Common use of Recovery of SRF and DWGTF Debt Issuance Costs Clause in Contracts

Recovery of SRF and DWGTF Debt Issuance Costs. Prior to the ratemaking modifications proposed in this Agreement, the debt issuance costs incurred by PAC to obtain loans through such programs as the State of New Hampshire’s Drinking Water State Revolving Loan Fund (DWSRF) or Drinking Water and Groundwater Trust Fund (DWGTF) were recovered as part of its cost of debt via the annual amortization of these costs over the life of the loan. However, under PAC’s proposed ratemaking structure, the amortization of debt acquisition expenses associated with DWSRF and DWGTF loans are no longer recoverable as they are not included in the OERR component of PAC’s overall revenue requirement. Although, on average, these costs might be considered de minimis during a given year, such might represent an expense to the Company for which it has no cash coverage. As a remedy to the cash coverage shortfall that PAC may experience relative to its debt acquisition costs incurred to procure DWSRF and DWGTF loans, the Settling Parties agree and recommend the Commission authorize PAC, commencing as of January 1, 2022 and thereafter, to record such costs in its Outside Services Expense account to be recovered through the OERR revenue component of its overall revenue requirement. It should be noted that per the proposed ratemaking modifications proposed in this Agreement, Outside Services Expense is classified as a Non-Material Operating Revenue Requirement (NOERR) account. As such, there would be no cash over-cover for these expenses through PAC’s proposed MOERR-RSF.

Recovery of SRF and DWGTF Debt Issuance Costs. Prior to its acquisition by the ratemaking modifications proposed in this AgreementCity, the debt issuance costs incurred by PAC PWW to obtain loans through such programs as the State of New Hampshire’s Drinking Water State Revolving Loan Fund (DWSRF) or Drinking Water and Groundwater Trust Fund (DWGTF) were recovered as part of its cost of debt via the annual amortization of these costs over the life of the loan. However, as explained in the direct pre-filed testimony of Xxxxx X. Xxxxxxx (Xxxxx 44-45) under PACPWW’s proposed present ratemaking structure, the amortization of debt acquisition expenses associated with DWSRF and DWGTF loans are no longer recoverable as they are not included in the OERR component of PACPWW’s overall revenue requirement. Although, on average, average these costs might be considered de minimis di minimis.16 However, during a given year, such might represent an expense to the Company for which it has no cash coverage. By contrast, PWW is able to recover the debt issuance costs associated with its taxable and tax-exempt bonds by virtue of the fact that these costs are included as part of the overall bond issuances that are recovered via the DSRR component of its overall revenue requirement. As a remedy to the cash coverage shortfall that PAC may experience PWW presently experiences relative to its debt acquisition costs incurred to procure for procuring DWSRF and DWGTF loans, the Settling Parties agree and recommend the Commission authorize PACPWW, commencing as of January 1, 2022 2021 and thereafter, to record such costs in its Outside Services Expense account to be recovered through the OERR revenue component of its overall revenue requirement. It should be noted that per the proposed ratemaking modifications proposed approved Settlement Agreement in this AgreementDW 16-806, Outside Services Expense is classified as a NonNon- 16 Based on the Company’s response to Staff 1-12 (Exhibit 10), the average issuance costs associated with these loans are approximately $7,200 . Additionally, the Company, on average, has procured one such loan each year during the ten years leading up to and including its 2018 test year. LDG Exibit 2 Material Operating Revenue Requirement (NOERR) account. As such, there would be no cash over-cover for these expenses through PACPWW’s proposed MOERR-RSF.