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Public Counsel Opposes Aquila Request to Use Utility Property as Collateral 9/17

Public Counsel Opposes Aquila Request to Use Utility Property as Collateral

(September 17)  The Missouri Office of the Public Counsel has recommended denial of Aquila's request to encumber its Missouri utility property as collateral for a $430 million three-year term loan.

According to Public Counsel's expert testimony, the request is unnecessary and has the potential to increase future rates for Missouri customers. Acting Public Counsel John Coffman said that his office’s analysis demonstrates that Aquila does not even need to collateralize Missouri utility property to meet its obligations to secure the loan it negotiated to meet daily operational cash flow requirements and the debt generated by its unsuccessful fling into the unregulated energy trading business. As a result of pledging assets in other states (with or without approval of state utility regulators), Aquila has already fulfilled its obligation to its lenders.

The demise of Aquila's foray into unregulated activities is the driving cause of Aquila's weakened financial condition that necessitated the term loan, Coffman said. The request to encumber Missouri property has the potential to cause its monopoly customers to shoulder the burden of Aquila's debt from its failed non-regulated adventures.

The Public Counsel noted that when Aquila enters into non-regulated businesses, the utility ratepayers do not share in the Company's successes. When these activities go sour, the regulated business customer should not be expected to bail out Aquila's failures. "Approval under these circumstances would not only be poor public policy, but a breach of faith with the Missouri customer who should be shielded from Aquila's gambles in the non-regulated business arena." Coffman said.

Source: Missouri Office of Public Counsel

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