DE 97-255
                  BIRCHVIEW BY THE SACO, INC.
  Investigation into Quality of Service and Continued Utility
                  Order Extending Receivership
                    O R D E R   N O.  23,105
                        January 12, 1999
     I.     BACKGROUND
       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 that hearing the Commission heard testimony
     from Francis Lyons, the principal of FX Lyons, Inc., and Douglas
     Brogan, P.E., the Commission's Water Engineer.   Mr. Brogan's and
     Mr. Lyon's testimony generally revealed that the water system was
     in poor condition and could fail at any time with the loss of the
     one remaining pump.  They also testified that: 1) FX Lyons, Inc.
     and a number of others that had provided services to the utility
     had not been paid by the utility; 2) the State of New Hampshire,
     Department of Environmental Services (DES) would no longer accept
     monthly water samples for bacteriological testing without first
     being paid because the utility owed DES over a thousand dollars
     for earlier testing it had provided; 3) the system was slowly
     deteriorating and major capital investments would be required to
     maintain a viable water supply and distribution system in the
     near future; 4) the system was experiencing numerous leaks
     because of its age and construction, and that the system had a
     number of "significant deficiencies", as determined by DES, which
     had never been addressed.  Based on this testimony, the
     Commission placed the utility under receivership for a period of
     90 days to ensure that customers received safe and adequate
     service that did not threaten their health or safety.  Order No.
     23,002 (August 31, 1998).  The Commission also urged the
     utility's customers to attempt to come to agreement concerning
     the available options for future water service to their community
     and directed Staff to conduct an informational meeting in the
     town of Bartlett to advance that end.  
       The informational hearing was held on October 17, 1998
     at the VFW Hall in Bartlett, New Hampshire.  According to Staff,
     presentations of available options and cost estimates for the
     future of the water distribution system were made by Commission
     Staff, representatives of DES, Birchview customers Karen and
     George Weigold (Weigolds), the Lower Bartlett Water Precinct.  
     (Precinct).  Staff also presented a brief cost overview of
     different options prepared by the North Country Council (NCC).   
       On November 17, 1998, a hearing was held to review the
     status of the receivership, customer progress towards a permanent
     resolution to the water supply needs of the community and the
     need to continue the existing receivership.  Moreover, since the
     November 17, 1998 hearing the Commission has received
     correspondence from two customers concerning their positions with
     regard to the future of this water utility.  At the November 30,
     1998 meeting the Commission orally extended the receivership
     previously approved by the Commission for another 60 days,
     scheduled a technical session for January 14, 1999, and a hearing
     for January 20, 1999 to address the merits of the future of this
     utility.  Thus, receivership was continued until January 29,
     1999, with this order to follow.   
       A. Commission Staff
       Staff Engineer Brogan reiterated the position he set
     forth at the August 18, 1998 hearing, testifying that the water
     distribution system was in a state of significant deterioration
     and that it would "conservatively" cost approximately $165,000 to
     bring the system up to "bare bones" state and federal standards. 
     He further testified that this would not address all of the long-
     term capital improvements that would be required immediately or
     in the near future.  Mr. Brogan also presented a similar analysis
     prepared by NCC which supported these conclusions. 
       B.  George Weigold
       Mr. Weigold, a resident and customer of Birchview and a
     self employed general contractor that has performed work on the
     system, testified that the system could be repaired for a
     fraction of the cost estimated by Mr. Brogan, Mr. Lyons and NCC.  
     Mr. Weigold requested that the receivership be continued for 60
     days and requested that Commission Counsel provide him with an
     opinion regarding the effect and enforceability of certain
     provisions contained in some customers' deeds.  
       C.   FX Lyons, Inc.
       Mr. Lyons testified regarding the poor conditions of
     the books and records of the utility which kept him from
     verifying and consequently paying any of the back debts of the
     utility.  He further indicated a willingness to continue as
       D.  Birchview Homeowners Association
       By letter dated November 12, 1998, the Board of
     Directors of the Homeowners Association informed the Commission
     that it had voted 6-2 in favor of transfer of the water system to
     the Precinct.  The Board also expressed concern over the
     inability of the Association and the customers in general to
     reach consensus concerning the future of their water system.  The
     Board also requested that the Commission conduct an independent
     poll of the customers to determine the overall preference of the
       Following the hearing, the Commission received
     correspondence from T.M. Egbert and James E. Richard, customers
     of the water system.  Both Mr Egbert and Mr. Richard requested
     that the Commission issue an order providing for the
     interconnection of the Birchview system with the Precinct.    
       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
       When the Commission placed this utility under its
     receivership it specifically noted that receivership was not a
     long-term solution to the utility's or the customers' problems. 
     Rather, the Commission noted that receivership was a temporary
     measure taken to provide this utility and, more importantly, its
     customers, an opportunity to come to a mutually acceptable
     long-term resolution for the provision of water service to the
     community.  Order No. 23,002 (August 31, 1998).  
       The Commission went on to note that,   
         [i]n 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.
     Order No. 23,002 at 10.
       It is apparent from the hearings in this matter and the
     correspondence that we have received that the customers cannot
     come to a mutually agreeable resolution concerning the future of
     water service to their community.  It is also apparent that
     disagreement over the future of the water distribution system is
     having a negative and divisive effect upon the community.  Thus,
     we shall conduct a hearing to determine what options are
     available to provide water service to the community and which
     option best serves the public interest.
       In our oral deliberations we continued the receivership
     for sixty (60) days and set the dates of January 14, 1999 and
     January 20, 1999, respectively, for a technical session and a
     hearing on the merits.  Since those deliberations we have learned
     that Mr. Lyons, the principal of the system operator, is
     unavailable on those dates.  Because his input into this decision
     would be valuable, we will reschedule the technical session for
     February 4, 1999 and a hearing on the merits at 10:00 am on
     February 16, 1999.  Any testimony that is proposed to be given at
     the hearing should be prefiled with the Commission on or before
     February 3, 1999.  Consequently, the receivership shall continue
     until we have issued a decision following the hearing. 
       Based upon the foregoing, it is hereby
       ORDERED, that Birchview by the Saco, Inc. shall remain
     under the receivership of FX Lyons, Inc. until an order issues
     following the hearing set for February 16, 1999.    
       By order of the Public Utilities Commission of New
     Hampshire this twelfth day of January, 1999.
           Douglas L. Patch       Susan S. Geiger     Nancy Brockway
               Chairman           Commissioner          Commissioner
     Attested by:
     Thomas B. Getz
     Executive Director and Secretary