#6, 9/4/13 AM, ML 149030, TW-16
ORDER NO. 85821
IN THE MATTER OF THE REQUEST
OF TERRAPIN UTILITY SERVICES,
INC. FOR AUTHORITY TO ISSUE
DEBT IN THE AMOUNT OF $5,000,000.
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BEFORE THE
PUBLIC SERVICE COMMISSION
OF MARYLAND
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CASE NO. 9333
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Issue Date: September 4, 2013
On August 13, 2013, Terrapin Utility Services, Inc. (“Terrapin” or “Company”) filed
with the Public Service Commission (“Commission”) a Request for Authority to Issue LongTerm Debt (“Request”) in the form of a promissory note with its parent, American States Utility
Services, Inc. (“ASUS”), in the amount of to $5,000,000. The Company is seeking authority to
extend the terms of an existing Promissory Note with its parent company, ASUS, past the current
12-month payoff limit. In doing so, the Company must obtain authority from the Commission
under § 6-102(b) of the Public Utilities Article, Annotated Code of Maryland. Terrapin owns
and operates water and wastewater utilities systems for the United States Air Force (U.S.
Government”) at Andrew’s Air Force Base, including off-site installations in Brandywine and
Davidsonville, Maryland. In its Request, the Company indicated that it is seeking funding to: (1)
construct, complete, extend or improve its facilities; (2) discharge or lawfully refund its
obligations, and/or (3) maintain or improve services, as circumstances warrant. Included in the
Company’s Request was an affidavit of three members of the Board of Directors of Terrapin
required by the Code of Maryland Regulations (“COMAR”) 20.70.04.02. The Company also
indicated to the Commission’s Technical Staff (“Staff”) that it will file a copy of the public
notice sent in compliance with COMAR 20.07.04.02.
By memorandum dated August 27, 2013, the Commission’s Technical Staff (“Staff”)
filed its comments regarding the matter.
Section 6-102(b) of the Public Utilities Article,
Annotated Code of Maryland (“PUA”) provides:
The Commission shall authorize a public service company to issue stocks,
bonds, securities, notes, or other evidence of indebtedness, payable wholly or
partly more than 12 months after the date of issuance, if the Commission finds
that the issuance is reasonably required for the public service company to:
(1)
(2)
(3)
(4)
(5)
acquire property;
construct, complete, extend or improve facilities;
discharge or lawfully refund its obligations;
maintain or improve service; or
reimburse money, not secured by or obtained from the
issuance that is expended for a purpose described in item (1),
(2), or (3) of this subsection within 5 years before the filing of
an application with the Commission for reimbursement.
Staff stated that it reviewed the Application and found that it met the applicable COMAR
Requirements. Staff also calculated the Company’s capital structure at the Fiscal Year 2012 and
compared it to the capital structure the Company would have under a full draw of the $5,000,000
on the Promissory Note. The table below shows the results:
December 31,
2012
Debt-to-Equity
Ratio
28.4%
Equity and Debt
with $6,000,000
full draw
$56,000,000
Debt-to-Equity
Ratio with full
draw
52.3%
Debt
$1,815,044
Equity
$4,564,850
71.6%
$4,564,850
47.7%
As the table shows, the Company’s capital structure at the end of Fiscal Year 2012 was
28.4% debt and 71.6% equity. The pro-forma capital structure under a full draw of $6,000,000
resulted in changes to 52.3% debt and 47.7% equity. Staff indicated that this level of debt and
equity ratios is near optimal for regulated public service companies.
Based upon the Request and information provided by Terrapin, Staff found that the
Company’s Request for authority to issue debt is appropriate and reasonable and recommended
that the Commission grant Terrapin’s request for authority to issue $5,000,000 in long-term debt.
The matter was considered at the Administrative Meeting of September 4, 2013. After
hearing from the Company and Staff on the matter, the Commission granted Terrapins Request
for authority to issue long-term debt in the amount of $5,000,000. The Commission concluded
that approval of the Request is in the public interest, and found that the proceeds from the debt
issuance are consistent with the public convenience and necessity and is reasonably required for
the discharge or lawful refunding of obligations, which are purposes enumerated in § 6-102 of
the PUA.
This Order shall not be construed in any way as approving a particular capital structure
for rate-making purposes or foreshadowing any element of a future rate-making proceeding.
Furthermore, the reasonableness of actual terms and conditions of the debt issuance and the
prudence of the Company’s uses of the funds will be considered in the appropriate rate-making
proceeding.
IT IS THEREFORE, this 4th day of September, in the year Two Thousand Thirteen, by
the Public Service Commission of Maryland,
ORDERED: (1)
That Terrapin Utility Services, Inc. is hereby authorized to issue
long-term debt in the amount of $5,000,000 for purposes set forth in the Request.
(2)
That Terrapin Utility Services, Inc. shall file reports as necessary to
comply with COMAR 20.07.04.02C.
By Direction of the Commission,
/s/ David J. Collins
David J. Collins
Executive Secretary