DF 96-210
                Petition for Authority to Issue Securities
                             and Increase Rates
                     Order Approving Increase in Rates
                          O R D E R  N O.  22,884
                              March 27, 1998
         APPEARANCES: Jay C. Boynton, Esq. for Tilton &
     Northfield Aqueduct Company; and Eugene F. Sullivan III, Esq. for
     the Staff of the New Hampshire Public Utilities Commission.
               The New Hampshire Public Utilities Commission
     (Commission) authorized the Petitioner, Tilton & Northfield
     Aqueduct Company, Inc. (TNA or the Company) in Docket DF 95-185,
     by Order No. 21,876, to issue securities in an amount not to
     exceed $3,124,398.  Order No. 21,876 also found the proposal to
     finance the construction of gravel packed wells in Northfield and
     a new transmission system to comply with the Safe Drinking Water
     Act (SDWA) to be prudent uses of the funds.  The Commission also
     approved a Stipulation entered into by TNA and Staff which
     resolved all of the issues in the proceeding and set forth the
     ratemaking methodology to be used to derive TNA's revenue
     requirement once the new source of supply provided service to
     customers.  On August 27, 1996, the Commission issued Order No.
     22,296 in DF 96-210 which provided authorization for borrowing an
     additional $64,318 for larger transmission mains in order to
     achieve acceptable fire flows.  On February 11, 1997, the
     Commission issued Order No. 22,502 which increased TNA's
     financing authorization up to $3,841,965, to enclose its storage
     reservoir rather than use a floating cover system.   Finally,
     Order No. 22,564 (April 21, 1997) further authorized the Company
     to increase its total borrowing authority up to $4,159,889.  The
     increase in financing related to the lapse in time since the
     original estimates in 1995 and the subsequent higher bids for the
     well pumping station and the water main improvement projects. 
               On December 30, 1997, the Company filed financial
     schedules, per the terms of the Stipulation in DF 95-185, which
     would provide for a 192% increase in its currently approved rates
     as a result of the construction of the wells, pump station,
     transmission system and one half of the storage reservoir (Phase
     I of the project).  Those schedules included the Company's
     calculations of the final construction costs of Phase I as well
     as related increases in expenses.
               A duly noticed prehearing conference was held on
     February 25, 1998.  The Commission received no requests for
     intervention.  On March 10, 1998, the Commission issued Order No.
     22,866 approving a procedural schedule to govern its
     investigation into the proposed increase in rates.  On March 16,
     1998, the Commission heard testimony from the Company and Staff
     in support of a rate increase. 
               TNA and the Staff presented financial schedules at the
     hearing which provided for a 180% increase in revenues for TNA. 
     In accordance with the methodology approved in the Stipulation in
     DF 95-185, TNA's rate increase would be calculated based on the
     new capital additions installed to comply with the SDWA as well
     as 1995 test year data.
               Staff witness Steven Mullen presented the schedules and
     explained the components of the rate increase.  An audit of the
     construction costs had been completed and the Company's records
     were found to be in good order.  The major exception noted during
     the audit, the amount of interest to be capitalized as part of
     the plant costs, was resolved with the Company.  TNA's plant in
     service totaled $4,036,520 which consisted of the cost of the new
     capital additions and the December 31, 1995 plant balance. 
     Subtracting accumulated depreciation resulted in net plant in
     service of $3,592,674.  Adding a cash working capital allowance
     of $61,866, materials and supplies of $16,357 and prepayments of
     $7,438 yielded a total rate base of $3,678,336.  Applying the
     overall cost of capital of 9.59% determined for this proceeding
     to the rate base resulted in a revenue requirement of $352,775. 
     Combining the revenue requirement with the proforma test year
     loss and a calculated tax effect yielded an overall revenue
     deficiency of $573,972, requiring an increase of 180% over test
     year revenues.  It was noted that the proposed effective date for
     the increased rates resulting from this proceeding would be
     January 1, 1998, to be reflected in bills rendered April 1, 1998.
               Mr. Mullen noted that the financial schedules, prepared
     by the Company, were agreed to by Staff earlier in the day prior
     to the hearing.  While Staff noted some minor calculation errors
     in the schedules, the schedules were accepted as presented.  It
     was agreed with the Company that final reconciliation of all
     numbers would occur during the proceedings for Phase II of the
     compliance project, which TNA anticipates filing in June 1998. 
     Items to be completed during Phase II include the second half of
     the reservoir, installation of a backup generator at the
     pumphouse and paving projects.
