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Wednesday, October 26, 2011

PUC hears Merrimack push for seat on board

CONCORD – With the town of Merrimack acting as the lone naysayer, spurred by fear of having prime industrial land left high and dry, the decade-long saga of Nashua vs. Pennichuck came to the brink of completion Monday at what was more like a coronation than a regulatory hearing.

“You’re looking at parties that really know how to disagree ... and we’re all here in agreement, with one exception. That’s something close to a miracle,” said Steven Camarino, one of many attorneys representing the city or Pennichuck Water Works in Tuesday’s hearing before the Public Utility Commission.

“It’s very telling that it was accomplished in a single day, less than a whole day,” said Mayor Donnalee Lozeau of the hearing, which took about five hours once the lunch break was factored in.

The two-member PUC will now decide whether it is in the public interest to let Nashua buy all the stock of Pennichuck Corp. in a $157 million deal that will create an arrangement that regulators say may be unique in the nation: A municipally owned private water utility.

Nashua and Pennichuck hope to get the PUC’s thumbs up before the end of November, which would allow them to start selling municipal bonds before Dec. 31. As several speakers said Tuesday, they want to lock in current interest rates of less than 5 percent for the 30-year bonds.

Most parties involved say that water rates will eventually go down despite the city having to pay back the money it borrows, partly because a city with a triple-A bond rating like Nashua can borrow money at rates much below the cost of equity capital used by private Pennichuck Corp., and partly because shareholders won’t get a cut of future earnings.

If the PUC agrees, the Board of Aldermen will have the final say on Pennichuck’s budgets but operations will be handled by the same management and field staff who currently work there – roughly 100 employees total – overseen by a board of directors of between nine and 12 people, none of whom is an elected official or city worker.

That board of directors was the only source of contention Tuesday, because Merrimack wants a seat on the board.

“Our concern is the board is, in essence, controlled by Nashua. Tariffs, charges would be a vote of the customer, and that, in essence, is Nashua by sheer numbers,” said Merrimack Town Council Chairman Finlay Rotthaus in testimony, asking the PUC not to agree to the sale unless Merrimack was given a board seat.

Rotthaus said Merrimack has interests beyond those of other non-Nashua communities served partly by Pennichuck Water Works, such as Hollis and Milford, because 60 percent of the utility-owned watershed land is in Merrimack, and 10 percent of the utility’s consumption is delivered to Merrimack.

However, as was pointed out, the bulk of that consumption is used by the Anheuser-Busch plant, which is Pennichuck’s biggest single customer – and Anheuser-Busch has agreed to the proposed deal. Most Merrimack residents are served by the Merrimack Village District, a separate utility.

Rotthaus also noted that the bulk of Merrimack’s industrially zoned land is served by Pennichuck, and he said some in Merrimack were concerned that a Nashua-dominated utility would favor Nashua’s industrial zones when deciding about connections or service.

In her testimony, Lozeau said Nashua opposed a Merrimack seat over fears that the holder would represent only the town rather than the whole company, which includes utilities that cover customers from Pittsfield to Exeter.

“You are not representing the town you come from, you are there as a board of directors member who has a fiduciary responsibility of what’s best for the company,” she argued.

The agreement does reserve one seat for the Merrimack Valley Regional Water District, which despite the name, does not include the town of Merrimack by that town’s choice. The district does include Nashua, Amherst, Litchfield, Bedford and five other towns.

The district was formed earlier in the Nashua-Pennichuck deal when it looked like the city was going to take Pennichuck Water Works by eminent domain, leaving outlying utilities owned by Pennichuck Corp. without a governing body. Merrimack declined to join the district, fearing that Nashua would de facto control it.

The district is an example of the complexity of the entire Pennichuck Corp. sale. The sale would result in a city owning a regulated water company that owns other unconnected, but still state-regulated utilities, as well as private water systems throughout the state, and which has long-term arrangement to sell backup water as needed to towns like Milford and Hudson.

“It’s like a square peg in a round hole. When you have a municipal owner at the top of pyramid, regulated utilities at the bottom, you quickly come to the conclusion that some things just have to be different to make it work,” said Mark Naylor, director of the gas and water division of PUC. “I think there are enough benefits to customers both inside and outside Nashua.”

Rorie Hollenberg, assistant consumer advocate from the Office of Consumer Affairs, said their experts had not been able to find any similar water utility arrangement in the country. The OCA does not oppose the sale after changes were made recently to keep Nashua from pushing more of the costs of its takeover onto ratepayers in outlying towns.

David Brooks can be reached at 594-5831 or dbrooks@nashuatelegraph.com.