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OCA Activity - Water

Case Update: Modified: 8/7/09

This update contains information about selected dockets with activity since the last Board meeting.

1. DW 04-048 Pennichuck Water Works, Nashua’s Petition for Valuation pursuant to RSA 38:9 (Eminent Domain)
2. DW 07-105 Lakes Region Water Co. Investigation
3. DW 08-052 Pittsfield Aqueduct Company
4. DW 08-065 Hampstead Area Water Company Rate Case
5. DW 08-073 Pennichuck Water Works – Petition to Increase Rates.
6. DW 08-088 Hampstead Area Water Company - Petition for Authority to Borrow Long-term Debt, to Increase Rates and to Expand Franchise
7. DW 08-098 Aquarion Water Co. of NH – Rate Case
8. DW 09-051 Pennichuck East Utility and Pittsfield Aqueduct Company
9. DW 09-098 Lakes Region Financing

1. DW 04-048 Pennichuck Water Works, Nashua’s Petition for Valuation pursuant to RSA 38:9 (Eminent Domain)

In March 2004 Nashua petitioned the Commission for permission to take by eminent domain three water utilities: Pennichuck Water Works (PWW), Pittsfield Aqueduct Company (PAC) and Pennichuck East Utilities (PEU). In November 2005, the NH Supreme Court affirmed Nashua’s right to proceed with a taking of PWW’s assets. On July 25, 2008, the Commission issued Order 24,878, granting Nashua’s taking of PWW and determining the value of the taking to be $203 million as of December 31, 2008. The Commission also required, as one of a number of conditions of approval, that Nashua establish a “mitigation fund” in the amount of $40 million to protect customers of PEU and PAC from lost economies of scale and/or synergies resulting from the taking. On August 22 and August 25, 2008 PWW and Nashua filed motions for rehearing. The Commission issued a Secretarial Letter on August 28 suspending the final order pending the review of the motions for rehearing. On March 13, 2009 the Commission issued Order No. 24,948 denying the motions for rehearing. Both parties have filed appeals to the Supreme Court, which accepted the appeals in case number 2009-0274. They brief of the City of Nashua is due on or before August 14, 2009 with opposing briefs due on or before September 14, 2009.

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2. DW 07-105 Lakes Region Water Co. Investigation

The Commission opened this docket at the request of Staff to determine whether the company should be placed in receivership. Underlying Staff’s concerns were questions about the Company’s managerial and financial fitness to provide safe and adequate service to customers. Issues included inadequate supplies of water, the use of an unapproved source of water, and providing water to customers with excessive levels of uranium. Following discovery and a technical session, Staff and the Company reached a settlement agreement which they presented to the Commission on May 8, 2008. The settlement agreement allows the present owners and operators to avoid receivership at this time, and provides for the continuation of the docket as “a monitoring docket for a limited period of time into the future, pending the completion of two other processes: a filing by Lakes Region for financing approval and rates, and the Attorney General's investigation into the issues surrounding the re-connection of a well at the Tamworth system.” Also included as a term of settlement, the Company agreed to hold quarterly meetings with representatives of the PUC, the OCA and DES. On July 25, 2008, the Commission issued Order 24,877, approving the Settlement Agreement. In mid-September the OCA learned that the Company has been indicted on felony counts in Carroll County Superior Court for violations of the Safe Drinking Water Act as a result of the AG’s investigation into the Tamworth incident. A hearing is expected in June 2009 unless a plea deal is reached. Quarterly meetings continue, with the most recent one held on July 16, 2009. A status conference in the criminal case will be held on August 28, 2009 in Carroll County Superior Court.

