Even without water works, company would continue to exist
NASHUA – It’s hard to say, even six years after the city began its attempt to take over Pennichuck Water Works by eminent domain, how the takeover would affect the overall company.
Pennichuck Corp., the parent company of the water works, also owns water utilities outside the Nashua area, services several water systems it doesn’t own and possesses a real-estate development arm. All of those businesses would continue to exist if the city were to take over Pennichuck Water Works.
The state Public Utilities Commission ruled in Nashua’s favor in July, clearing the way for the city to buy the utility for more than $200 million. But that doesn’t mean a buyout will happen anytime soon, according to Pennichuck Corp. CEO Duane Montopoli.
“We have plenty of time to evaluate what to do with the remaining elements of business and would make those decisions along the way,” he said.
The company has filed a motion for rehearing with the PUC, Montopoli said, and, if necessary, will appeal the commission’s decision to the state Supreme Court.
Pennichuck Corp. doesn’t just provide Nashua’s water. For now, it owns Pennichuck Water Works, the state’s largest water utility, providing water to about 110,000 people in 10 towns in southern New Hampshire, about 10 percent of the state, according to the company’s Web site.
It also owns Pennichuck Water Service Corp., Pennichuck East Utility, the Pittsfield Aqueduct Co. and Southwood Corp., a real-estate management firm that owns about 450 acres in Nashua and Merrimack, according to the site.
PWSC operates and manages the water systems in Hudson; Salisbury and Hyannis, Mass.: as well as many non-town-based water systems. Pennichuck East Utility serves 15 towns in central and southern New Hampshire and the Pittsfield Aqueduct Co. serves Pittsfield and three nearby towns, according to the site.
All of those communities would continue to be served by their normal water company, Montopoli said, even if the company ultimately loses its fight to retain Pennichuck Water Works.
The PUC order requires the city, in addition to the $203 million purchase price, to establish a $40 million mitigation fund to protect the customers served by Pennichuck Corp.’s other companies.
That fund should insulate the customers of the company’s other holdings from feeling the impact of the “loss of economies of scale,” according to the PUC’s former general counsel, Don Kreis.
Kreis, who worked for the PUC when the decision was issued, is now the associate director and assistant professor of law at the Vermont Law School’s Institute for Energy and the Environment. He said removing the largest part of a company would likely mean increased cost for the remaining companies for things such as accounting, inventory, payroll and number of other functions.
“It’s the reason things are cheaper at Wal-Mart than at mom-and-pop grocery store,” he said.
But if Pennichuck Corp. invests the $40 million mitigation fund, it’s hoped its dividends would cover those increased costs.
“It’s designed to do that,” Kreis said. “Whether it actually will do that, then you’re trying to predict the future. At this point, I don’t have any reason to think it won’t work out as anticipated.”
Montopoli said the $40 million should be enough.
“We would expect, in particular because of the economic benefits of the mitigation fund, to remain in a position to serve our remaining customers,” Montopoli said.
But several of the corporation’s 100 or so employees would be laid off. Pennichuck Water Works makes up a “substantial majority” of the company’s operations and, accordingly, a majority of the employees work for the water works, Montopoli said.
“There could be a substantial reduction in work force,” he said. “I think that’s unfortunate when you consider that most of the people that would be affected live in the Nashua area.”