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OCA Activity - Water

Case Update: Modified: 11/20/08

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 08-070 Lakes Region Water Company – Petition for Authority to Finance and to Increase Rates
4. DW 08-052 Pittsfield Aqueduct Company
5. DW 08-065 Hampstead Area Water Company Rate Case
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 08-073 Pennichuck Water Works – Petition to Increase Rates.
8. DW 08-098 Aquarion Water Co. of NH – Rate Case

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). Since the filing, the Commission determined that Nashua could seek to take assets of PWW but not assets of PAC and PEU. In November 2005, the NH Supreme Court affirmed Nashua’s right to proceed with a taking of PWW’s assets. In the OCA’s Statement of Position filed on November 16, 2007, we did not take a position in the case but instead raised issues for the Commission’s consideration, including who must pay the costs of the proceeding, and how the non-Nashua customers of PWW could be impacted if the taking is approved. 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. Commissioner Below dissented on the valuation of the taking, setting the value at $191 million. On August 22 and August 25, 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. The Commission’s decision on the motions for rehearing is pending.

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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 th. 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. The first quarterly meeting was held on June 24. At that meeting, the OCA learned for the first time of several instances when the Company failed to comply with terms of the Settlement Agreement in this case. Deadlines had passed without notice to the Commission or the parties and the Company confirmed its inability to meet other commitments, including the completion of a storage system serving a group of customers participating in the case by the deadline previously agreed to. In response, the OCA filed a letter with the Commission on June 26, bringing these new developments and disclosures to its attention and requesting that the Commission consider a more frequent monitoring schedule than Settlement Agreement provides. On July 3, Staff filed a letter in response to the OCA’s letter, indicating its willingness to afford the Company “reasonable leeway” in meeting what Staff characterized as not “absolute” deadlines contained in the Settlement Agreement. On July 25, 2008, the Commission issued Order 24,877, approving the Settlement Agreement. On 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. On September 23 a quarterly monitoring meeting was held in the docket to discuss the status of several projects.

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3. DW 08-070 Lakes Region Water Company – Petition for Authority to Finance and to Increase Rates

On May 15, 2008, Lakes Region Water Company (LRWC), pursuant to RSA 369, filed a petition for authority to finance approximately $779,930 in order to complete a number of capital improvements in its water systems. In order to recover its investments in these capital improvements, LRWC proposes to adjust its customer rates in three step increases. On August 5, the Commission approved the proposed procedural schedule (see Order No. 24,883). The OCA has actively participated in discovery and intends to file testimony in this docket. On August 26, the OCA filed a motion seeking a short extension of the deadline for the filing of its testimony due to new information provided by the Company in response to a data request propounded by Staff. On September 4 the OCA filed the joint testimony of Traum and Eckberg. Our testimony did not support the Company’s request for Step Increases to Rates related to certain projects completed and investments made. The OCA argued in favor of the Company proposing a full rate case so that parties could review the complete expenses and income of the Company rather that address some issues through “single issue ratemaking.” The OCA did not support a Settlement Agreement reached between Staff and the Company. A Hearing was held on September 30, and a decision from the Commission is pending.

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4. DW 08-052 Pittsfield Aqueduct Company

