by Elizabeth Carvlin, Yvette Shields, and Rochelle WilliamsThe power outage that reached its tentacles into Canada, Northeast, and the Midwest last week highlighted not only electric, utilities and their infrastructure needs but also water systems that depend, on electricity and have been working to upgrade aging facilities through, bond issuance., As the electricity went out last Thursday, so did Cleveland's largest, according to local reports. Residents of both cities were under orders to boil their drinking water., Both cities have long-term plans to finance upgrades to the aging, systems through bond issuance over time, but industry experts have argued, major water systems across the country need additional help., Cleveland has been investing an average of $60 million per year over, according to, testimony from Beverly Ingram in front of a subcommittee of the House, Over the next eight years, To finance the upgrades, Cleveland since 2001 has raised rates 18%, annually and will do so to *2006-, said Ingram, the assistant director of the, Detroit Water and Sewer Department., Aside from upgrades, the interdependence of many systems has some, market experts concerned., This really focuses attention on the quality of our infrastructure and, whether we have the appropriate backup systems in place to run critical, said Richard Ciccarone, president of Merritt Research Services, which tracks various municipal sectors such as public power and municipal, infrastructure., Ciccarone said he expects that governments that do not now operate, critical systems independent of each other -- whether they were impacted by, last week's blackout or not -- will seriously look at taking steps to, separate them. That could result in increased borrowing to finance such projects., Besieged California Gov. Gray Davis, who faces a recall election on Oct. 7, knows about energy woes. California endured rolling blackouts and skyrocketing power costs during the energy crisis of 2000 and 2001. As a result, with electricity users footing the bill for debt service., The state has since added 6, 000 megawatts of new power during the past, we are not vulnerable if one major power plant, Davis said., Also, 38 power plants received operating licenses since *1999-, according, to the governor's office. The Davis administration contends manipulation in the power market by Enron and other energy firms made the situation worse., President Bush on Friday echoed the comments of many municipal leaders, call to modernize the nation's, electrical system. The municipal market could see additional bond issuance by public utilities whose infrastructure will also come under scrutiny., The assets of public utilities last year had an average age of 13.3, years, Ciccarone said. That was up from 11.5 years a decade earlier, although Ciccarone had no figures for investor-owned companies., Projects have been deferred for the sake of the bottom line with, companies having to produce certain financial margins for investors, said., Municipal leaders play a key role in pressuring investor-owned, utilities to keep their equipment upgraded, We depend on electricity as the lifeblood of our economy, and we have, to look at it and say, `Is it time to upgrade it?' We are far too vulnerable, Politically
Published in Bond Buyer (2003)
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