It's the Grid, Stupid!
Mass. Requires Innovative Financing for Water Plant
The Massachusetts Department of Public Utilities (DPU) has granted preliminary approval to a water utility's proposal to "project finance" the cost of a new treatment facility required to comply with federal and state laws. The utility, Massachusetts-American Water Co., had proposed forming a special purpose corporation solely to finance the plant. The new corporation would lease the facility to the utility, using the payments to repay tax-exempt bonds issued under the financing plan. While reluctant to issue advisory opinions in advance of formal review of utility construction projects, the DPU found advance assurances necessary to mitigate rate shock associated with a large construction project. According to the DPU, the new corporation would not fall under its regulatory jurisdiction as a utility. While refusing to make a "categorical" determination that project financing was prudent and acceptable for utilities, the DPU said that it favored innovative approaches to finance expensive facilities that otherwise exceed a utility's fiscal powers. Re Massachusetts-American Water Co., D.P.U. 95-41, May 3, 1995 (Mass.D.P.U.). t
Phillip S. Cross is an associate legal editor of PUBLIC UTILITIES FORTNIGHTLY.
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