DE 97-255
BIRCHVIEW BY THE SACO, INC.
Investigation into Quality of Service and Future of Water Supply
and Distribution System
Order Extending Receivership for 90 Days
O R D E R N O. 23,002
August 31, 1998
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
374:47-a.
On August 18, 1998, the Commission held a duly noticed
hearing to determine whether the Utility should remain in
receivership. At the hearing the Commission heard testimony from
Commission Staff and Mr. Francis Lyons, the principal of FX
Lyons, Inc. The Commission also received letters via facsimile
on the morning of the hearing from the Birchview Homeowners
Association (Association), a homeowners' association representing
some, but not all, of the Utility's customers, and George
Weigold, one customer of the Utility, relative to the
continuation of the receivership. The principals of Birchview
did not appear at the hearing, although the president of
Birchview did contact Staff the day prior to the hearing to
inform the Commission that funds received from the recent billing
were used to pay electric and telephone bills and the remainder
was placed in the Utility checking account which had a balance of
approximately $1,000.
II. POSITIONS OF THE PARTIES
A. Birchview Homeowners Association
The Association requested that the Commission continue
the receivership for 90 days. The Association advised the
Commission that they had requested a representative of the
Northeast Rural Water Association to conduct a leak survey of the
water distribution system and that Mr. Lyons had indicated that
as receiver he would not allow such a survey unless he was paid
to be present during the procedure. The Association also
requested that any other individual or entity retained by the
Association be allowed to examine the system to determine its
continuing viability and the cost of bringing the system into
compliance with state and federal standards. The Association
asserted it needed such information in order to present its
membership with all available information if they were to provide
meaningful input into the future of the Utility.
The Association requested that the Commission direct
the receiver to allow the Northeast Rural Water Association or
any other individual or entity it retained to examine the system.
The Association also raised questions regarding the financial
condition of the Utility and the legitimacy of certain financial
transactions in the past by the Utility.
B. George Weigold
By facsimile dated August 18, 1998, Mr. Weigold
requested that the Utility remain under receivership, but that FX
Lyons, Inc. be replaced as the receiver. Mr. Weigold alleged
that FX Lyons, Inc. was biased because the corporation also
serves as the system operator of the Lower Bartlett Water
Precinct (Precinct). Mr. Weigold concluded that this
relationship would somehow interfere with the ability of FX
Lyons, Inc. to continue to operate the system because of the
financial benefit that it would accrue from the interconnection
or takeover of the Birchview System by the Precinct.
C. Lower Bartlett Village Precinct
Although the Precinct did not appear at this hearing
the record indicates that the Precinct, a municipal corporation
that provides water service in the vicinity of the Birchview
system, offered to take over the operation and maintenance of the
water distribution system after being approached by the current
owner of the Birchview system who requested the Precinct take
over the system. The Precinct would eventually interconnect the
system with its main transmission and distribution system. The
Precinct represented it would provide to the customers of
Birchview the same quality of service at the same rates it
provides customers within the Precinct boundaries.
D. Commission Staff
Staff Engineer Douglas Brogan, P.E. testified that the
water system has not been operated in a professional or safe
manner in the recent past. Mr. Brogan testified that the system
operator has not been paid for its services in over a year and
that the system operator has taken care of the system at his own
expense for that period of time. Mr. Brogan also testified that
the State Department of Environmental Services (DES) had not been
paid for water testing services and that it was owed
approximately $1,000. Currently the system operator pays for
these tests without compensation. Testimony also revealed that
customers had repaired leaks on the system when the Utility did
not respond and that the system was in a condition of serious
disrepair. Mr. Brogan testified that it would conservatively
cost approximately $165,000 to bring the system up to State and
federal standards. Mr. Brogan recommended that the system remain
under receivership, and that FX Lyons, Inc. remain as the
receiver.
E. FX Lyons, Inc.
Mr. Lyons testified that he had not been paid for his
services in over one year, that the electric bill from the New
Hampshire Electric Cooperative was months in arrears until just
this week, and that the previous operator of the system had not
been paid for his services. Mr. Lyons also expressed concern
regarding the financial condition of the Utility and the lack of
available cash to meet any expenses other than the monthly
electric bill and his monthly fee. He concluded that there were
insufficient funds to meet any extraordinary expenses such as
leak repairs, pump failures or the like.
Mr. Lyons also reiterated Mr. Brogan's conclusion that
the system was in a condition of serious disrepair. Although Mr.
Lyons agreed with Mr. Brogan's conclusion, he took issue with Mr.
Brogan's cost estimates to repair the system. Mr. Lyons
estimated that the cost to properly repair the system exceeded
$300,000 based on his experience in operating 38 water
distribution systems in northern New Hampshire, and that that
figure was probably low.
III. COMMISSION ANALYSIS
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
receivership.
Pursuant to RSA 374:47-a, a utility may be placed under
receivership if it is failing to provide adequate and reasonable
service to its customers, and if that failure threatens the
health and welfare of the utility's customers. Based on the
record of the August 18, 1998 hearing we find that the owners of
Birchview by the Saco, Inc. have failed to meet their
responsibilities to provide utility customers with adequate and
reasonable service and such failure threatens their health and
safety. Thus, the current receivership of the Utility must be
maintained.
