Executives of the Milford Water Company will seek permission from the state Department of Public Utilities Tuesday to borrow up to $20 million to build the new water treatment plant.

And to pay for this loan, by the fall, the utilty company plans to seek a significant rate increase — as much as 50 percent, according to a company response shared with Milford selectmen by Town Counsel Gerald Moody.

"No clear rate adjustment has been calculated at this time, but based on the projected costs of the new plant and the associated financing, the expected increase could be around 50 percent," the company response stated.

The response came following an information request filed by Moody, in which he asked, as part of the company's request to borrow the $20 million: "What will the impact be to customers, assuming the associated annual debt service costs are allowed to be passed on through across-the-board rate increases..."

The company did not provide dollar amounts associated with the increase.

In a letter to Milford selectmen, Moody said he intervened in the company's request for the $20 million loan, not to object, but to monitor the proceedings "with thought to the coming and inevitable petition for a further rate increase."

"That they will seek a significant increase is not a surprise," he wrote. " ... Water quality and capacity will be significantly improved for years to come. That is obviously a good thing. The other side of the coin, however, is that the significant additional costs will be passed on to the rate payers."

Construction of the new water treatment plant began this year and has progressed through the spring. The new plant is taking shape on the Dilla Street property of the Water Company, near the Milford Upper Charles trail.

The new plant, approved by state and local environmental authorities, will pump up to five million gallons a day, the same capacity as the existing water treatment plant, which dates to the 1970s, according to David Condrey, general manager. It will include state-of-the-art technology for purifying drinking water, and is anticipated to be operational in 2013.

In February, the water company awarded a contract for construction of the new water treatment plant to the lowest bidder, R.H. White Construction. At that time, the private utility company also disclosed the construction would require a rate increase for customers, but did not specify the amount.

The winning bid was more than $1 million less than the next lowest bid, Condrey said, in February. The exact amount of the contract was not disclosed by the company. The bid range, Condrey said, was a low of $16.8 million to a high of $17.9 million.

The hearing on the request for the $20 million loan will begin at 10 a.m. in Boston, at the headquarters of the DPU.