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Sunday, September 12, 2010

What goes down (the drain) must come up (water rates)

CONCORD – Pennichuck Water Works officials are scheduled to go before state regulators Wednesday to ask for a temporary rate increase.

The request is a prelude to a permanent 16 percent rate increase for which Pennichuck plans to ask for in the spring.

As a regulated utility, Pennichuck gets to operate a natural monopoly and also gets a guaranteed rate of return on its money in return for having to exist under government oversight.

The most notable aspect of the oversight is the need for permission to increase its rates – although technically, the PUC gives Pennichuck permission to increase its total revenue, with the actual rates determined by the company.

A complication is that Pennichuck has separate contracts with Anheuser-Busch’s Merrimack plant, which uses at least 2 million gallons a day, plus the towns of Hudson and Milford, which use Pennichuck as a fallback water supply.

The company signed a 10-year contract with Anheuser-Busch in 2005, for example, although that rate was increased in 2008, along with rates to Nashua residences.

The temporary rates would result in an effective increase of 10.17 percent for general metered customers, 17.95 percent for private fire protection, 61.26 percent for the Anheuser-Busch plant in Merrimack and 20.43 percent in volumetric charges for Milford.

Also, volumetric charges for Hudson would decrease by 9.12 percent, and municipal hydrants would decrease by 0.24 percent, according to the company’s PUC filing.

“The proposed temporary increase in rates would increase an average annual residential bill for a single family home from $492.36 to $556.32, or by $5.33 per month, based on an average annual usage of 9,500 cubic feet,” according to the company’s filing.

Pennichuck Water Work requested the rate take effect for service in June.

The company is seeking a permanent rate increase of 16.23 percent.

A portion of that increase would go toward the mounting legal fees the utility has spent fighting the city of Nashua’s takeover attempts.

The city tried for six years to seize Pennichuck by eminent domain before getting approval by the state Public Utilities Commission in 2008.

But the $243 million price set by the PUC was more than the city wanted to pay, so the takeover never happened. The city and Pennichuck are trying to negotiate a private sale.

Pennichuck is hoping to recoup $5.4 million in eminent domain legal costs over a period of 10 years, and this year’s rate increase would cover the first installment, about $536,000.

A 2005 PUC order gave Pennichuck the go-ahead to seek a rate increase to cover legal fees after the eminent domain case was resolved.

If granted, the 16.23 percent rate increase, plus another 3.68 percent step increase, would bring in an extra $4.8 million per year.

The money would also be used to recover the cost of upgrades to the water treatment plant, pay for increases in state utility and property taxes, and compensate for a decline in water use over the last few years, Pennichuck said in a statement.

The company attributes the decline in water use since 2007 to the combined effects of the recession, cool and wet weather during the peak-use summer season and customer conservation efforts.

Pennichuck is also asking the PUC to approve a program in which it can self-approve small rate increases.

Normally, water companies have to file a formal request with the PUC for a rate increase and go through a series of hearings.

The money would be used to replace aging infrastructure, and it would spread rate increases more gradually over time, the statement said. Self-approved increases would be capped at 2 percent per year and a total of 7.5 percent between formal rate cases with the PUC.

Patrick Meighan can be reached at 594-6518 or Telegraph reporters Ashley Smith and David Brooks contributed to this story.