FX Lyons, Inc., the operator of the system, shall
remain as the receiver of this utility. Birchview shall
surrender all of its books and records to FX Lyons, Inc.
(Receiver), and shall transfer all checking or savings accounts
and the like to the Receiver. The Receiver shall have the
authority to take all necessary actions to ensure safe and
adequate service is provided to the Utility's customers. In the
event the cost to be incurred for any discrete action taken to
ensure safe and adequate service exceeds $1,000, the Receiver
shall obtain preapproval from the Commission's Engineering Staff.
The Receiver shall have the authority to take any necessary
action on an emergency basis and inform our Staff after the
fact.
The record revealed that there were only sufficient
funds available to meet the normal operating expenses of the
Utility, the Receiver's monthly fee, which includes the cost of
bacteriological testing by DES, and the electric bill. Both
Staff and Mr. Lyons indicated a concern that there are
insufficient funds to operate the system in the event any type of
repair to the system is required. Staff requested that a
surcharge be implemented to provide the Utility with sufficient
funds to pay for such unexpected repairs and to pay the
outstanding accounts payable to DES, the Receiver and the
Utility's previous operator.
After the accounts payable have been audited and
verified, we believe Staff should meet with customer
representatives to determine a reasonable revenue level and a
means of collecting those revenues. Such meeting shall also
address the future of this water utility.
With regard to the request by the Association that the
Northeast Rural Water Association be provided access to the water
system to conduct a leak survey, it appears the Receiver has no
objection as long as it is present to handle any leaks that may
occur as a result of the survey. We believe it would be prudent
for the Receiver to be present during such a procedure in the
event there are any problems and to foster communication that may
be constructive regarding any long term solutions for the water
system. Should any damage occur as a result of the survey
conducted by the Northeast Rural Water Association, Northeast
Rural Water Association should be prepared to reimburse the
Receiver or any homeowner harmed by the procedure.
Although we have placed this Utility under
receivership, neither the Utility nor its customers should
consider this a long term solution to the problems they face. As
the Commission has stated previously, receivership under RSA
374:47-a is a "temporary" measure designed to maintain safe and
adequate service while customers and the Utility examine and
implement a long term solution to continued service. See eg., Re
Beaver Village Realty Trust, 80 NH PUC 31 (1995)
There are a number of long term alternatives available
to the Utility and the customers. These alternatives include
transfer of the system to the Precinct or to another utility that
is willing to purchase and rehabilitate the system, or transfer
of the system to an association of customers, such as the
existing Homeowners Association. Based on the record before us,
however, restoration and reconstruction of the existing system
would be extremely expensive because of the numerous items that
need to be corrected to meet state and federal standards. Such a
solution also appears problematic given that the existing well
field could not be used if the existing primary well failed.
These are, however, options available to the customers of the
system should they decide to take over the system or interest
another utility in taking over the system. The other alternative
is to interconnect with the Precinct, which appears to be the
more economic alternative.
Subject to Commission review, the customers of the
utility are to be provided with the opportunity to come to a
consensus concerning the future of this water supply and
distribution system. In 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.
Based upon the foregoing, it is hereby
ORDERED, that Birchview by the Saco, Inc. shall remain
under the receivership of FX Lyons, Inc. for ninety (90) days
from the date of this order; and it is
FURTHER ORDERED, that FX Lyons, Inc. as receiver shall
have the authority to take all necessary and appropriate actions
to operate the water system located at the Birchview by the Saco
development including, but limited to, payment of bills,
rendering of bills and making necessary repairs to the system,
subject to the conditions set forth in the foregoing report; and
it is
FURTHER ORDERED, that the principals of Birchview by
the Saco, Inc. shall turn over all of the books and records of
the utility to FX Lyons, Inc.; and it is
FURTHER ORDERED, that our Staff shall conduct an
informational hearing as soon as possible for the customers of
Birchview by the Saco, Inc. in the Town of Bartlett or vicinity
at a mutually convenient time; and it is
FURTHER ORDERED, that the Northeast Rural Water
Association or whatever other individual or entity the Homeowners
Association selects is granted access to the water supply and
distribution system to assess the system's condition subject to
the oversight and supervision of the Receiver with any disputes
regarding this condition to be resolved by the Commission's
Engineering Department; and it is
FURTHER ORDERED, that a hearing be held at 10:00 a.m.
on November 17, 1998, to assess the progress of the customers
towards a long term resolution that provides for continued water
service to the community, the continuing need for a Receiver, or
the need for Commission action to determine the future of the
water distribution system; and it is
FURTHER ORDERED, that the Commission's Finance
Department conduct an audit of the books and records of the
Utility and specify those past due accounts for goods or services
that should be paid; and it is
FURTHER ORDERED, that Staff, FX Lyons, Inc., the
Homeowners Association, and any interested customers attempt to
determine an appropriate surcharge to be assessed customers to
ensure the short term viability of the water system and to begin
repayment of legitimate and verifiable accounts payable owed by
the Utility to those that have provided goods or services for the
operation of the system.
By order of the Public Utilities Commission of New
Hampshire this thirty-first day of August, 1998.
Douglas L. Patch Bruce B. Ellsworth Susan S. Geiger
Chairman Commissioner Commissioner
Attested by:
Thomas B. Getz
Executive Director and Secretary