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3. DW 08-052 Pittsfield Aqueduct Company

On May 2, 2008, Pittsfield Aqueduct Company (PAC), a wholly-owned subsidiary of Pennichuck Corporation, filed a rate case. PAC provides water service to approximately 650 customers in Pittsfield and to approximately 1,109 customers in what PAC refers to as its “North Country” systems: Birch Hill in Conway, Sunrise Estates in Middleton, and Locke Lake Colony in Barnstead. PAC acquired the “North Country” systems from Central Water Company, Inc. and Consolidated Water Company, Inc. in 2005 (DW 05-132). PAC originally proposed to separate the rates of the Pittsfield and North Country customers, which would have resulted in a permanent rate increase of over 300% for the North Country customers. The Commission approved temporary rates in December 2008. The temporary rate increase for Pittsfield customers was roughly 40%, and the temporary increase for North Country customers was roughly 150%. On January 14, 2009, the Company filed a motion to stay the procedural schedule to give it time to develop a new proposal to transfer the North Country systems from PAC to another Pennichuck affiliate, PEU (Pennichuck East Utility), and to set the rates more in line with the PEU rates. On March 13, 2009, the Company filed its new proposal. The non-company parties are currently engaged in discovery on the Company’s revised proposal. The Commission issued Order No. 24,975 on June 5, 2009 approving the Company’s request to consolidate this case with DW 09-051. On July 31, 2009, the OCA filed testimony. In pertinent part, the OCA recommended that, for Sunrise Lake Estates customers, the PUC approve, as new rates, the PEU base rates with a minimum usage of 4 ccf. As the new rates for Locke Lake and Birch Hill, the OCA recommended that the PUC approve the PEU base rates, with the minimum usage of 4 ccf, in addition to a reduced surcharge to recover the costs of acquisition and improvements to these systems. The OCA deferred to PUC Staff on the issue of whether the improvements to PAC systems were prudent. The OCA also deferred to the PAC customers on the issue of whether the transfer of the “North Country” systems to PEU was consistent with the public good. Lastly, the OCA deferred to Pittsfield on the issue of whether the revised proposed rates are just and reasonable.

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4. DW 08-065 Hampstead Area Water Company Rate Case

On April 28, 2008, Hampstead Area Water Company (HAWC) notified the Commission of their intention to file a rate case. On June 25, 2008 the Company filed its case, requesting an annual increase in permanent revenues of $167,193, effective July 1, 2008. According to the Company, an average residential customer would experience an increase of 13.77%, or their rates would increase by $58.50, from $424.92 to $483.42. On January 16, the Commission issued Order No. 24,932 approving the settlement agreement of the parties, which set temporary rates at current rates effective September 1, 2008. Discovery has continued and the parties have met in two technical sessions. Testimony of intervenors, including the OCA, was filed on April 22, 2009. The OCA, Staff and the Company filed a settlement agreement on May 27. The final hearing was held on June 3, 2009. The OCA awaits the PUC’s ruling in this case.

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5. DW 08-073 Pennichuck Water Works – Petition to Increase Rates.

On June 23, 2008, Pennichuck Water Works (PWW) filed a petition seeking an increase of $3,193,791 in its operating revenue. This translates to a 14.72% increase for its roughly 25,000 general metered customers in the City of Nashua and parts of surrounding communities. In addition, PWW seeks authority for two Step Increases totaling $2,291,412, or an additional 10.56% for capital projects that will be placed into service in 2008. The total impact of these requests is an overall rate increase of 25.27% for general metered customers. On December 30. 2008, the Commission issued its order on temporary rates (Order No. 24,926), approving the settlement agreement between Staff and the Company which set the temporary rate increase at 11%, effective July 28, 2008. The OCA filed testimony on March 24 generally taking the position that the Company’s proposed revenue requirement should be reduced by $973,285. Staff and the Company filed a settlement agreement, and the final hearing was held on May 19, 2009. The OCA awaits the PUC’s ruling in this case.

