DF 95-016 Pittsfield Aqueduct Company, Inc. Petition for Authority to Borrow and for Authority for a Step Increase in Rates Order Denying Petition of the Town of Pittsfield for Rehearing O R D E R N O. 22,894 April 7, 1998 On December 31, 1997, the New Hampshire Public Utilities Commission (Commission) issued Order No. 22,811 in this docket (the Order) providing for an increase in the revenues and rates of the Pittsfield Aqueduct Company, Inc. (PAC). This increase in revenues, amounting to $217,952 or 101.6% over current revenues, resulted primarily from PAC's construction of a new water treatment plant in compliance with the federal Safe Drinking Water Act (SDWA). In the Order, the Commission approved the proposal of PAC to allocate the revenue increase in a manner which provided for an increase of approximately 155% to water customers and for an approximate increase of 40% to fire protection rates. In its Order, the Commission noted that a cost of service study completed for PAC during the proceeding indicated that current fire protection revenues were adequate to cover the costs of providing such service. However, the Commission approved an increase in such fire protection revenues because the level proposed by PAC represented 30% of PAC's revenues, a standard often used in the industry and other regulatory commissions. In addition, the Commission pointed to testimony presented at the hearing which indicated the Town was to receive a substantial increase in property tax revenues as a result of the construction of the treatment plant that caused the increase in rates. On January 15, 1998, the Town of Pittsfield, an intervening party to this docket, submitted a Motion for Rehearing (the Motion) of the Order, indicating that it believed the Commission erred in granting any increase in the fire protection rates. The Town averred that the Commission did not give proper weight to testimony which established that the existing fire protection rates were equal to or in excess of the cost of service for that rate classification. In addition, the Town asserted its belief that such rate setting unfairly subsidizes one rate class, i.e., General Metered Service Customers, at the expense of another, namely the taxpayers of the Town of Pittsfield, the vast majority of whom, they contend, receive no benefit or service under the fire protection rates charged to the Town of Pittsfield and included in their municipal property tax. The Town also questioned the Commission's reliance on and the relevance of the standard adopted in Maine, of a 30% allocation of a utilities' revenue to fire protection, and the Town also questioned the appropriateness of pointing to property tax revenue to be derived from the new treatment plant as further justification for the Commission's decision. The Town asked that the Commission rescind the Order as it relates to the increase in fire protection rates; issue a new order providing for revenues for the municipal fire protection classification of $76,898 annually; amend the allocations of revenues to the remaining rate classifications as per the cost of service study; rescind its action in accepting a standard establishing that fire protection revenues for smaller water companies shall be 30% allocated to municipal fire protection; and, rescind its action in linking property tax revenue to be derived from new plant or improvements with the rates to be charged to a municipality for fire protection. Having reviewed the Town's petition for rehearing in this matter, we believe our decision as detailed in Order No. 22,811 is sound. We continue to believe that the benefits the Town receives from property tax increases should be factored into our analysis. Moreover, we believe that the use of a 30% standard of a water utility's revenue to municipal fire protection revenues is appropriate under these circumstances, especially when considering the substantial increase in rates to Pittsfield residents taking service from PAC without such an allocation. Based upon the foregoing, it is hereby ORDERED, that the request for rehearing by the Town of Pittsfield is DENIED. By order of the Public Utilities Commission of New Hampshire this seventh day of April, 1998. Douglas L. Patch Bruce B. Ellsworth Susan S. Geiger Chairman Commissioner Commissioner Attested by: Thomas B. Getz Executive Director and Secretary