PSC (Public Service Commission)

Safe Drinking Water Loan Program

The Department of Natural Resources is concerned about the on-going ability of local governmental units in the state to properly operate and maintain their water systems in order to ensure the delivery of quality water to State residents. In order to deliver quality water, a municipality must generate sufficient revenues to cover its operation and maintenance costs, debt costs, and debt coverage requirement on water revenue bonds.

The Public Service Commission of Wisconsin (PSC) (exit DNR) regulates public utility rates and associated services. If a local governmental unit's water operation is defined as a public utility under ch. 196, Wis. Stats., it is regulated by the PSC. The PSC must approve any proposed changes in water rates before they are implemented. The PSC has up to 6 months from receipt of a rate change request to issue the new rate order.

PSC regulated Safe Drinking Water Loan Program (SDWLP) applicants must provide the SDWLP with documentation showing user rate approval from the PSC. An SDWLP financial assistance agreement cannot be executed prior to the issuance of a PSC rate order. Therefore, a municipality planning to apply for SDWLP financial assistance should develop its proposed water rate changes while its Engineering Report is being developed. An applicant should submit the proposed changes as a rate increase request to the PSC no later than the October 1 following SDWLP application submittal, allowing sufficient time for PSC staff to analyze the request and issue a decision. A copy of the PSC approved rate order must be submitted to an applicant's DNR Project Manager at least one month prior to execution of the financial assistance agreement.

If there is not sufficient time to receive the PSC's approval of a rate increase before financing is needed the applicant may have to finance the project by issuing a General Obligation debt. A general obligation debt secures the SDWLP loan with a pledge of property tax revenues instead of revenue from water user charges. Note that this solution assumes that the existing water user charge is sufficient to support the water system's operating expenses and any previously issued water revenue debt.