GWA's proposed rate increase might get delayed

$122M PROJECT: The Guam Waterworks Authority has awarded Black Construction a $122 million contract for major upgrades to the Northern Wastewater Treatment Plant, shown in this undated file photo. Post file photo

The Guam Waterworks Authority is experiencing difficulty obtaining a rate decision from the Public Utilities Commission within this fiscal year, which may hinder the utility's ability to borrow more money from the bond market and meet deadlines on certain court-ordered projects. 

GWA is proposing a series of rate increases, first with a 10% increase next budget year. Between fiscal years 2020 and 2024, GWA is looking at $260 million in new bond borrowing, Post files show. 

GWA filed its rate petition with the PUC on July 6. The utility anticipated 60 to 90 days for the PUC to act on the petition, based on past petitions. The intent was to complete the process before the beginning of next fiscal year, according to GWA General Manager Miguel Bordallo.  

Higher rates are to support GWA's debt repayments. A portion of bond money GWA is borrowing would complete court-ordered projects by the end of 2020 and cover shortfalls to upgrade the Northern District Wastewater Treatment Plant, Bordallo said. The Department of Defense has committed to paying about $118 million, including funding from the Japan government, for upgrades to the wastewater treatment plant ahead of the upcoming military buildup, according to DOD's Office of Economic Adjustment. The treatment plant has been estimated to need $139 million, OEA stated.

The Department of Defense recently awarded a $122 million contract to Black Construction for the project.

GWA would need to be on the bond market by the end of September or early October for ratings, and for marketing and sale a month later, Bordalllo added. 

But the PUC schedule moved the formal approval process to February. The timeline for February is assuming the proposed rate increase is uncontested.

GWA floated the idea of reducing the borrowing to cover court-ordered projects and some work on the wastewater plant upgrade, but in order to cover debt service requirements, the rate would have to jump 17% for the one year.

The CCU will meet again on the issue Friday.

"It would be prohibitively high," Bordallo said. "Our worry is the ALJ will say, 'We'll this is an entirely new rate request' ... and we would not have met the 90-day public notice period. We're kind of in a quandary as to whether or not we could even do it. We're not sure of the value of asking that question at this point."

If GWA is unable to complete the court-ordered projects on time, the utility will be in contempt and face potential fines.

So far, the U.S. Environmental Protection Agency has not assessed fines on the utility as it takes away money that could be used for projects, said Consolidated Commission on Utilities Chairman Joey Duenas during a special meeting last Friday. If GWA was in contempt, it would be USEPA's call, he added.

Bordallo said he has made it clear to the PUC that request to expedite their decision was specifically for court-ordered projects and eliminating as much uncertainty as possible to get the best interest rates on the bonds.

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