How Do I Fix KM Read File Error Due to Encoding Error?

Here is a better AppleScript to write text to file:
Tested running Keyboard Maestro 9.2 on macOS 10.14.6 (Mojave).

AppleScript to Write Text to File

property ptyScriptName : "Create & Write String to File UTF8 ASObjC"
property ptyScriptVer : "1.1"
property ptyScriptDate : "2021-02-21"
property ptyScriptAuthor : "JMichaelTX"

use AppleScript version "2.5"
use framework "Foundation"
use scripting additions

try
  
  ### --- Set Your File HFS Path Here ---
  set fileHFS to "Macintosh HD:Users:home:Desktop:Lists:NameofList.txt"
  
  set filePath to POSIX path of fileHFS
  set fileContents to "
This file was created by AppleScript, using ASObjC.
"
  
  set results to my writeFile(filePath, fileContents)
  return filePath
  
on error errMsg number errNum
  
  if errNum = -128 then ## User Canceled
    set errMsg to "[USER_CANCELED]"
  end if
  
  set scriptResults to "[ERROR] [MACRO CANCELLED] " & errMsg
  
  set currentApp to path to frontmost application as text
  
  tell application currentApp
    display notification errMsg ¬
      with title ("SCRIPT:  " & ptyScriptName & " " & ptyScriptVer) ¬
      subtitle "[ERROR] MACRO CANCELLED " sound name "glass"
  end tell
  
  --»  THROW ERROR ~~~~~~~
  error scriptResults
  
end try

--~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
on writeFile(pPosixPath, pStringToWrite)
  (*  VER: 1.1    2020-01-07
---------------------------------------------------------------------------------
  PURPOSE:      Write String to File.  Will be created if necessary.
  PARAMETERS:
    • pPosixPath          ┃ text  ┃ Posix Path of File to write to
    • pStringToWrite    ┃ text  ┃ String to be written
  RETURNS:                 ┃boolean┃ true if successful; else error is thrown
  AUTHOR:  JMichaelTX
  REF:
    1. 
—————————————————————————————————————————————————————————————————————————————————
*)
  local successfulBool
  
  set nsStringToWrite to current application's NSString's stringWithString:pStringToWrite
  set nsPosixPath to (current application's NSString's stringWithString:pPosixPath)'s stringByExpandingTildeInPath
  
  set successfulBool to nsStringToWrite's writeToFile:nsPosixPath atomically:true encoding:(current application's NSUTF8StringEncoding) |error|:(missing value)
  
  if (successfulBool is false) then
    error "Unable to write to file: " & pPosixPath
  end if
  
  return successfulBool
  
end writeFile
--~~~~~~~~~~~~~~~ END OF handler writeFile ~~~~~~~~~~~~~~~~~~~~~~~~~