DR 98-120 Pittsfield Aqueduct Company, Inc. Petition to Decrease Rates Order Reducing Rates and Approving Financing O R D E R N O. 23,081 December 8, 1998 APPEARANCES: Sulloway and Hollis by Martin L. Gross, Esq. for Pittsfield Aqueduct Company, Inc.; and Eugene F. Sullivan III, Esq. for the Staff of the New Hampshire Public Utilities Commission. I. PROCEDURAL HISTORY On July 17, 1998, Pittsfield Aqueduct Company, Inc.(Company) filed with the New Hampshire Public Utilities Commission (Commission) a petition, testimony and exhibits supporting a 3.89% decrease in rates. The filing was made in accordance with representations made to the Commission as part of Pennichuck Corporation's acquisition of Pittsfield Aqueduct Company, Inc. in Docket No. DE 97-225. Order No. 22,843 (January 30, 1998). On October 1, 1998, the Commission issued an order of notice scheduling a prehearing conference for October 28, 1998. No motions to intervene were filed prior to the prehearing conference. On September 4, 1998, however, the Town of Pittsfield indicated by letter that it would appreciate any action on the part of the Commission to grant some measure of rate relief to the citizens and ratepayers of Pittsfield. On October 28, 1998, the Commission held the duly noticed prehearing conference. There being no intervenors or opposition to the proposed rate reduction, the Company and Staff proffered a stipulation designed to resolve all issues presented by the petition. Following the hearing, the Commission received a resolution from the Selectmen of the Town of Pittsfield dated October 27, 1998, supporting the Stipulation between the Company and Staff and requesting that the Commission act expeditiously in implementing the rate reduction. II. POSITIONS OF THE PARTIES AND STAFF The Stipulation generally provided that the proposed rate decrease resulted in just and reasonable rates on the property of the utility used and useful in service to the public and that the refinancing that resulted in the rate reduction was in the public interest. Specifically, the stipulation and the testimony in support thereof provided, in relevant part, that the Company had refinanced an existing long term debt obligation totaling $1,144,000 having a fixed annual interest rate of 10% with a debt obligation to the Company's parent, Pennichuck Corporation, at the annual interest rate of 6.5%. The savings that resulted from this refinancing were then offset by certain capital expenses and annual increases in operating expenses made to improve the operation of the water supply and distribution system. These increased expenses, all determined by the Staff to have been prudently incurred, result in a proposed rate decrease of 3.89%. At the hearing, the Company requested that the rate decrease be reflected in January bills and further requested that the Company be authorized to bill monthly instead of quarterly. III. COMMISSION ANALYSIS The issues before us are the reasonableness of the proposed rate reductions and whether the refinancing of the Company's existing debt obligation with Pennichuck Corporation is for the public good. We find that the proposed rate decrease will result in just and reasonable rates to customers, and is consistent with the representations of Pennichuck Corporation in DE 97-225. We note, however, that there was some confusion expressed at the hearing regarding the accounting treatment and rate treatment of a water filtration grant received by the Company from the State Department of Environmental Resources. Staff and the Company should meet to determine the appropriate accounting treatment of this grant. Staff and PAC also requested that the rate decrease be effective on a bills rendered rather than a service rendered basis. PAC testified it bills customers in arrears, but that the rate decrease should be effective retrospectively because the savings achieved through refinancing had been recognized during this billing period. Pursuant to N.H. Admin. Rule, Puc 1203.05 (b), all rate changes must be implemented on a service rendered basis unless the Commission waives the provision of the rule. N.H. Admin. Rule, Puc 201.05 authorizes the Commission to waive the provisions of any rule where the waiver serves the public interest and does not disrupt the orderly proceeding of the Commission. In the case at hand, we believe a waiver is in the public interest and therefore should be granted, because the savings that will be passed on to ratepayers pursuant to this filing were achieved during the period when service was rendered in the billing period at issue. With regard to the refinancing of the existing debt obligation by the Company's parent, the record reveals that there is in fact no formal note documenting this debt. We do not believe such informality is appropriate in these circumstances. The Company and its parent should reduce the terms and conditions of the note to writing and file the note with the Commission within one month of the date of this order. We find the refinanced debt to be in the public interest based on the new rate of interest, but we will reserve our right to revisit this conclusion once we have reviewed the terms and conditions of the note after it has been filed with the Commission for our approval under RSA 369. The Commission will issue a separate order addressing the issue of switching from quarterly to monthly billing. Based upon the foregoing, it is hereby ORDERED, that the proposed rate reduction of 3.89% is APPROVED; and it is FURTHER ORDERED, that the debt obligation entered into between Pittsfield Aqueduct, Inc. and Pennichuck Corporation is consistent with the public interest subject to our review of the terms and conditions of the new note; and it is FURTHER ORDERED, that the formal note shall be filed with this Commission within one month of the date of this order; and it is FURTHER ORDERED, that the provisions of Puc 1203.05 requiring all changes in rates to be implemented on a service rendered basis are waived pursuant to Puc 201.05 and the rate decrease shall be implemented on a bills rendered basis; and it is FURTHER ORDERED, that Pittsfield Aqueduct Company, Inc. shall file properly annotated tariff pages in compliance with this Order no later than 15 days from the issuance date of this order, as required by N.H. Admin. Rules, Puc 1603. By order of the Public Utilities Commission of New Hampshire this eighth day of December, 1998. Douglas L. Patch Susan S. Geiger Nancy Brockway Chairman Commissioner Commissioner Attested by: Thomas B. Getz Executive Director and Secretary