Lifetime Citizen Portal Access — AI Briefings, Alerts & Unlimited Follows
Staff orders pro forma swap analysis and loan documents after hearing on company's embedded debt
Loading...
Summary
PURA staff requested pro forma calculations showing how the company's interest-rate swap affects the embedded cost of a 2.5M construction loan and asked for finalized loan documents, updated amortization schedules and bank amortization tables so staff can compute accurate pro forma interest for 04/01/2026'027.
PURA staff told the hearing they could not reconcile the company's testimony that its embedded cost of long-term debt is 3.96 percent with the line-item interest rates in Schedule D-1, and requested documentary support.
Jonathan Norton of PURA staff asked the company to provide a pro forma calculation that includes the interest-rate swap's cash flows beginning at the commencement of the loan and to explain the calculation. "What I'm asking for is calculation of the interest expense at the 3.76% and then an adjustment down from that interest rate expense by the interest received ... that you can then utilize to calculate the cost of debt on this loan," Norton said.
Company witnesses confirmed the construction loan carries a 3.76% fixed leg and that the company receives swap payments reflecting the spread against the floating rate; internally, the company uses the 3.76% figure and nets swap receipts as interest income. To document the net effect and to allow an apples-to-apples pro forma computation, PURA recorded the late-file request LFE 24 and asked for the loan documents (LFE 25) and an updated schedule (LFE 26) showing average carrying balances and expected interest owed or received for each long-term financing.
Staff later expanded the evidentiary requests to include the bank amortization tables for each loan so pro forma interest for the 04/01/2026 to 03/31/2027 pro forma year could be computed more precisely (Late-file 38). The company agreed to supply the requested supporting exhibits and to work with staff on the read-in supplements. The requested documents (loan terms, amortization schedules and swap details) will be entered into the record to enable staff and intervenors to model the pro forma impact of the swap and debt paydowns on rates.
Why it matters: Whether swap receipts are treated as a recurring reduction to interest expense or as periodic balance-sheet items changes the numerator for the company's cost-of-debt calculation and can materially alter the revenue requirement. PURA's late-file orders are designed to replace testimony-level assertions with verifiable, auditable numbers before the commission rules on capital structure and allowed return.
