The town counsel for Milford has challenged the size of a construction loan sought by the Milford Water Company, a debt that, if approved, could lead to a 50 percent rate increase for customers.
The Milford Water Company, a privately owned utility, is seeking permission from the state Department of Public Utilities to borrow up to $20 million to cover construction of a new water treatment plant.
The plant is currently under construction, behind the Water Company offices on Dilla Street.
The Department of Public Utilities does not issue loans; but its approval is required before a utility company can secure private financing.
The Water Company requested the loan approval, and presented its case in a public hearing May 8.
The Department has not yet acted on the loan request, a spokeswoman said Wednesday.
The town, represented by town counsel Gerald Moody, is challenging the scale of the loan sought by the company. In a May 21 memo, Moody described the request as "excessive" and said the town is concerned that the authorization of up to $20 million will eliminate any incentive for the company to economize.
Wrote Moody: "It is almost an inevitability that if authorization is given to the number of $20,000,000, something close to that number will be utilized and the incentive to economize might flow from a number more reasonably reflecting what is contained in the record may not be there. This is of particular concern when the Company, and the contractor R.H. White Construction Co. are for all practical, legal ad moral purposes under the same controlling ownership."
The town has proposed that the company not be allowed to borrow any more than $18 million.
The town has status in the loan request before the Department of Public Utilities as an "intervenor."
The rate increase, which has not yet been requested, would be on top of a rate increase approved late in 2011. The company sought a 49 percent rate increase then,
The new treatment plant is It will not expand the capacity of the existing water company treatment plant, but it will bring the plant up to date with purifying techniques for drinking water. The contract was awarded to R.H. White Construction Co.
The company is majority-owned and controlled by the family of David White, president of the Milford Water Company, according to statements made at the Department of Public Utilities hearing on the loan request.
The relationship between the owner and the general contractor should result in fewer disputes, which should reduce the need for construction contingencies, Moody wrote, in the memo.
The town argued that the company had over-estimated its need for contingency in the construction project, as well as the amount of engineering fees.