DE 97-255
                     BIRCHVIEW BY THE SACO, INC.
   Investigation into Quality of Service and Future of Water Supply
                       and Distribution System
               Order Extending Receivership for 90 Days
                       O R D E R   N O.  23,002
                           August 31, 1998
         On August 3, 1998, the New Hampshire Public Utilities
Commission (Commission) placed Birchview by the Saco, Inc.
(Birchview or the Utility), a water utility providing service to
approximately 110 customers in a limited area of the Town of
Bartlett, under the receivership of FX Lyons, Inc., the system's
operator, for thirty days pursuant to the provisions of RSA
374:47-a.  Order No. 22,992 (August 3, 1998).  This action was
taken without hearing based on a memorandum of Commission Staff
indicating that there was a "serious and imminent threat to the
health and welfare of customers of the utility . . . ."  RSA
       On August 18, 1998, the Commission held a duly noticed
     hearing to determine whether the Utility should remain in
     receivership.  At the hearing the Commission heard testimony from
     Commission Staff and Mr. Francis Lyons, the principal of FX
     Lyons, Inc.  The Commission also received letters via facsimile
     on the morning of the hearing from the Birchview Homeowners
     Association (Association), a homeowners' association representing
     some, but not all, of the Utility's customers, and George
     Weigold, one customer of the Utility, relative to the
     continuation of the receivership.  The principals of Birchview
     did not appear at the hearing, although the president of
     Birchview did contact Staff the day prior to the hearing to
     inform the Commission that funds received from the recent billing
     were used to pay electric and telephone bills and the remainder
     was placed in the Utility checking account which had a balance of
     approximately $1,000. 
          A.  Birchview Homeowners Association
          The Association requested that the Commission continue
     the receivership for 90 days.  The Association advised the
     Commission that they had requested a representative of the
     Northeast Rural Water Association to conduct a leak survey of the
     water distribution system and that Mr. Lyons had indicated that
     as receiver he would not allow such a survey unless he was paid
     to be present during the procedure.  The Association also
     requested that any other individual or entity retained by the
     Association be allowed to examine the system to determine its
     continuing viability and the cost of bringing the system into
     compliance with state and federal standards.  The Association
     asserted it needed such information in order to present its
     membership with all available information if they were to provide
     meaningful input into the future of the Utility. 
          The Association requested that the Commission direct
     the receiver to allow the Northeast Rural Water Association or
     any other individual or entity it retained to examine the system.
     The Association also raised questions regarding the financial
     condition of the Utility and the legitimacy of certain financial
     transactions in the past by the Utility.
          B.  George Weigold
          By facsimile dated August 18, 1998, Mr. Weigold
     requested that the Utility remain under receivership, but that FX
     Lyons, Inc. be replaced as the receiver.  Mr. Weigold alleged
     that FX Lyons, Inc. was biased because the corporation also
     serves as the system operator of the Lower Bartlett Water
     Precinct (Precinct).  Mr. Weigold concluded that this
     relationship would somehow interfere with the ability of FX
     Lyons, Inc. to continue to operate the system because of the
     financial benefit that it would accrue from the interconnection
     or takeover of the Birchview System by the Precinct.  
          C.  Lower Bartlett Village Precinct
          Although the Precinct did not appear at this hearing
     the record indicates that the Precinct, a municipal corporation
     that provides water service in the vicinity of the Birchview
     system, offered to take over the operation and maintenance of the
     water distribution system after being approached by the current
     owner of the Birchview system who requested the Precinct take
     over the system.  The Precinct would eventually interconnect the
     system with its main transmission and distribution system.  The
     Precinct represented it would provide to the customers of
     Birchview the same quality of service at the same rates it
     provides customers within the Precinct boundaries.
