Trending
The state agency that helps water utilities pay for infrastructure projects has adjusted its affordability index, so that it can take advantage of money allocated to Pennsylvania through the 2021 Bipartisan Infrastructure Law.
That adjustment by Pennvest will not only help the agency "drive" the BIL money out to utilities that provide water and sewer services, but will increase opportunities for utilities to get some of the money in the form of grants, rather than the typical low-interest loans that Pennvest makes, according to Pennvest Executive Director Robert Boos, who spoke to the Mirror by phone Friday.
The adjustment lowers Pennvest's target range for utility customers' annual bills -- the range that
Pennvest wants utilities whose projects it funds to be able to maintain for their customers, including customers of the Altoona Water Authority, which is hopeful of benefiting from the adjustment.
When utilities ask Pennvest to help pay for projects, the agency conducts financial analyses, and considers providing either grant money, interest rates that are especially low or payback extensions, if needed to keep customer rates within the range -- in the low end of the range for poor communities and in the higher end for wealthy ones.
Pennvest essentially asks, "What can a community afford?" Boos said.
The more favorable conditions are bestowed where they "can make the biggest impact" on affordability by relieving community hardship, according to Boos.
Prior to the BIL, Pennvest's target range for annual utility rates for customers was between 1% and 2% of the average median household income for each utilitiy's full customer base, according to Boos.
After BIL, Pennvest's target range for annual utility rates has gone down to between 0.5% and 1.25% of median household income for the average customers of each utility.
"We lowered the bar," Boos said.
Lowering the range makes it more likely that projects will receive some grant funding or an interest rate on the lower end of the interest range that Pennvest charges or perhaps a payback extension to 30 years from the typical 20.
In addition to median household income, Pennvest also considers a variety of socioeconomic factors in its affordability analyses, Boos said.
There is never enough grant funding to meet demand, and the vast majority of Pennvest funding will continue to be with low-interest loans, according to Boos.
The current interest rate for Pennvest loans is between 1% and 2.25%.
The current market rate for interest is between 8% and 10%, so that even the loans Pennvest makes are like grants, in that they save utilities money the utilities would otherwise need to spend, Boos said.
Pennvest has an annual budget of $1 billion, Boos said.
Loan repayments help the funds from which Pennvest pays for projects to increase, he said.
There is a portion of the BIL money that came to Pennsylvania that must go out as 100% grant funding for projects -- money intended to remove the "emerging contaminants" per- and polyfluoroalkyl substances (PFAS) and perfluorooctanoic acid (PFOA) from drinking water; and for removal of lead lines that carry drinking water, Boos said.
Pennvest is still applying affordability analyses for such projects, he said.
Earlier this month, the Environmental Protection Agency set its first-ever limits for PFAS in drinking water, an action that was accompanied by the release of BIL funding to deal with the issue.