DR 97-121
                          Wildwood Water Company
                    Petition for General Rate Increase
                      Order Approving Permanent Rates
                        O R D E R   N O.   22,881 
                              March 24, 1998
         APPEARANCES: Stephen P. St. Cyr for Wildwood Water
     Company, Inc.; Representative Richard T. Cooney, pro se; Amy L.
     Ignatius, Esq. for the Staff of the New Hampshire Public
     Utilities Commission.   
         On July 18, 1997, Wildwood Water Company (Wildwood)
     filed with the New Hampshire Public Utilities Commission
     (Commission) a petition for an increase in annual revenue of
     $8,930.  This annual increase would result in an increase in
     permanent rates of approximately 67.31% to the 42 customers
     served by Wildwood in the town of Albany, New Hampshire.   
         On August 8, 1997, the Commission by Order No. 22,680
     suspended the proposed increase in rates.  By Order of Notice
     issued November 6, 1997, the Commission scheduled a prehearing
     conference to address procedural matters and to seek intervention
     by interested parties in the permanent rate proceeding.  
         On November 19, 1997, a duly noticed prehearing
     conference was held at the Commission offices in Concord. 
     Richard T. Cooney, a customer of Wildwood and a New Hampshire
     State Representative from Salem, New Hampshire, made a motion for
     intervention which was granted at the prehearing conference. 
         By Order No. 22,802, (December 9, 1997) the Commission
     approved the procedural schedule.  A Commission Secretarial
     letter rescheduled the hearing on the merits to February 9, 1998. 
         Commission Staff prefiled testimony of Douglas W.
     Brogan and Thomas M. Sculley on December 31, 1997 and January 7,
     1998, respectively.  On February 6, 1998, Staff and Wildwood
     filed a Settlement Agreement (Settlement) resolving all issues in
     the permanent rate proceeding.  The Commission heard testimony on
     the Settlement on February 9, 1998.  Finally, on February 20,
     1998, Staff submitted a memo addressing Wildwood's request for
     rate case expenses.
         The Settlement details all terms agreed to between
     Wildwood and Staff, which are summarized herein.
         Wildwood and Staff agreed to: (1) rate base of $26,358;
     (2) rate of return, for a company that is 100% equity, of 9.85%;
     which, applied to rate base, results in annual net operating
     income of $2,596; (3) total expenses of $19,313, the components
     of which are itemized in Schedule 3 of the prefiled testimony of
     Thomas M. Sculley; (4) total annual revenue requirement of
     $21,929; (5) a flat billing rate of $130.53 per customer per
     quarter; (6) the rate increase will be effective for bills
     rendered on and after the date of issuance of this order; (7) to
     address deficiencies in the system and NH Department of
     Environmental Services mandates regarding system deficiencies,
     Wildwood shall comply with the following schedule: (a) by April
     30, 1998 Wildwood shall: meet with the CVFD Commissioners to
     discuss possible interconnection; attempt to meet with
     Representative Cooney and/or other homeowner representatives to
     discuss possible sale of the system to the homeowners; hire an
     engineer to assess long term remedies to the system deficiencies,
     intermediate measures which could partially address major
     deficiencies while limiting capital investment, and cost
     estimates; and submit to the Commission and DES the engineer's
     recommendations and a status update on discussions with CVFD and
     the homeowners; (b) by June 15, 1998, Wildwood shall implement
     intermediate remedial measures to address water quality and
     pressure deficiencies; (c) by June 30, 1998, and quarterly
     thereafter through June, 1999, report to the Commission and DES
     on the status of negotiations with CVFD and the homeowners and on
     progress in addressing system deficiencies; and (d) absent
     interconnection with CVFD, apply for SRF funds as early as
     possible, and implement all long-term solutions as soon as funds
     are available; and (8) barring the feasibility of interconnection
     with CVFD, Wildwood shall be permitted, without filing a new rate
     case, two step increases in 1999 which shall be limited to a
     return of 9.85% on equity capital or actual interest on any debt,
     and which shall include annual depreciation, tax effect, and
     operation and maintenance expenses, all specifically associated
     with treatment, pressure, flushing, pump station ladder, air
     compressor and air tubes, and provided that any adjustment to
     operation and maintenance expenses shall specifically consider
     the reduction in flushing time resulting from the improvements.  