On May 2, 2008, the Company Pittsfield Aqueduct Company (PAC), a wholly-owned subsidiary of Pennichuck Corporation, filed a rate case. PAC currently 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, in DW 05-132. PAC seeks an overall increase in gross annual revenues of $957,641 and requests separate rates for its Pittsfield customers and for its North Country customers, applying the revenue increase as follows: $200,503 from general metered and fire protection customers in Pittsfield (a 44.01 percent increase) and $757,138 from North Country customers (a 239.52 percent increase). PAC also requests a step increase in rates to its North Country customers to cover capital improvements planned for completion by November 2008. This proposed step increase would generate $228,836 in additional revenues, which is an additional 72.39 percent increase. The proposed rate increases would result in an increase of $181.76 to the average annual residential bill for Pittsfield customers and an increase of $682.72 to the average annual residential bill for North Country customers. If approved, the new average annual residential bill would be, respectively, $593.58 and $1,159.92. PAC also requests temporary rates to take effect on June 1, 2008 on a service-rendered basis, or the date of which customers are notified, whichever is sooner. For temporary rates, PAC proposes a $150,377 increase in revenues from customers in Pittsfield, which corresponds to a 33.01 percent temporary rate increase; and a $567,854 increase in revenues from North Country customers, which corresponds to a 179.64 percent temporary rate increase. On May 23, 2008, the Commission issued the Order of Notice and scheduled a prehearing conference and technical session for July 16. The period for discovery (i.e., data requests on Company’s filing) began on August 8 and a hearing on temporary rates is scheduled for October 7. Presently, a hearing on permanent rates is scheduled for March 27, 2009. Due to the significant increases requested, the Commission has held three evening public sessions in North Conway, Alton, and Pittsfield to hear comments from customers. The OCA attended all three hearings and has had significant contact with customers. On August 27, the Commission convened a hearing on the Company’s request for temporary rates. At that hearing, the Company and Staff asked the Commission to approve, without modification, the Company’s temporary rate increase request. The OCA took the position that the temporary revenue increase should be collected according to the Company’s current rate design rather than as proposed by the Company. A representative of Birch Hill asked the Commission to take into account the seasonality of some of the customers in the “North Country” systems. A representative of Locke Lake advocated for approval of a temporary rate increase based only, or primarily, on the increased operating costs of the Company (and not the capital improvements), and the collection of this temporary revenue increase according to the Company’s current rate design. The Commission’s order on the temporary rates is pending. Discovery is ongoing in the permanent rates phase of the Docket.

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5. 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. In Order 24,879, the Commission suspended the tariff and scheduled a prehearing conference and technical session for September 3. On August 7, the OCA filed a motion in this docket and in another HAWC docket, DW 08-088 (see below), asking the Commission to consolidate the rate issues in both dockets. On August 18, the Company filed its objection to the OCA’s motion. On September 3, 2008, the Commission convened a prehearing conference in this case, as well as one in HAWC’s pending financing case, DW 08-088 (see below). At that hearing, the Commission heard argument from the OCA, the Company and Staff, on the OCA’s motion to consolidate. Discovery is now under way, and a hearing on temporary rates is schedule for December 3, 2008.

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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 seeks 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. On August 18, 2008, the OCA filed a motion in this docket (and in DW 08-065, see above) to consolidate the rate issues in both dockets. The Company opposes the OCA’s request. At the prehearing conference on September 3, which was held after the prehearing conference in HAWC’s general rate case, DW 08-065 (see above), the Commission asked the parties to obtain information from DES about HAWC’s pending application for SRF financing. Specifically, the Commission sought a definitive answer to the question: Does DES require approval of a rate increase before it will approve HAWC’s pending SRF loan application? This request for information was forwarded to DES by Staff on September 4. Richard Skarinka, the administrator of the SRF loan program for DES, responded on October 16. In the interim, the OCA, Staff and the Company negotiated a settlement agreement, which provides, in pertinent part, for the transfer of the rate issue to the pending general rate case. On October 21, John Wolters, an intervenor in this case and a resident of Atkinson, filed testimony. On October 20, Mr. Wolters filed amended testimony and the testimony of William Bennett, also a resident of Atkinson. A hearing is scheduled for November 4.

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7. 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. The Commission convened a prehearing conference on August 27, 2008. Following the prehearing conference, the parties began discovery and, on October 24, the parties met for a technical session. At the technical conference, the Staff agreed to a Company proposal to increase rates, temporarily, in an amount equal to 75% of the Company’s proposed permanent revenue increase. A hearing on temporary rates is scheduled for November 13.

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8. 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 proposes rate design changes. A prehearing conference is scheduled for November 5, 2008.

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