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Sunday, November 14, 2010

Nashua makes history with utility acquisition

Telegraph Editorial

When Nashua historians look back on the mayoral tenure of Donnalee Lozeau, she is most likely to be remembered as the mayor who put Nashua in control of its own destiny when it comes to precious water supplies and watershed lands through the friendly acquisition of Pennichuck Corp.

Efforts by Nashua to acquire the water utility began in 2002, when city officials initiated eminent domain proceedings after learning Pennichuck was poised to sell to an out-of-state company. It’s important to recall that all of this started because Pennichuck announced it had been sold.

Then-mayor Bernie Streeter pushed for the utility to sell to the city instead, and when that effort failed he initiated eminent domain proceedings. Lozeau as a candidate professed an aversion to eminent domain, but always felt that acquisition of Pennichuck at the right price was in the best interest of the city.

She continued to push for a negotiated settlement and was active at the bargaining table throughout the process. The resulting agreement is a good deal for the city now and into the indefinite future. Nashua will own the water company and its subsidiaries, including Southwood Corp. and its valuable 450 acres of watershed land.

The utility will continue to operate as a private business, not a city department, with an independent board of directors using the same employees now on staff. The city will issue bonds to pay for the stock purchase, and use the revenue from water customers to pay them off. In 30 years, the bonds will be paid and the city will own the resource outright, as a legacy for generations to come.

Water rates for Pennichuck customers, which will still have to be approved by the Public Utilities Commission, will stabilize at first and eventually be set at levels lower than what Pennichuck would have charged under private ownership.

Pennichuck rates have doubled in the past decade, with recent rate hike requests in the 20 to 30 percent range. The city will face the same operating costs, but will not have to generate profit to pay shareholder dividends.

The stage was set for the deal when the PUC ruled in 2008 that Nashua could take the utility by eminent domain for $203 million, plus a $40 million mitigation fee for damages to Pennichuck’s sister companies.

Whether the PUC did so intentionally or inadvertently, we’ll never know. But the decision had the effect of forcing both sides to the bargaining table.

Neither side came away with a clear victory. Pennichuck lost because the PUC essentially decided it would be in the public interest for Nashua to own the utility, but set the price at a level Nashua would never pay. When the state Supreme Court affirmed the PUC decision in every respect, both parties had little choice but to negotiate.

It’s almost as if the PUC, with the backing of the Supreme Court, told both parties, “We are not going to settle this for you. Work something out.” And they did.

The Pennichuck board was motivated because it could not continue to operate a publicly traded company under the constant threat of eminent domain. The mayor was on record as opposed to eminent domain, but committed to a purchase if the price was low enough to ensure stable or lower water rates.

Having exhausted all regulatory and legal options, we finally had a motivated seller talking to a motivated buyer, and as any real estate agent will tell you, that means a deal is at hand.

The city has acquired Pennichuck under terms that will enable it to continue to operate with the efficiency of a private business, with a board of directors subject to the Right to Know law because of taxpayer ownership.

It’s the best of both worlds. A win-win for the city, taxpayers, ratepayers, Pennichuck employees and Pennichuck shareholders. A triumph of negotiation, patience, compromise and tenacity. A historic moment, indeed.