               It was further noted that TNA had filed an additional
     financing petition with the Commission in February 1998 for the
     primary purpose of replacing concrete-tin mains which were
     experiencing leaks due to increased system pressure from placing
     the Phase I plant additions in service.  This was an
     unanticipated consequence and Staff recommended that, due to
     timing considerations, the financing petition be assigned a new
     docket number, although it was referred to as "Step III"
     throughout the proceeding.
               Staff witness Douglas Brogan explained that Staff had
     been in contact with the Company throughout the construction
     process, had visited the site of the new wells and pumphouse, and
     was satisfied with the Phase I plant additions.  Mr. Brogan
     further explained that, regarding Step III, the leakage in
     concrete-tin mains occurred in spite of surge protection
     installed in the new pump station and the relatively low pressure
     increases seen in the system from the project.  He stated that
     the leakage was more a reflection of the age and type of mains
               Kenneth Money, President of TNA, detailed the
     construction process and the financial and engineering oversight
     responsibilities required by the bank.  Mr. Money was asked what
     the potential rate implications were for Phase II of the
     compliance project.  He explained that it was difficult to
     determine because TNA had submitted an application for a Surface
     Water Treatment Rule Filtration grant which could potentially
     offset 30% of the costs of qualified Phase I and II plant
     additions.  Any potential impact on rates could, in fact, be
     negative.  The Company did not yet know whether it will be
     receiving the grant.
               Mr. Money also elaborated on the problems the Company
     had been experiencing with the concrete-tin pipe and the
     difficulty involved in repairing it.  He expected that if the
     main replacement project is approved it will be completed by mid-summer 1999.  TNA applied for State Revolving Loan Funds from the
     Department of Environmental Services and is on the list to
     potentially receive funding.  That funding is contingent in part
     upon receiving approval from the Commission to borrow and
     increase rates accordingly.  He explained that TNA has been
     identified as a disadvantaged water company which would make the
     Company eligible for principal forgiveness, lessening the
     potential rate impact.
               Attorney Boynton read into the record the following
     procedural schedule for Phase II of the SDWA project proposed by
     Staff and the Company:
          Audit of 1995 Test Year                April - May 1998
          Company Filing                             July 1, 1998
          Data Requests                             July 15, 1998
          Data Responses                           August 1, 1998
          Staff Testimony                       September 1, 1998
          Hearing                           September 15-20, 1998
               We have reviewed the financial schedules presented by
     the Company and Staff, and approve them as presented.  We note
     that the agreed upon 180% increase in rates is lower than the
     192% originally requested by the Company.  We previously
     addressed and approved the construction on TNA's water system,
     which was necessary to comply with the SDWA.  We are now
     approving the 180% increase in rates necessary to service the
     debt incurred to bring the water system into compliance with
     federal law.  Although this is a dramatic increase in rates, it
     is just and reasonable in light of the significant modifications
     made to the water system to meet the requirements of the SDWA.  
               We find that all investments that are the subject of
     this proceeding have been prudently incurred and that the
     facilities are used and useful in the provision of public utility
     service.  We direct the Company to vigorously pursue State
     Revolving Loan Funds and any other avenues available that will
     assist in reducing rates to customers and to keep the Commission
     informed of all such efforts.
               We also find the aforementioned procedural schedule set
     forth during the hearing for Phase II of the SDWA compliance
     project to be reasonable and will approve it for the duration of
     the proceeding.
               Finally, the financing petition for "Step III" has been
     assigned a new docket number, DF 98-035.  We find that to be
     reasonable in light of the fact that construction may not be
     completed until mid-1999.
               Based upon the foregoing, it is hereby 
               ORDERED, that Tilton & Northfield Aqueduct Company is
     authorized to increase its rates related to Phase I of the SDWA
     compliance project, effective January 1, 1998, as per the
     Stipulation in DF 95-185, in order to recover additional revenues
     of $573,972; and it is
               FURTHER ORDERED, that the procedural schedule
     delineated above for Phase II of the project is approved; and it
               FURTHER ORDERED, that TNA submit a properly annotated
     tariff with the Commission within 10 days of the date of this
     order in accordance with N.H. Admin. Rules Puc 1603.06(o); and it
               FURTHER ORDERED, that matters related to the financing
     petition filed on February 11, 1998 will now be addressed in
     docket DF 98-035.
               By order of the Public Utilities Commission of New
     Hampshire this twenty-seventh 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