OAG 77-410 | KOGC

Request By:

Mr. Tom Thurston
City Manager
City of Corbin
Corbin, Kentucky 40701

Opinion

Opinion By: Robert F. Stephens, Attorney General; By: Walter C. Herdman, Asst. Deputy Attorney General

This is in answer to your letter of July 1 in which you, on behalf of the Board of Commissioners of the city of Corbin, seek an opinion concerning the following questions relating to water rates:

"1. Can the City charge higher rates outside the City limits than they charge inside?

"2. Does the Board of Commissioners have the authority to set the rates outside the City or must the Public Service Commission set the rates? The board of Commissioners have the authority to set the rates inside the City limits and I would surmise that this authority extended to customers outside."

Our response to your initial question would be in the affirmative as held in OAG 71-341 [copy enclosed]. We particularly refer you to the case of McClelland v. Louisville Water Company, 351 S.W.2d 197 (1961), where the Court of Appeals upheld a substantial increase in the Louisville Water Company rates for nonresident consumers over that rate fixed for resident consumers.

In response to your second question, all municipally owned water systems are exclusively controlled by the city and this of course includes the fixing of reasonable rates. Again referring to the McClelland case, the Court held that the state Public Service Commission has no jurisdiction or control over the operation or management of a municipally owned water system, whether it be operated inside or outside the city limits. We also refer you to the more recent case of City of Georgetown v. Public Service Commission, Ky., 516 S.W.2d 842 (1974), and of course KRS 278.010 (3), a part of Chapter 278 governing the Public Service Commission, which declares that the term "utility" does not include a city which owns, controls and operates its own public utility.

Under the circumstances, the Board of Commissioners would have the authority to fix utility rates for those customers residing outside the city.

LLM Summary

In OAG 77-410, the Attorney General responds to inquiries from the City of Corbin regarding the authority to set different water rates for residents inside and outside the city limits, and whether the Board of Commissioners or the Public Service Commission should set these rates. The opinion affirms that the city can charge higher rates outside the city limits and that the Board of Commissioners has the authority to set these rates, not the Public Service Commission. The decision references OAG 71-341 to support the legality of differential water rate setting based on residency.

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