presented below. Rate based net income (adjusted net income minus debt service) was negative in all years and financial performance subsequent to 2020 (the test year of the prior alternative rate filing) more than offset the revenue increase. Cash basis income (rate- based income plus depreciation) was positive from 2021 through 2022 and negative in 2020 and 2023 through 2024.

Case No. 2022-00054, Nov. 10, 2022 Nunc Order. 14

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Description / Year 2020 2021 2022 2023 2024 Adjusted Net Income Net Income / (Loss) (56,677)$ (7,496)$ (18,145)$ (39,429)$ (63,453)$ Subtract: Principal Payments ( ) (9,431) (9,717) (10,013) (10,013) (10,631) The Commission notes that the negative rate based net income and cash basis

Rate Based Income (66,108)$ (17,213)$ (28,158)$ (49,442)$ (74,084)$

Add: Depreciation Expense 37,739 30,371 30,446 30,548 32,681 income identified above should be addressed by Beech Grove Water's prospective filing, Cash Basis Income (28,369)$ 13,158$ 2,288$ (18,894)$ (41,403)$ Cash Basis Income as Percent of Depreciation -75% 43% 8% -62% -127% pursuant to Case No. 2025-00139, of an application for a rate adjustment to ensure

sufficient revenue or a motion setting forth the reasons why a rate case is not necessary. Capital Spending 2,095$ 4,293$ 12,678$ 35,295$ 33,042$ 15

Cash and Investments Purchased Water Adjustment Factor Unrestricted Cash and Investments 208,285$ 229,211$ 224,881$ 221,926$ 213,175$ Restricted Funds 0 0 0 0 0 Adjusted Cash Balances 208,285$ 229,211$ 224,881$ 221,926$ 213,175$ In its application, Beech Grove Water proposed a purchased water adjustment Net Increase (Decrease) in Cash (22,675)$ 20,926$ (4,330)$ (2,955)$ (8,751)$ factor of $(0.37) per 1,000 gallons. During the 12 months ended January 31, 2026, Beech Customer Count 586 598 590 581 581 Gallons Purchased 79,819 78,344 72,374 67,140 75,096 Gallons Sold 55,806 60,929 59,181 58,855 58,329 Gallons Used for Internal Use 560 72 680 322 4,529 Water Loss Gallons 23,453 17,343 12,513 7,963 12,238 Case No. 2025-00139, Electronic Purchased Water Adjustment Filing of Beech Grove Water 15System Use Percentage 0.70% 0.09% 0.94% 0.48% 6.03% System, Inc. (Ky. PSC June 3, 2025), final Order at 6, ordering paragraph 5. Water Loss Percentage 29.3827% 22.1370% 17.2894% 11.8603% 16.2965% Gallons Sold Per Customer Per Month 7,936 8,491 8,359 8,442 8,366

-5- Case No. 2026-00059 Revenues from the Sale of Water 344,018$ 392,360$ 455,435$ 431,042$ 447,552$ Purchased Water Expense 215,049 210,185 250,758 256,927 254,119Purchased Water Expense Over 15% Water Loss 30,930 15,001 5,741 0 3,295Water Loss Expense Over 15% as Percentage of 8.99% 3.82% 1.26% 0.00% 0.74%Water RevenueSelected Statistical Information (PSC Annual Reports) Fire Customers Not included, Loss of 48 customers

Grove Water purchased 65,529,000 gallons of water from Henderson Utility and 12,820,000 gallons of water from Daviess District and sold 57,736,871 gallons of water to its customers. The decrease in the cost of purchased water from Henderson Utility is $21,447.65, resulting in a purchased water adjustment factor of $(0.37) per 1,000 gallons. No rate changes occurred from Daviess District. The Commission finds the purchased water adjustment factor of $(0.37) per 1,000 gallons, as calculated in Appendix A, and the rates as set forth in Appendix B to this Order are fair, just and reasonable and should be approved for water service rendered by Beech Grove Water on and after April 1, 2026, because the rates are supported by evidence of the decrease in rates from Beech Grove Water's wholesale water supplier and the volume of purchased water used to calculate the rates in accordance with KRS 278.012. IT IS THEREFORE ORDERED that:

1. The purchased water adjustment factor of $($0.37) per 1,000 gallons is
   approved.

2. The rates proposed by Beech Grove Water are approved.

3. The rates as set forth in Appendix B to this Order are approved for water
   service rendered by Beech Grove Water on and after April 1, 2026.

4. Within 20 days of the date of service of this Order, Beech Grove Water shall
   file with the Commission, using the Commission's electronic Tariff Filing System, revised

tariff sheets reflecting the rates approved herein.

1. This case is closed and removed from the Commission's docket. -6- Case No. 2026-00059

Entered on this 8th day of April, 2026. PUBLIC SERVICE COMMISSION ___________________________ Angie Hatton Chairman ___________________________ Mary Pat Regan Commissioner ___________________________ Andrew W. Wood Commissioner

ATTEST:

______________________ Linda C. Bridwell, PE Executive Director

Case No. 2026-00059

APPENDIX A APPENDIX TO AN ORDER OF THE KENTUCKY PUBLIC SERVICE COMMISSION IN CASE NO. 2026-00059 DATED APR 08 2026

Page 1 of 1 Change Henderson Utility Purchases in Gallons Rate per 1,000 Gallons $3.0040/1,000 $2.6767/1,000 Subtotal ($21,447.65) Daviess District Purchases in Gallons Rate per 1,000 Gallons Sub-total Total ($21,447.65) Decreased water cost Decreased water cost Divided by Gallons sold/1,000 Purchased water adjustment factor per 1,000 Gallons per Gallon or ($0.00037) ($21,447.65) Base Rate $196,849.12 $175,401.47 $250,308.52 $228,860.87 New Rate $4.17/1,000 $4.17/1,000 65,529,000 65,529,000 12,820,000 12,820,000 $53,459.40 $53,459.40 57,736,871 $0.00 ($0.37)

APPENDIX B APPENDIX TO AN ORDER OF THE KENTUCKY PUBLIC SERVICE COMMISSION IN CASE NO. 2026-00059 DATED APR 08 2026 The following rates and charges are prescribed for the customers in the area served by Beech Grove Water System, Inc. All other rates and charges not specifically mentioned herein shall remain the same as those in effect under the authority of the Commission prior to the effective date of this Order.

Monthly Water Rates

Page 1 of 1 First Minimum Bill Next Per Gallon Over Per Gallon Bulk Loading Station Per 35 Gallons 100,000 Gallons 98,000 Gallons 2,000 Gallons $0.00596 $0.00500 $18.63 $0.25

Service List for 2026-00059

• Beech Grove Water System, Inc. 445 State Route 56 North Calhoun, KY 42327
• Sheila Murphy Beech Grove Water System, Inc. 445 State Route 56 North Calhoun, KY 42327
• Jason Pennell Kentucky Rural Water Association Post Office Box 1424 1151 Old Porter Pike Bowling Green, KY 42102-1424
• Denotes served by Email