DR 98-120
Pittsfield Aqueduct Company, Inc.
Petition to Decrease Rates
Order Reducing Rates and Approving Financing
O R D E R N O. 23,081
December 8, 1998
APPEARANCES: Sulloway and Hollis by Martin L. Gross,
Esq. for Pittsfield Aqueduct Company, Inc.; and Eugene F.
Sullivan III, Esq. for the Staff of the New Hampshire Public
Utilities Commission.
I. PROCEDURAL HISTORY
On July 17, 1998, Pittsfield Aqueduct Company,
Inc.(Company) filed with the New Hampshire Public Utilities
Commission (Commission) a petition, testimony and exhibits
supporting a 3.89% decrease in rates. The filing was made in
accordance with representations made to the Commission as part of
Pennichuck Corporation's acquisition of Pittsfield Aqueduct
Company, Inc. in Docket No. DE 97-225. Order No. 22,843
(January 30, 1998).
On October 1, 1998, the Commission issued an order of
notice scheduling a prehearing conference for October 28, 1998.
No motions to intervene were filed prior to the prehearing
conference. On September 4, 1998, however, the Town of
Pittsfield indicated by letter that it would appreciate any
action on the part of the Commission to grant some measure of
rate relief to the citizens and ratepayers of Pittsfield.
On October 28, 1998, the Commission held the duly
noticed prehearing conference. There being no intervenors or
opposition to the proposed rate reduction, the Company and Staff
proffered a stipulation designed to resolve all issues presented
by the petition.
Following the hearing, the Commission received a
resolution from the Selectmen of the Town of Pittsfield dated
October 27, 1998, supporting the Stipulation between the Company
and Staff and requesting that the Commission act expeditiously in
implementing the rate reduction.
II. POSITIONS OF THE PARTIES AND STAFF
The Stipulation generally provided that the proposed
rate decrease resulted in just and reasonable rates on the
property of the utility used and useful in service to the public
and that the refinancing that resulted in the rate reduction was
in the public interest.
Specifically, the stipulation and the testimony in
support thereof provided, in relevant part, that the Company had
refinanced an existing long term debt obligation totaling
$1,144,000 having a fixed annual interest rate of 10% with a debt
obligation to the Company's parent, Pennichuck Corporation, at
the annual interest rate of 6.5%. The savings that resulted from
this refinancing were then offset by certain capital expenses and
annual increases in operating expenses made to improve the
operation of the water supply and distribution system. These
increased expenses, all determined by the Staff to have been
prudently incurred, result in a proposed rate decrease of 3.89%.
At the hearing, the Company requested that the rate
decrease be reflected in January bills and further requested that
the Company be authorized to bill monthly instead of quarterly.
III. COMMISSION ANALYSIS
The issues before us are the reasonableness of the
proposed rate reductions and whether the refinancing of the
Company's existing debt obligation with Pennichuck Corporation is
for the public good.
We find that the proposed rate decrease will result in
just and reasonable rates to customers, and is consistent with
the representations of Pennichuck Corporation in DE 97-225. We
note, however, that there was some confusion expressed at the
hearing regarding the accounting treatment and rate treatment of
a water filtration grant received by the Company from the State
Department of Environmental Resources. Staff and the Company
should meet to determine the appropriate accounting treatment of
this grant.
Staff and PAC also requested that the rate decrease be
effective on a bills rendered rather than a service rendered
basis. PAC testified it bills customers in arrears, but that the
rate decrease should be effective retrospectively because the
savings achieved through refinancing had been recognized during
this billing period.
Pursuant to N.H. Admin. Rule, Puc 1203.05 (b), all rate
changes must be implemented on a service rendered basis unless
the Commission waives the provision of the rule. N.H. Admin.
Rule, Puc 201.05 authorizes the Commission to waive the
provisions of any rule where the waiver serves the public
interest and does not disrupt the orderly proceeding of the
Commission. In the case at hand, we believe a waiver is in the
public interest and therefore should be granted, because the
savings that will be passed on to ratepayers pursuant to this
filing were achieved during the period when service was rendered
in the billing period at issue.
With regard to the refinancing of the existing debt
obligation by the Company's parent, the record reveals that there
is in fact no formal note documenting this debt. We do not
believe such informality is appropriate in these circumstances.
The Company and its parent should reduce the terms and conditions
of the note to writing and file the note with the Commission
within one month of the date of this order. We find the
refinanced debt to be in the public interest based on the new
rate of interest, but we will reserve our right to revisit this
conclusion once we have reviewed the terms and conditions of the
note after it has been filed with the Commission for our approval
under RSA 369.
The Commission will issue a separate order addressing
the issue of switching from quarterly to monthly billing.
Based upon the foregoing, it is hereby
ORDERED, that the proposed rate reduction of 3.89% is
APPROVED; and it is
FURTHER ORDERED, that the debt obligation entered into
between Pittsfield Aqueduct, Inc. and Pennichuck Corporation is
consistent with the public interest subject to our review of the
terms and conditions of the new note; and it is
FURTHER ORDERED, that the formal note shall be filed
with this Commission within one month of the date of this order;
and it is
FURTHER ORDERED, that the provisions of Puc 1203.05
requiring all changes in rates to be implemented on a service
rendered basis are waived pursuant to Puc 201.05 and the rate
decrease shall be implemented on a bills rendered basis; and it
is
FURTHER ORDERED, that Pittsfield Aqueduct Company, Inc.
shall file properly annotated tariff pages in compliance with
this Order no later than 15 days from the issuance date of this
order, as required by N.H. Admin. Rules, Puc 1603.
By order of the Public Utilities Commission of New
Hampshire this eighth day of December, 1998.
Douglas L. Patch Susan S. Geiger Nancy Brockway
Chairman Commissioner Commissioner
Attested by:
Thomas B. Getz
Executive Director and Secretary