         Wildwood requested recovery from its customers of rate
     case expenses of $4,538.48 for accounting services related to the
     filing.  After the hearing, Staff filed a memo to disallow
     recovery of certain accounting services.  Staff recommended
     disallowance of a $661.00 fee for preparation of Wildwood's case
     and $286.75 in audit expense.  Staff recommended recovery of
     $3,590.73 through a surcharge over a period of 3 years.  With 42
     customers, $3,590.73 collected over twelve quarters would result
     in a surcharge of $7.12 per customer per quarter, beginning with
     quarterly bills as of April 1, 1998.
         After review of the evidence, we find that the terms
     and conditions in the Settlement will result in just and
     reasonable rates while providing Wildwood an opportunity to earn
     a reasonable return on its investment.  The average annual flat
     rate bill, as a result of this increase, will be approximately
     $522.  Although the approximately 65% increase in annual rates is
     a significant amount, we do note that it has been approximately 7
     years since Wildwood petitioned for a rate increase.  Further,
     the rates set in the prior rate case were based on estimated
     costs as there were no reliable records to work from.  Wildwood's
     representative testified at the hearing that actual expenditures
     far exceeded the estimates and that the company has been
     operating at a loss under those rates.
         The Settlement requires Wildwood to contract for an
     engineering study of the system and implement certain future
     improvements to the system which we agree are necessary to
     promote adequate and reliable service in the future.  The
     Settlement also provides for two prospective step adjustments in
     1999.  We will approve the use of the step adjustment mechanism
     as a way to avoid significant rate case expenses in the near
     term.  Wildwood should understand, however, that no step increase
     will take effect unless approved by the Commission.  Though the
     proceeding will not be a full rate case, Wildwood must petition
     the Commission for approval, demonstrating that any improvements
     are used and useful in the provision of utility service and the
     investments undertaken were prudently incurred.
         Further, Wildwood has agreed to provide to its
     customers with its next billing a summary of this order and a
     statement that the full text of the order is available upon
         We conclude that the Settlement is in the public
     interest and therefore we will approve it, pursuant to RSA 378:7. 
     The record reveals that the plant included in rate base is used
     and useful and the investment in that plant has been reasonably
     and prudently incurred.
         We agree with Wildwood and Staff in the value of
     exploring the prospect of connecting the system with the Conway
     Village Fire District or of a purchase of the system by the
     homeowners and in applying for Revolving Loan Fund money.  We
     will instruct Staff to notify us if the discussions lead to a
     transfer agreement.   
         Based upon the foregoing, it is hereby
         ORDERED, that the Settlement entered into between
     Wildwood and Staff is APPROVED; and it is
         FURTHER ORDERED, that Wildwood may, as provided in the
     Settlement, bill its 42 customers a quarterly flat rate of
     $130.50 or $522.00 on an annual basis for bills rendered on or
     after April 1, 1998; and it is
         FURTHER ORDERED, that a rate case expense surcharge of
     $7.12 per quarter per customer to be collected over 12 quarters
     is hereby approved on bills rendered on or after April 1, 1998;
     and it is
         FURTHER ORDERED, that Wildwood submit to the Commission
     for approval any step increase proposed under the Settlement and
     obtain such approval prior to imposing any increase; and it is
         FURTHER ORDERED, that Wildwood distribute to its
     customers a summary of the contents of this order as an insert
     accompanying its next billing; and it is 
         FURTHER ORDERED, that Wildwood submit a properly
     annotated tariff with the Commission within 14 days of the date
     of this order in accordance with N.H. Admin. Rules, Puc
              By order of the Public Utilities Commission of New
     Hampshire this twenty-fourth day of March, 1998.
        Douglas L. Patch    Bruce B. Ellsworth        Susan S. Geiger
            Chairman           Commissioner            Commissioner
     Attested by:
     Thomas B. Getz
     Executive Director and Secretary