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Financing Scenarios Show Different Short-Term Costs for Shaker Heights Customers; DWSRF Option Seen as Unlikely
Summary
PURA staff and company witnesses compared traditional financing versus a Drinking Water State Revolving Fund scenario for the Shaker Heights acquisition: the traditional model shows higher first-year revenue requirement after $700,000 in improvements, while a DWSRF scenario lowers near-term cost but is unlikely because of timing and program priorities; the company confirmed a $400/ft estimate for pipe replacement and corrected a service‑line count error.
PURA staff questioned Connecticut Water Company witnesses about two financing scenarios and the capital plan for the proposed acquisition of Shaker Heights Water Company, focusing on short‑term cost impacts for customers and the likelihood of low‑cost state financing.
Under the company’s traditional financing model, Dixon testified the full cost of service at acquisition in the model’s year‑0 column is $15,210, rising — after a planned $700,000 of improvements — to roughly $103,028 in year 1 before declining over time as improvements depreciate.
Staff also asked the company to compute a surcharge under that scenario; Dixon confirmed an annualized deficit (surcharge) of approximately $393. He said the model used a 20‑year horizon and that cumulative deficits flip sign after about 24 years under the assumptions used.
The company also modeled a Drinking Water State Revolving Fund (DWSRF) scenario by applying a 2% financing rate (instead of an assumed ~8.61% return) to capital costs. Under that scenario Dixon said the cost of service at acquisition would be about $9,184 and would peak at $51,956 in year 1, with customer revenues exceeding cost of service beginning in year 6. However, Dixon told commissioners the DWSRF path is “very unlikely” because projects must be listed on the state’s annual intended use plan (with submissions usually due in March) and small pipe and meter projects may receive lower priority than lead or PFAS remediation projects.
On the capital plan, PURA staff (Ms. Jewel) and company witnesses confirmed the estimate of $400 per foot for pipe replacement used for planning, and staff and company clarified a prior counting discrepancy: an interrogatory response had listed 11 full‑service renewals, while the late‑filed exhibit shows 17. Staff asked whether the $700,000 capital estimate was a top estimate; company staff said it was a worst‑case/top estimate and that major upward changes were not expected. Combining purchase price, legal fees and the capital top estimate yields roughly $793,013 in total project cost.
No financing decision was made at the hearing. PURA tentatively scheduled a decision in the docket for Oct. 7; parties will await the written order to learn whether or how the authority’s eventual decision affects financing assumptions or the timing of work.