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6. DW 08-088 Hampstead Area Water Company - Petition for Authority to Borrow Long-term Debt, to Increase Rates and to Expand Franchise

On June 27, 2008, HAWC filed a petition for authority to borrow long term debt pursuant to RSA 369, to extend its franchise area, and for a step increase in rates HAWC. HAWC sought PUC permission to borrow $1,100,885 from the State Revolving Loan Fund (SRF) administered by the New Hampshire Department of Environmental Services (DES) and to recover an additional $85,340 in revenues, which represents an overall increase of approximately 6.73% in revenues. The OCA opposed the rate-increase aspect of the filing, arguing that it should be considered in the pending rate case. The parties filed a settlement agreement, which required the rate increase issue to be transferred to the pending rate case (DW 08-065). The Commission held a hearing on November 4, at which it heard from the parties about the settlement agreement. On February 6, 2009, the Commission issued Order 24,937, which approved the settlement agreement. Since then, the OCA has requested a correction to this order, as well as a correction to a subsequent order in this docket, concerning the Company’s request for explicit authority to use its assets as security for the proposed financing. The OCA continues to await a response from the PUC on the second request.

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7. DW 08-098 Aquarion Water Co. of NH – Rate Case

On August 29, 2008 Aquarion, which serves Hampton, North Hampton and Rye, filed for approval of an average 12% increase in rates, as well as several new conservation and infrastructure charges. The Company also requested temporary rates and proposed rate design changes. The Commission held the prehearing conference in November and held a hearing on temporary rates in January. On February 13, 2009, the Commission issued Order 24,942 setting temporary rates at current rates, effective December 15, 2008, and increasing temporary rates by 7.65% on February 1, 2009. Discovery on the Company’s filing concluded in May. On June 9, the OCA filed its testimony. In pertinent part, the OCA recommended some reduction to the proposed revenue requirement, and supported, with certain conditions, the Company’s proposed conservation and infrastructure charges. On July 10, 2009, the OCA, Aquarion, PUC Staff, and the Town of North Hampton filed a settlement agreement resolving all of the issues in this case. Although not a signatory, the Town of Hampton did not oppose the settlement agreement. In pertinent part, the settlement agreement provided for an increase in the rates for residential customers of 18.14%, as well as a step adjustment of 3.64%. The settlement also provided for a new pilot program, giving the Company an opportunity to recover the costs of certain capital investments between rate cases through a rate adjustment mechanism. On July 14, the parties presented the settlement to the PUC.

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8. DW 09-051 Pennichuck East Utility and Pittsfield Aqueduct Company

On March 13, PEU and PAC jointly filed for authority to transfer certain systems of PAC to PEU. These systems include the Birch Hill, Sunrise Lake Estate and Locke Lake systems which are the subject of another pending docket, DW 08-052. The proposal to transfer these systems is interconnected with the Company’s rate proposal in DW 08-052. The Commission issued Order No. 24,975 on June 5, 2009 approving the Company’s request to consolidate this case with DW 08-052. For more information about the status of this case, please see DW 08-052, above.

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9.DW 09-098 Lakes Region Financing

On June 1, 2009, Lakes Region Water Company, Inc. (LRWC) filed a petition seeking authority to borrow $1,500,000 in long term debt to complete seven separate projects. The funds are to be made available through the American Recovery and Reinvestment Act (ARRA) of 2009 and will be dispersed through the existing State Revolving Loan Fund (SRF) administered by the Department of Environmental Services (DES). The petition also included a request for an associated step increase in rates. On June 19, 2009, PUC Staff filed a letter supporting the request for financing authority, but recommending that the step increase considered within the context of a future general rate case. On June 23, 2009, the OCA filed a letter expressing several concerns about LRWC’s filing, including a concern about the ability of the Company to continue to provide safe and adequate service to its customers and function effectively as a regulated utility. The OCA also expressed its concern that LRWC planned to use an affiliate to perform some of the construction work and that the arrangement could jeopardize the ARRA financing. The OCA also questioned the accuracy of some of LRWC’s proposed operating expenses and opposed the request for a step increase outside of the context of a general rate case. On July 2, 2009, in order 24,983, the PUC approved LRWC’s request for authority to borrow the long term debt, but denied the request for a specific mechanism for increasing rates.

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