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Back Local News Water rates may increase due to GWA bond borrowing

Water rates may increase due to GWA bond borrowing

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THE Guam Waterworks Authority's planned bond borrowing of up to $495 million could yield rate increases of as high as 32 to 44 percent for residential customers and 82 percent for commercial and government ratepayers phased in within a period of five years.

The Legislature’s appropriations committee yesterday conducted a public hearing on Bill 181, a measure introduced by Sen. Tom Ada seeking to approve the terms and conditions for the issuance of GWA revenue bonds and the possible refinancing of the water agency’s existing revenue bonds.

Consolidated Commission on Utilities chairman Simon Sanchez said should the Legislature and the governor provide concurrent approval for Bill 181, the CCU would authorize the waterworks authority to borrow funds for capital improvement projects such as the upgrading of the agency’s wastewater treatment plants. These are required by the 2011 amended court order and the recent U.S. Environmental Protection Agency significant findings for water and wastewater.

Just like in the past, GWA will be funding the latest borrowing through a third five-year rate plan, phasing the rate increases from 2013 to 2015, according to Sanchez.

In December 2002, USEPA sued the government of Guam and GWA for failure to comply with federal Clean Water and Safe Drinking laws.

As a result of a federal court order, from 2003 to 2010, the waterworks authority was allowed to borrow $220 million to begin modernizing, repairing and replacing GWA infrastructure in order to improve service to ratepayers and bring GWA into full compliance with federal laws.

Amended

The court order was amended in 2011, requiring GWA to implement CIP projects estimated to cost $330 million. The projects must be completed between 2013 and 2021, Sanchez said.

On top of the federal court order-required project costs, USEPA's significant finding reports for water and wastewater requires funding of at least $130 million.

These proposed additional projects include rehabilitation of the wastewater collection system, SCADA implementation, waterline replacement, and water system planning, among others.

"USEPA has said that if we are unable to fund these projects, agree on timelines, and actually execute these projects, they would approach the district court to include these projects in the court order," Sanchez said.

"When you take the projects required out of the court order and the projects required from the significant findings of the USEPA, you put them together and you have the financing cost for all of these projects, which is $495 million," he added.

Sanchez said to complete these projects, GWA has to borrow the funds in three separate financings, over the next five years, starting in 2013.

So far, GWA has had two bond issuances since 2004 and borrowed around $220 million using the two five-year rate plans to pay for the two initial bonds.

From 2004 to 2013, rates have increased in the aggregate by more than 75 to 80 percent, spread out over 11 years under two five-year rate plans.

GWA utilized funds from the $220 million borrowing to fund their meter replacement program, upgrades to the Ugum Water Treatment Plant, and construction of the water reservoirs in Barrigada and Mangilao.

The funding also enabled the waterworks authority to bring the northern wastewater plant into compliance this year.

Rider

Sanchez said the other reason the CCU and GWA support Bill 181 is it removes a rider that was put on the 2010 borrowing legislation, in which ratepayers were required to repay to the general fund $20 million for a water and wastewater infrastructure loan which was made in 1988, before GWA existed.

"That loan was actually paid off in 2010. Nevertheless, this requirement still sits on the books and it has led to a disagreement with (the Public Utilities Commission) and GWA which ended in court," Sanchez said.

According to the bill, the rider was interpreted by the Public Utilities Commission in 2012 to require an 18 percent increase that ratepayers would have to pay over an 18-month period.

"We would like to talk about that disagreement because it has a significant impact on ratepayers and would result in even higher rate increases that are already being contemplated to fund the $495 million," Sanchez said.

Sanchez said they hope to obtain approval from the Legislature and governor by the end of October in order to sell bonds in November and close the sale in December, to comply with court-ordered timelines.

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