Financing infrastructure improvements

So how do we fund our water infrastructure needs here in the Kanawha Valley?

Aging infrastructure and lack of infrastructure re-investment is a national problem. But it’s especially acute here where we have a declining customer base to pay for it.

WV American Water’s proposal is that new rates should reflect a 10.75% profit rate on infrastructure investment by the company. But we know that the company has been chronically unable to keep pace with infrastructure replacement needs. At the current rate of investment, it would take nearly 400 years to replace all of the company’s water mains. And we know that WV American Water’s parent company has had little incentive to make more investments here because it’s more profitable for them to invest elsewhere.

In the past, public money has gone to finance the water company’s infrastructure expansion. When WV American Water took over Boone County’s public service districts, for example, the Boone County Commission got public money to pay for extensions to WV American Water’s system; those bonds were then paid off through surcharges on water bills. Interest rates on government bonds are signficantly cheaper than capital raised by WV American Water. (A recent state budget shows outstanding bonds from the WV Infrastructure and Jobs Development Council with interest rates of 2-5%, far lower than the 10.75% return proposed by WV American Water). If public money can finance infrastructure expansion, why not infrastructure replacement?

Other parts of the country are able to think more creatively about financing their infrastructure needs. Washington D.C. is undergrounding its electrical distribution system, owned by the private electric utility Pepco. This billion-dollar investment is 50% financed by Pepco (who earns a profit on its investment), with the rest coming from D.C. funds and bonds floated by the D.C. government. The project is being managed in a partnership between Pepco and the D.C. Department of Transportation. Utility customers pay less for the project than if it were entirely privately financed, and the city has more control over managing the investment.

Clearly our traditional approach has failed to produce the infrastructure investment we need. What next?

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