Senate committee reviews CUC–CEDA preferred‑stock dividends, requests records on payments

At an informational hearing Feb. 20, the Senate Public Utilities, Transportation and Communications Committee heard officials from the Commonwealth Utilities Corporation (CUC) and the Commonwealth Economic Development Authority (CEDA) review a 2009 preferred‑stock arrangement under which CUC pays dividends to CEDA and senators asked for documents reconciling differing payment totals.

Committee members said the discussion matters because the dividend payments affect both CUC’s cost recovery and CEDA’s ability to fund infrastructure projects. Senators and agency officials described past legislative proposals to return dividends to CUC so the utility could use the funds for new engines or other capital work.

CUC and CEDA officials traced the arrangement to infrastructure loans made around 1988. CUC officials said the loans for electric and later sewer and wastewater projects originally totaled more than $70 million. Those loans were later converted into preferred stock issued in 2009. CUC Chief Financial Officer Betty Terlahi said the preferred stock held 45 million shares with a 2 percent annual payout and that, under the current agreement, CUC pays about $270,000 in quarterly dividend installments, or about $1.08 million annually.

Terlahi told the committee that CUC has paid roughly $9.19 million to CEDA to date and that the dividend receipts are held by CEDA in a special account meant for infrastructure. A CEDA letter referenced during the hearing states a different figure: year‑to‑date dividend payments of $13.5 million. Senate fiscal analyst David Dimapan flagged the discrepancy and asked the agencies to reconcile their records.

Senators also discussed prior legislative efforts. Committee members and CEDA chair Frank Rebalman said a bill in the previous legislature — cited as House Bill 23‑52 during the hearing — sought to address the obligation but did not become law. Rebalman said attempts to “do away with the obligation” would be problematic for CEDA because the arrangement was intended to fund infrastructure.

Senator Francisco Cruz asked whether past proposals had been intended to return dividend receipts to CUC to lower customer rates or directly to fund capital projects such as generator engines. Officials said one amendment considered transferring the preferred stock back to CUC, and at one point roughly $7.75 million in accumulated dividends had been diverted by separate action to cover a 25 percent retiree pension payment; those funds remain with CEDA until repaid, officials said.

CUC staff briefed senators that dividends are part of CUC’s cost of doing business and are recovered through rates. Several senators suggested that if dividends were returned to CUC, statutory safeguards or restrictions should require that the money be used solely for infrastructure. Members asked CEDA and CUC to provide the committee a full packet of records, including the 02/2009 preferred‑stock agreement and reconciled payment histories, before any legislative action.

The hearing was informational; no formal votes were taken. Committee staff said they would compile the materials into a staff report for the full Senate and follow up if legislation is proposed.

The committee asked CEDA and CUC to deliver the 2009 preferred‑stock agreement, the CEDA reconciliation letter referenced during the hearing, and line‑item records of dividend receipts and dispositions so senators can review the differing totals and the record of any transfers of dividend funds.