DE 97-154
                    Hampstead Area Water Company, Inc.
               Order Approving Franchise and Permanent Rates
                  R E V I S E D  O R D E R  N O.  22,854
                             February 18, 1998
         APPEARANCES: Stephen J. Noury for Hampstead Area
     Water Company, Inc. and James L. Lenihan for the Staff of
     the New Hampshire Public Utilities Commission.
               On July 28, 1997, Hampstead Area Water Company,
     Inc. (Hampstead or the Petitioner) filed with the Public
     Utilities Commission (Commission) a petition to establish a
     franchise and permanent rates in a limited area known as the
     Colby Pond subdivision (Colby Pond) located in the Towns of
     Danville and Sandown.  The Petitioner is seeking authority
     under RSA 378 to provide water service to Colby Pond.  Colby
     Pond is planned for 141 single family residential homes.  As
     of the date of the final hearing in this matter, there was
     testimony that 82 homes had been sold.
               An Order of Notice was issued September 5, 1997
     setting a prehearing conference for October 10, 1997 at the
     Commission and setting deadlines for intervention and
     objections thereto.  No requests for intervention were
     submitted in writing or orally at the prehearing conference. 
     On October 28, 1997, the Commission issued Order No. 22,770
     which approved a procedural schedule and scheduled a hearing
on the merits of the petition for January 14, 1998. 
               At the hearing on January 14, 1997, the Commission
     Staff (Staff) and the Petitioner presented a Settlement
     Agreement (Settlement) on the proposed franchise and
     permanent rates.  The Settlement supported granting the
     franchise and set forth the following terms and conditions:
               RATE BASE
               Rate base is agreed to consist of net plant in
     service of $218,559 and a working capital requirement of
     $4,970.  The total rate base is therefore agreed in the
     amount of $223,529.
               RATE OF RETURN
               The Petitioner's capital structure consists of
     100% debt at 8.5% interest as specified in a promissory note
     from the Petitioner to Lewis Builders Development, which is
     the owner and operator of the Colby Pond system.  Therefore,
     Staff and Hampstead agree to an overall rate of return of
               Operation and maintenance expense has been agreed
     upon in an annual amount of $24,186.  The components of this
     figure, as listed in Schedule 3 of Staff witness Thomas M.
     Sculley's prefiled testimony submitted December 23, 1997,
     consist of production expense of $11,821, transmission and
     distribution expense of $5,015, customer accounting expense
     of $3,200, office supplies and expense of $350, special
     services of $3,000, and miscellaneous expense of $800.
               The total annual revenue requirement agreed upon
     by the parties is therefore $51,155, ($32,155, total
     operating costs, plus $19,000, net operating income) to be
     applied to the full system build-out of an anticipated 141
     single family homes.
               RATE STRUCTURE
               The rate structure, as agreed upon by Staff and
     Hampstead, will consist of a quarterly customer charge and a
     volumetric rate.  The customer charge has been calculated by
     dividing the annual depreciation and amortization charge of
     $7,624 by the anticipated total customer base of 141 for a
     quarterly charge of $13.52 per customer.  The consumption
     charge is calculated by allocating the remaining revenue
     requirement of $43,530 over an estimated annual consumption
     of 2,250 cubic feet per quarter per customer (2,250 x 4
     quarters x 141 customers), or 1,269,000 cubic feet,
     resulting in a consumption rate of $3.43 per hundred cubic
     feet.  An average annual bill would amount to approximately
               EFFECTIVE DATE
               The Petitioner and Staff recommended that these
     rates be effective for service rendered on and after the
     date of issuance of a Commission order in this franchise and
     permanent rate proceeding.
               We have reviewed the agreement between the parties
     and heard testimony in support thereof.  We find granting
     the franchise to Hampstead Area Water Company to be in the
     public good.  We also find that the recommended rates
     provide a reasonable return on property used and useful in
     service to the public.  Accordingly, the settlement is
               Based upon the foregoing, it is hereby 
               ORDERED, that Hampstead Area Water Company is
     granted authority pursuant to RSA 374:22 and 26 to operate
     as a public water utility in a portion of the Towns of
     Danville and Sandown described as follows:
     Beginning at a point 3000' south of the centerline of Hersey
     Road on the Danville and Sandown town line: thence, running
     easterly, 3000' south of the centerline of Hersey Road, to a
     point 200' east of the centerline of Route 111-A (Main St.):
     thence, running northerly, 200' east of the centerline of
     Route 111-A, to a point 200' north of the centerline of
     Sandown Road: thence, running westerly, 200' north of the
     centerline of Sandown Road in Danville and then of North
     Danville Road in Sandown, to a point 200' northwest of the
     centerline of Fremont Road: thence, running southwesterly,
     200' northwest of the centerline of Fremont Road, to a point
     200' west of the centerline of Odell Road: thence, running
     southerly, 200' west of the centerline of Odell Road, to a
     point 3000' south of the centerline of Hersey Road: thence,
     running easterly, 3000' south of the centerline of Hersey
     Road to the point of beginning; 
     and it is
               FURTHER ORDERED, that for water service rendered
     on or after the date of this order that the Hampstead Area
     Water Company, Inc. may bill its Colby Pond customers a
     quarterly fixed charge of $13.54 and a volumetric charge of
     $3.43 per 100 cubic feet; and it is 
               FURTHER ORDERED, that the Petitioner file a
     revised tariff annotated with the above Commission order
     number within 10 days of the date of this order.
                    By order of the Public Utilities Commission of New
     Hampshire this eighteenth day of February, 1998.
        Douglas L. Patch    Bruce B. Ellsworth          Susan S.
            Chairman           Commissioner                  Commissioner
     Attested by:
     Thomas B. Getz
     Executive Director and Secretary