Nashua: City takeover of Pennichuck Water Works would cause 60% hike!

[KBCraig]

This is an ongoing issue, as seen in these threads:

http://newhampshireunderground.com/forum/index.php?topic=428.0
http://newhampshireunderground.com/forum/index.php?topic=8301.msg148668#msg148668
http://newhampshireunderground.com/forum/index.php?topic=9977.msg172945#msg172945


Consultants say that if the city takes over PWW by eminent domain, it will cost consumers at least 60% more.

http://www.unionleader.com/article.aspx?headline=Nashua%27s+acquisition+of+PWW+may+result+in+%27rate+shock%27&articleId=ddb8d780-b316-4492-9da0-bb0294db2f34

Nashua's acquisition of PWW may result in 'rate shock'

By DENIS PAISTE
New Hampshire Union Leader Staff

CONCORD – Customers of Pennichuck East Utility and Pittsfield Aqueduct Co. would experience rate shock, with increases of more than 60 percent, if the city of Nashua is successful in acquiring Pennichuck Water Works by eminent domain, according to testimony yesterday.

All three companies are under the umbrella of Merrimack-based Pennichuck Corp.

John F. Guastella, president of Guastella Associates Inc., in Boston, who was hired by Pennichuck to prepare a rate analysis, was questioned at the state Public Utilities Commission by attorney Robert Upton, who represents the city of Nashua.

Asked whether the anticipated rate hike if the two smaller affiliates are separated from the much larger Pennichuck Water Works meant that Nashua ratepayers are "subsidizing" the smaller entities' customers, Guastella refused to accept that characterization.

Instead, Guastella said, the customers simply benefitted from "economies of scale" by being tied in with the larger water works.

"That's not a subsidy, it's smart utility operation and smart regulation to encourage larger utilities to take advantage of economies of scale," Guastella said.

But those economies will be lost to the companies as stand-alone entities, he said.

However, Nashua customers would see no big change in rates if the city is successful in acquiring Pennichuck Water Works by eminent domain, according to Guastella, who is a former Director of the Water Division, New York State Public Service Commission.

Guastella based his rate analysis on a market value for Pennichuck Water Works of $248,400,000, which was determined by Pennichuck's valuation expert.

"On the basis of my analysis of 2005 operations of these companies, I found that if the City of Nashua acquired PWW, PEU would have needed a rate increase of approximately 64 percent above the revenue requirement PEU would have had without the acquisition; and PAC would have needed a rate increase of about 66 percent above the revenue requirement it would have had without the acquisition," Guastella said in written testimony.

Those increases will be on top of a 21 percent hike Pennichuck East Utilities asked the Public Utilities Commission to approve in May. The PUC granted a temporary rate increase of 12 percent effective May 29, 2007.

Pennichuck Water Works has about 25,000 customers, of whom about 21,500 are in Nashua. Pennichuck East Utility serves about 5,000 customers in Atkinson, Bow, Chester, Derry, Exeter, Hooksett, Lee, Londonderry, Litchfield, Pelham, Plaistow, Raymond, Sandown and Windham. Pittsfield Aqueduct Co. serves the town of Pittsfield.

Nashua also sought to take over the two smaller Pennichuck affiliates, but in January 2005, the Public Utilities Commission narrowed the scope of the taking to include only Pennichuck Water Works.

The PUC would need to find that the taking was in the public interest in order to approve it.

The hearing resumes at 9 a.m. today.