Request By:
Mr. Ralph Ed Graves
Commissioner
Department for Local Government
Capitol Annex
Frankfort, Kentucky 40601
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
The Coal Severance Economic Aid Fund is created, by KRS 42.330, in the state treasury and is administered by the Department for Finance and Administration. The money in the fund can only be used for capital projects, in "coal producing counties", as described in the statute. Under subsection (11) of KRS 42.330, upon the award of any contract to provide capital improvement, a grant in aid of the projected total cost shall be established to the "credit of the appropriate political subdivision, agency, or special district or combination thereof, including entities created by the parties to interlocal agreements" . . . (Emphasis added).
The Rough River Water System is requesting $13,000 to extend water lines for a distance of three miles to supply water for a community in Ohio County. Your question is whether that corporation qualifies as a beneficiary agency to operate the capital project. The answer is "no".
The Articles of Incorporation filed in the Secretary of State's Office indicate that Rough River Water System, Inc., is a nonstock, nonprofit corporation organized under KRS Chapter 273 for the purpose of establishing and operating a complete water supply and distribution system, as well as a sanitary and storm sewer collection system. The purpose includes selling water to members of the corporation, public bodies, and local businesses. It was not organized by any political subdivision. It is not an agent of any political subdivision.
From the literal language of KRS 42.330(11), it is our opinion that the Rough River Water Corporation does not qualify as a beneficiary agency, since it does not fall within any of the listed categories, i.e., a political subdivision, agency of a political subdivision, or special district.
You ask whether approval of the Rough River Water System of its formation by the Public Service Commission, either at this time or prior to incorporation, would make or could have made a difference.
While KRS 74.012 provides for a "water association", as well as a water district, to seek the approval of the Public Service Commission, such inclusion of a "water association" in KRS Chapter 74 (water districts) in no way converts a private corporation into a governmental subdivision or governmental agency. There is nothing in the statute that suggests such conversion. To buttress this view, we find that KRS 278.012 expressly provides that any water association formed for the purpose of furnishing water services to the general public pursuant to KRS Chapter 273 is deemed to be a public utility and shall be subject to the jurisdiction of the Public Service Commission in the same manner and to the same extent as any other utility as defined in KRS 278.010. Thus KRS 74.012 and 278.012 when read together simply reflect the legislative intent to bring private corporations furnishing water to the general public (water associations) within the regulatory power of the Public Service Commission. Nothing else can be read into it. Water districts are under the same regulatory control. KRS 278.015. Thus the Public Service Commission has exclusive jurisdiction over the regulation of rates and services of such utilities (water districts and water associations). KRS 278.040. It may be noted that KRS 74.012 carefully distinguishes between a water district and a "water association" by way of the two named categories.
The answer to your second question is simply that Public Service Commission regulation as applied to a private water utility does not convert the utility into a governmental agency, as envisioned by KRS 42.330(11). Incidentally, a reading of the articles of incorporation suggests that Rough River was not established to furnish water to the general public. That would explain why it did not apply for P.S.C. approval. Since a third question hinges on a "yes" answer to question no.2, such answer is not necessary since we have answered no. 2 as being a "no".
KRS 42.330, in spelling out beneficiary agencies under that program, only included political subdivisions or agencies of political subdivisions. This would include cities, counties, special tax districts (except school districts) or agencies thereof. Rough River does not fit any of these.