          D.  Commission Staff
          Staff Engineer Douglas Brogan, P.E. testified that the
     water system has not been operated in a professional or safe
     manner in the recent past.  Mr. Brogan testified that the system
     operator has not been paid for its services in over a year and
     that the system operator has taken care of the system at his own
     expense for that period of time.  Mr. Brogan also testified that
     the State Department of Environmental Services (DES) had not been
     paid for water testing services and that it was owed
     approximately $1,000.  Currently the system operator pays for
     these tests without compensation.  Testimony also revealed that
     customers had repaired leaks on the system when the Utility did
     not respond and that the system was in a condition of serious
     disrepair.  Mr. Brogan testified that it would conservatively
     cost approximately $165,000 to bring the system up to State and
     federal standards.  Mr. Brogan recommended that the system remain
     under receivership, and that FX Lyons, Inc. remain as the
          E.  FX Lyons, Inc.
          Mr. Lyons testified that he had not been paid for his
     services in over one year, that the electric bill from the New
     Hampshire Electric Cooperative was months in arrears until just
     this week, and that the previous operator of the system had not
     been paid for his services.  Mr. Lyons also expressed concern
     regarding the financial condition of the Utility and the lack of
     available cash to meet any expenses other than the monthly
     electric bill and his monthly fee.  He concluded that there were
     insufficient funds to meet any extraordinary expenses such as
     leak repairs, pump failures or the like.
          Mr. Lyons also reiterated Mr. Brogan's conclusion that
     the system was in a condition of serious disrepair.  Although Mr.
     Lyons agreed with Mr. Brogan's conclusion, he took issue with Mr.
     Brogan's cost estimates to repair the system.  Mr. Lyons
     estimated that the cost to properly repair the system exceeded
     $300,000 based on his experience in operating 38 water
     distribution systems in northern New Hampshire, and that that
     figure was probably low. 
          The issue for our consideration is whether the
     receivership of this water utility under RSA 374:47-a should
     continue, and if so, what conditions should be placed on the
          Pursuant to RSA 374:47-a, a utility may be placed under
     receivership if it is failing to provide adequate and reasonable
     service to its customers, and if that failure threatens the
     health and welfare of the utility's customers.  Based on the
     record of the August 18, 1998 hearing we find that the owners of
     Birchview by the Saco, Inc. have failed to meet their
     responsibilities to provide utility customers with adequate and
     reasonable service and such failure threatens their health and
     safety.  Thus, the current receivership of the Utility must be
          FX Lyons, Inc., the operator of the system, shall
     remain as the receiver of this utility.  Birchview shall
     surrender all of its books and records to FX Lyons, Inc.
     (Receiver), and shall transfer all checking or savings accounts
     and the like to the Receiver.  The Receiver shall have the
     authority to take all necessary actions to ensure safe and
     adequate service is provided to the Utility's customers.  In the
     event the cost to be incurred for any discrete action taken to
     ensure safe and adequate service exceeds $1,000, the Receiver
     shall obtain preapproval from the Commission's Engineering Staff. 
     The Receiver shall have the authority to take any necessary
     action on an emergency basis and inform our Staff after the
          The record revealed that there were only sufficient
     funds available to meet the normal operating expenses of the
     Utility, the Receiver's monthly fee, which includes the cost of
     bacteriological testing by DES, and the electric bill.  Both
     Staff and Mr. Lyons indicated a concern that there are
     insufficient funds to operate the system in the event any type of
     repair to the system is required.  Staff requested that a
     surcharge be implemented to provide the Utility with sufficient
     funds to pay for such unexpected repairs and to pay the
     outstanding accounts payable to DES, the Receiver and the
     Utility's previous operator.
          After the accounts payable have been audited and
     verified, we believe Staff should meet with customer
     representatives to determine a reasonable revenue level and a
     means of collecting those revenues.  Such meeting shall also
     address the future of this water utility.
           With regard to the request by the Association that the
     Northeast Rural Water Association be provided access to the water
     system to conduct a leak survey, it appears the Receiver has no
     objection as long as it is present to handle any leaks that may
     occur as a result of the survey.  We believe it would be prudent
     for the Receiver to be present during such a procedure in the
     event there are any problems and to foster communication that may
     be constructive regarding any long term solutions for the water
     system.  Should any damage occur as a result of the survey
     conducted by the Northeast Rural Water Association, Northeast
     Rural Water Association should be prepared to reimburse the
     Receiver or any homeowner harmed by the procedure. 
