DE 96-227
           Pennichuck East Utility, Inc./Pennichuck Corporation
            Sale of Consumers New Hampshire Water's Non-Hudson
               Water System to Pennichuck East Utility, Inc.
              Order Approving Pennichuck East Utility, Inc.'s
                          Petition for Financing
                         O R D E R   N O.  22,893
                               April 6, 1998
         On March 26, 1998, Pennichuck Corporation (PC) and its
     wholly-owned subsidiary Pennichuck East Utility, Inc. (PEU)
     (collectively, Pennichuck) filed a petition with the New
     Hampshire Public Utilities Commission (Commission), pursuant to
     RSA 369, for authorization to issue and sell $4,500,000 of debt. 
     The purpose of the debt is to acquire the "Non-Hudson" utility
     assets of Consumers New Hampshire Water Company (Consumers) from
     the Town of Hudson (Hudson).
         The lengthy procedural history of this docket is
     described in previous Commission orders.  In particular, Order
     No. 22,792 (the Order), issued November 21, 1997, describes the
     involvement of Pennichuck in the proceeding as a party to Phase 2
     of the docket.  The Order provided Commission approval for
     Pennichuck's acquisition of the utility assets of Consumers
     located outside of the Town of Hudson, immediately after their
     purchase by Hudson.  The purchase price of these assets is
     $7,500,000.  The Order provided for Pennichuck to charge rates to
     the approximately 3,500 customers at a level 10% below those
     charged previously by Consumers, on an interim basis for 18 to 24
     months until a rate case is filed.  The Commission authorized a
     capital structure for the new utility, Pennichuck East Utility,
     Inc., of 60% debt and 40% equity.  The equity amount of
     $3,000,000 is to come from PC, which would derive such funds from
     a dividend to be paid by an unregulated subsidiary, Southwood
     Corporation.  It is the 60% debt, or $4,500,000, which is the
     subject of the instant petition.
         Pennichuck has received a commitment letter from Fleet
     Bank-New Hampshire for a loan of $4,500,000, for which Pennichuck
     Corporation and Pennichuck East Utility, Inc. will be jointly and
     severally liable.  The note will also be secured by a first
     mortgage on the assets of Pennichuck East Utility, Inc.  The note
     will initially be structured as a Line of Credit, and after two
     years will convert to a term facility for the remaining five
     years.  Pennichuck requested a fixed rate for the loan, and in
     order to accommodate that request Fleet Bank, N.A., the parent of
     the lending institution Fleet Bank-New Hampshire, will enter into
     a swap agreement with Pennichuck effective at the closing date. 
     Under the swap agreement, Fleet Bank, N.A. will reimburse
     Pennichuck for its variable interest payments paid to Fleet Bank-New Hampshire and, in exchange, Pennichuck will pay Fleet Bank
     N.A. a monthly interest payment at a fixed rate of 6.5% over the
     seven year term of the note.  Pennichuck is to also pay Fleet
     Bank-New Hampshire an origination fee of $25,000 at closing.
         In our Order No. 22,792 (November 21, 1997), we
     approved Pennichuck's purchase of the Non-Hudson assets of
     Consumers New Hampshire Water Company as being in the public
     interest.  Also in that Order, we found that Pennichuck had the
     requisite managerial, technical and financial expertise to assume
     ownership of the assets.  In addition, in our Order No. 22,880
     (March 23, 1998), we provided our specific approval for
     Pennichuck to engage in business, and for Consumers to terminate
     service, consistent with our findings in the November Order.  The
     only remaining matter, then, for our consideration, is review and
     approval of Pennichuck's financing arrangements pursuant to RSA
         Our Staff has reviewed the financing proposal presented
     by Pennichuck.  We have reviewed Staff's recommendation with
     respect to that financing and we find that the terms and
     conditions of the proposed financing are reasonable, and we will
     approve them.  We note that the Staff recommendation provides
     comment on the source of the equity funds to be infused into PEU,
     namely that the parent Pennichuck Corporation, coincident with
     the note being executed as contemplated herein, is also borrowing
     from Fleet Bank in order to effectuate the purchase of the water
     assets from Hudson.  We note that, consistent with our Order No.
     22,792, we continue to reserve our right to evaluate the capital
     structure of the new utility at the time it files a rate case 18
     to 24 months after assuming ownership of the assets.
         Based upon the foregoing, it is hereby
         ORDERED, that Pennichuck East Utility, Inc. And
     Pennichuck Corporation, are hereby authorized, pursuant to RSA
     369, to execute and deliver its note to Fleet Bank-New Hampshire
     in the amount of $4,500,000, together with a security interest in
     the assets of Pennichuck East Utility, Inc.; and it is
         FURTHER ORDERED, that Pennichuck East Utility, Inc. and
     Pennichuck Corporation provide executed copies of the loan
     documents following closing.
         By order of the Public Utilities Commission of New
     Hampshire this sixth day of April, 1998.
        Douglas L. Patch    Bruce B. Ellsworth        Susan S. Geiger
            Chairman           Commissioner            Commissioner
     Attested by:
     Thomas B. Getz
     Executive Director and Secretary