DR 98-104
                  Rolling Ridge Water Company
                   Petition to Increase Rates
      Order Addressing Rate Increase and Future Operations
                    O R D E R   N O.  23,140
                        February 8, 1999
       APPEARANCES:  Stephen C. Robinson, C.P.A. for Rolling
     Ridge Water Company; Thomas Sweeny, pro se; and Eugene F.
     Sullivan III, Esq. for the Staff of the New Hampshire Public
     Utilities Commission.
               On July 28, 1998, Rolling Ridge Water System (Rolling
     Ridge) filed a petition for a proposed permanent rate increase
     with supporting financial schedules which, if approved, would 
     result in an annual revenue increase of $7,693.00 or a 91.7%
     increase in customers' annual rates.  On August 31, 1998, the
     Commission issued Order No. 23,004 suspending the proposed rate
     increase for investigation pursuant to RSA 378:6. 
               Rolling Ridge is a public water utility operated as a
     sole proprietorship by Robert A. DeMers, a Maine resident.  The
     water system provides service to thirty (30) customers in a
     limited area of the Town of Bartlett.
                    A.   Rolling Ridge
               Mr. Stephen C. Robinson, CPA, appeared on behalf of
     Rolling Ridge and testified that for the last 6 years the system
     has operated at a loss in the total amount of $14,000.  He stated
     that the revenue increase is necessary to meet increased
     operating expenses, to purchase a new pump and to remain
     financially viable.  The requested rate of return on equity is
     10.4%; the system has no debt. Mr Robinson testified that Mr.
     DeMers was ill and could not be present at the hearing because he
     was in the hospital.  
               Mr. Robinson testified that the system is currently
     being operated by Scott Hayes.  Although Mr. DeMers pays Mr.
     Hayes as work is performed, Mr. Robinson was unaware of any
     written contract between Mr. DeMers and Mr. Hayes.
                    B.   Intervenor Thomas Sweeny
               Mr. Sweeney testified that he believed the Commission
     should step in and appoint a receiver because the health and
     safety of customers are at risk.
                    C.   Staff
               Douglas Brogan, of the Commission's Engineering
     Department, testified that the system has many structural
     deficiencies including an underground pump station that is only 5
     feet from the road and is frequently flooded or covered with
     snow.  Mr. Brogan recommended that the pump station be relocated
     and that there are other severe problems with the system that
     need attention, including: poor water quality; inadequate
     pressure storage; leaks in the distribution system which lead to
     periodic outages; and poor construction generally.   In summary,
     according to Mr. Brogan, the system is in "serious condition" and
     Mr. DeMers clearly does not want to continue to operate it. 
               At the request of a customer, the North Country Council
     filed an application with the Department of Environmental
     Services for state revolving loan funds to be used for three
     possible scenarios: replacement of the system; consolidation of
     the system with up to three small neighboring systems; and
     interconnection with nearby Bartlett Village Fire Precinct.  Mr.
     Brogan recommended delaying any rate increase for at least a year
     or making any increase conditional upon the award of state
     revolving funds or grant money or the transfer of system
               Thomas Scully, of the Commission's Finance Department,
     testified that after making certain adjustments to the proposal
     filed by Rolling Ridge he could support a rate increase of
     44.82%.  The Finance Department, however, strongly opposes any
     rate increase at this time primarily because Rolling Ridge has
     not taken steps to address the high costs associated with system
     leakage, and based on the testimony of Mr. Brogan, customers were
     not receiving safe and adequate service.
               The first issue for our consideration is whether to
     grant the request to increase rates and whether this water
     utility should be placed under our receivership.  
               We agree with Staff that it would be inappropriate to
     grant this particular system a rate increase of 91.7% at this
     time.  Given Mr. DeMers' current and past failure to address
     significant water problems, there is no guarantee that a revenue
     increase would be used for system improvements.  We believe that
     the record supports a finding that Rolling Ridge is failing to
     provide adequate and reasonable service to its customers and that
     such failure is a serious and imminent threat to the health and
     safety of its customers.  
               At this time, however, we will not appoint a receiver,
     but will direct our Staff to take such temporary action as is
     necessary to assure continued service.  RSA 374:47-a.  Such 
     action should include, but not be limited to: finding a party who
     would be willing to act as a receiver; making sure that Mr. Hayes
     is continuing to operate the system; and exploring the
     willingness of another company to acquire the system.  Staff
     shall report its findings to the Commission on these issues
     within 60 days of the date of this order.   
               In the event the water system is placed under the
     supervision of a receiver or the Commission approves the transfer
     of the system to another water utility we will grant the rate
     relief suggested by Staff.  Such action will ensure that any
     revenues garnered through a rate increase are used to improve the
     system and provide safe and adequate service to customers. 
     Moreover, the 44.82% rate increase will not preclude a receiver
     or a new owner from petitioning the Commission for an additional
     rate increase if circumstances so warrant.
               Based upon the foregoing, it is hereby 
               ORDERED, that Robert A. DeMers', doing business as
     Rolling Ridge Water System, request to increase rates is DENIED;
     and it is
               FURTHER ORDERED, that our Staff take the actions set
     forth above and report back to us within sixty (60) days of this
     order; and it is
               FURTHER ORDERED, that the recommended increase in rates
     of 44.82% will be effective upon the appointment of a receiver or
     transfer of the system.
               By order of the Public Utilities Commission of New
     Hampshire this eighth day of February, 1999.
           Douglas L. Patch       Susan S. Geiger     Nancy Brockway
               Chairman           Commissioner          Commissioner
     Attested by:
     Thomas B. Getz
     Executive Director and Secretary