          Although we have placed this Utility under
     receivership, neither the Utility nor its customers should
     consider this a long term solution to the problems they face.  As
     the Commission has stated previously, receivership under RSA
     374:47-a is a "temporary" measure designed to maintain safe and
     adequate service while customers and the Utility examine and
     implement a long term solution to continued service.  See eg., Re
     Beaver Village Realty Trust, 80 NH PUC 31 (1995)
          There are a number of long term alternatives available
     to the Utility and the customers.  These alternatives include
     transfer of the system to the Precinct or to another utility that
     is willing to purchase and rehabilitate the system, or transfer
     of the system to an association of customers, such as the
     existing Homeowners Association.  Based on the record before us,
     however, restoration and reconstruction of the existing system
     would be extremely expensive because of the numerous items that
     need to be corrected to meet state and federal standards.  Such a
     solution also appears problematic given that the existing well
     field could not be used if the existing primary well failed. 
     These are, however, options available to the customers of the
     system should they decide to take over the system or interest
     another utility in taking over the system.  The other alternative
     is to interconnect with the Precinct, which appears to be the
     more economic alternative.
          Subject to Commission review, the customers of the
     utility are to be provided with the opportunity to come to a
     consensus concerning the future of this water supply and
     distribution system.  In the event customers are unable to reach
     a reasonable resolution concerning the future of this water
     supply and distribution system, we will determine what is in the
     public interest for the future of this water utility and
     implement that course of action.  See e.g., RSA 374:30.   
          Based upon the foregoing, it is hereby
          ORDERED, that Birchview by the Saco, Inc. shall remain
     under the receivership of FX Lyons, Inc. for ninety (90) days
     from the date of this order; and it is
          FURTHER ORDERED, that FX Lyons, Inc. as receiver shall
     have the authority to take all necessary and appropriate actions
     to operate the water system located at the Birchview by the Saco
     development including, but limited to, payment of bills,
     rendering of bills and making necessary repairs to the system,
     subject to the conditions set forth in the foregoing report; and
     it is
          FURTHER ORDERED, that the principals of Birchview by
     the Saco, Inc. shall turn over all of the books and records of
     the utility to FX Lyons, Inc.; and it is
          FURTHER ORDERED, that our Staff shall conduct an
     informational hearing as soon as possible for the customers of
     Birchview by the Saco, Inc. in the Town of Bartlett or vicinity
     at a mutually convenient time; and it is
          FURTHER ORDERED, that the Northeast Rural Water
     Association or whatever other individual or entity the Homeowners
     Association selects is granted access to the water supply and
     distribution system to assess the system's condition subject to
     the oversight and supervision of the Receiver with any disputes
     regarding this condition to be resolved by the Commission's
     Engineering Department; and it is
          FURTHER ORDERED, that a hearing be held at 10:00 a.m.
     on November 17, 1998, to assess the progress of the customers
     towards a long term resolution that provides for continued water
     service to the community, the continuing need for a Receiver, or
     the need for Commission action to determine the future of the
     water distribution system; and it is
          FURTHER ORDERED, that the Commission's Finance
     Department conduct an audit of the books and records of the
     Utility and specify those past due accounts for goods or services
     that should be paid; and it is 
          FURTHER ORDERED, that Staff, FX Lyons, Inc., the
     Homeowners Association, and any interested customers attempt to
     determine an appropriate surcharge to be assessed customers to
     ensure the short term viability of the water system and to begin
     repayment of legitimate and verifiable accounts payable owed by
     the Utility to those that have provided goods or services for the
     operation of the system.    
          By order of the Public Utilities Commission of New
     Hampshire this thirty-first day of August, 1998.
       Douglas L. Patch    Bruce B. Ellsworth    Susan S. Geiger
           Chairman           Commissioner        Commissioner
     Attested by:
     Thomas B. Getz
     Executive Director and Secretary