DF 98-035 TILTON & NORTHFIELD AQUEDUCT COMPANY, INC. Petition for Authority to Issue Securities and Increase Rates Order NISI Approving Financing and Stipulation O R D E R N O. 22,908 April 28, 1998 The Petitioner, Tilton & Northfield Aqueduct Company, Inc. (TNA or the Company), was authorized by the New Hampshire Public Utilities Commission (Commission) in dockets DF 95-185 and DF 96-210 to issue securities in an amount not to exceed $4,159,889 pursuant to RSA 369. The funds were expended to construct gravel packed wells in Northfield, a new transmission system, reservoirs and other plant to comply with the Surface Water Treatment Rule of the Safe Drinking Water Act (SDWA). The use of the funds was found to be prudent by the Commission. Order No. 21,876 (October 24, 1995) and Order No. 22,296 (August 27, 1996). On December 31, 1997, Phase I of the project was completed and the new wells and transmission system were placed in service. Those system improvements resulted in slightly increased water pressure which caused numerous failures in "cement-tin" mains located in the Towns of Tilton and Northfield which were installed one hundred years ago. The main failures were not determined to be an engineering risk during the planning phase of the SDWA compliance project, and have resulted in customers in the affected areas being without water for substantial periods of time. On February 11, 1998, TNA filed a petition with the Commission, pursuant to RSA 369, requesting authority to borrow an additional $2,319,439 to replace the cement-tin mains and to upgrade a substantial amount of undersized mains, thereby improving system reliability. By letter dated March 18, 1998, the Company decreased its requested borrowing authority to $1,230,000 to target only those mains in most immediate need of replacement. The revised request covered replacement of only the cement-tin mains and 2 inch mains located on Watson Street and Route 132 in Northfield. TNA has filed an application with the New Hampshire Department of Environmental Services (NHDES) requesting State Revolving Loan Fund (SRF) financing for the main replacement project. The Company is on the funded portion of the NHDES list of projects to receive SRF financing at a twenty year fixed rate of 4.216%, subject, in part, to the prior approval by the Commission to issue the securities and to increase rates to service the resultant debt. On April 10, 1998, TNA and Staff executed an Agreement resolving all of the issues in this proceeding. The Agreement stipulates that the proposed use of the funds is in the public interest and prudent, and further provides that TNA shall receive the necessary funds to service the resultant debt once the proposed plant is placed in service. The Agreement also concurs in the terms of the financing; however, as of the date of the Agreement, the terms and conditions were recommendations of the New Hampshire Business Finance Authority and were not yet finalized. The Company agrees to submit the final terms to the Commission as soon as they are available. TNA's March 18, 1998 letter also indicated that it had been identified as a "disadvantaged water company" which makes it eligible to receive principal reduction payments of between 15% to 30% of the loan amount. Staff has reviewed the proposed terms and conditions of the financing as they currently are proposed and finds them to be just and reasonable and in the public interest. Staff has also reviewed the proposed use of the funds and believes such use to be prudent. Based upon Staff's review and the Agreement, we find the proposed use of the funds to be prudent and in the public interest and the terms and conditions of the loan just and reasonable. We believe the Company should vigorously pursue the principal reduction and any other avenues that will assist it in reducing its cost of debt and, therefore, rates to its customers. The Company shall keep the Commission informed of all such efforts. If the final terms and conditions of the SRF financing vary materially from those outlined in the Agreement; however, we reserve the right to revisit any borrowing authority provided under this order. Based upon the foregoing, it is hereby ORDERED NISI, that, pursuant to RSA 369, TNA is authorized to borrow up to $1,230,000 under the terms and conditions set forth in the Stipulation and the forgoing order; and it is FURTHER ORDERED, that the proposed use of these funds is prudent as presented; and it is FURTHER ORDERED, that pursuant to N.H. Admin. Rules, Puc 1604.03 or Puc 1605.03, the Petitioner shall cause a copy of this Order Nisi to be published once in a statewide newspaper of general circulation or of circulation in those portions of the state where operations are conducted, such publication to be no later than May 5, 1998 and to be documented by affidavit filed with this office on or before May 12, 1998; and it is FURTHER ORDERED, that all persons interested in responding to this petition be notified that they may submit their comments or file a written request for a hearing on this matter before the Commission no later than May 19, 1998; and it is FURTHER ORDERED, that any party interested in responding to such comments or request for hearing shall do so no later than May 26, 1998; and it is FURTHER ORDERED, that this Order Nisi shall be effective May 28, 1998, unless the Commission provides otherwise in a supplemental order issued prior to the effective date; and it is FURTHER ORDERED, that the Petitioner shall file an accounting with this Commission, each January 1 and July 1, duly sworn to by its Treasurer, showing the disposition of the proceeds of this financing, until said proceeds are fully expended. By order of the Public Utilities Commission of New Hampshire this twenty-eighth day of April, 1998. Douglas L. Patch Bruce B. Ellsworth Susan S. Geiger Chairman Commissioner Commissioner Attested by: Claire D. DiCicco Assistant Secretary