DR 97-243
                      Indian Mound Water Corporation
                        Petition to Increase Rates
                   Order Approving Settlement Agreement
                         O R D E R   N O.  22,974
                               July 7, 1998
         APPEARANCES: Mary Ellen Goggin, Esq. On behalf of
     Indian Mound Water Corporation; and Eugene F. Sullivan, III,
     Esq. for the Staff of the New Hampshire Public Utilities
               On December 18, 1997, the Indian Mound Water
     Corporation (Company) filed revised with the New Hampshire
     Public Utilities Commission (Commission) permanent tariff
     pages designed to increase its annual revenues by $15,294,
     an increase of 145% over its current authorized level of
     rates.  The Company provides service to 77 customers in a
     limited area of the Town of Ossipee.  Operation, maintenance
     and management services are provided pursuant to a contract
     with Consolidated Water Company, an affiliate of the
               By Order 22,837 (January 19, 1998) the Commission
     suspended the proposed revisions to the Company's permanent
     rate tariffs pursuant to RSA 378:6, pending investigation
     and decision thereon.  By Order 22,837 the Commission also
     scheduled a prehearing conference to address procedural
     matters regarding the proposed permanent rate increases, and
     ordered the Company to mail a copy of the Order to all of
     its customers by first class mail postmarked no later than
     January 30, 1998.  
               The Company duly noticed the hearing and filed an
     Affidavit of Notice with the Commission on January 30, 1998. 
     In accordance with the Commission's Order of Notice, a
     prehearing conference was held on February 17, 1998.  No
     petitions for intervention were filed prior to the hearing
     nor made orally at the prehearing conference.    
               Following a period of discovery in which the
     Company responded to data requests and Staff audited the
     books of the Company, the Company and Staff entered into a
     Settlement Agreement which they presented to the Commission
     at a hearing on May 19, 1998. 
           A.  Revenue Requirement
               Based on Staff's audit of the books and records of
     the Company, the Settlement Agreement provides for a revenue
     requirement of $21,843, which reflects an overall increase
     in revenues of 196%.  This results in an increase of a
     residential customer's annual bill from $101 to $283.68.
          B.   Rate Design
               Although Order No. 22,203 (June 19, 1996), which
     approved the acquisition of this water utility by its
     current principals, required the metering of the system,
     Staff and the Company agreed to retain the current flat rate
     for billing purposes.  The Company agreed to file a request
     pursuant to N.H. Admin. R., Puc 603.03 to request a
     modification of Order No. 22,203 to remove the metering
     requirement for this particular system because of the
     seasonal nature of the residents.  
               The Staff and the Company also agreed to modify
     the Company's tariff to remove an availability charge on
     unbuilt lots in the service territory.  Staff and the
     Company based this recommendation on the fact that a number
     of residences occupy two lots, some lots are unbuildable and
     because the owners of those lots that are buildable refused
     to pay bills rendered.        
          C.   Management Contract
               The Staff and the Company agreed to allocate 10%
     of the overhead costs of Consolidated Water Company to IWS,
     Inc. an unregulated affiliate, for the purposes of this case
     with the understanding that this issue will be revisited in
     subsequent cases.
               Based on the testimony of Staff and the Company,
     and the Staff's audit of the books and records of the
     Company we find the proposed increase in revenues just and
     reasonable based on the assets of the company used and
     useful in service to customers.
               With regard to rate design issues, we will allow
     the Company to continue to bill on a flat rate basis pending
     its request for exemption from our general requirement that
     utility services be metered, and we will accept the proposed
     revision to the tariff to remove the availability fee.
               The next issue for our consideration is the
     management contract and the proposed allocation of overhead
     to the unregulated affiliate for the purposes of this
     proceeding.  Our records do no indicate any explicit review
     or approval of management contract between and among all of
     the affiliates owned or operated by the principals of the
     Company.  Thus, we believe our Staff and the principals
     should confer regarding the inter-relationships among the
     affiliates and ultimately initiate a proceeding under RSA
     366 for our review.
               Finally, subsequent to the hearing, our Staff
     audited the expenses of the Company incurred in the
     prosecution of the rate case.  Staff has concluded, and the
     Company agreed, that the Company reasonably incurred rate
     case expenses of $7339 which should be recovered from
     ratepayers via a surcharge over a two year period.  The
     resultant surcharge amounts to a $11.91 charge per quarterly
     bill, or $47.64 per year.  The recovery of those expenses
     through a surcharge over eight quarters balances the
     interests of the Company and its customers. 
               Although we cannot affirmatively establish that
     the rate cases expenses incurred to prosecute this
     proceeding are unreasonable, we are concerned with the
     amount of money that was expended by the Company in this
     proceeding which was ultimately resolved through settlement. 
     We believe the Company should make every effort in future
     proceedings to avoid such expenses where possible or to
     institute appropriate measures to keep these expenses in
               Based upon the foregoing, it is hereby 
               ORDERED, that the Settlement between Commission
     Staff and Indian Mound Water Corporation is approved in
     accordance with the foregoing report; and it is 
               FURTHER ORDERED, that the revenues approved
     therein may be collected on a bills rendered basis on or
     after the date of this order; and it is 
               FURTHER ORDERED, that rate case expenses in the
     amount of $7339, may be collected by surcharge over a two
     year period.
               By order of the Public Utilities Commission of New
     Hampshire this seventh day of July, 1998.
       Douglas L. Patch    Bruce B. Ellsworth   Susan S. Geiger
           Chairman           Commissioner       Commissioner
     Attested by:
     Thomas B. Getz
     Executive Director and Secretary