Pennichuck Q & A

Most of us don’t spend time thinking about the water company unless it’s time to pay the bill. Even then, we write a check and move on.

But the privately owned water company that serves Nashua and some of the surrounding towns has been a constant source of headlines in the last six years.

This latest fight between the company and the city for control of the local water supply has played out in court, behind closed doors and in the public forum.

It appears none of this will change anytime soon, given the latest developments in the case known as the City of Nashua vs. Pennichuck Water Works.

Read on for a recap of what has happened – in case you haven’t been following each twist – and some new information about what this legal battle means to everyone who turns on the tap.

QUESTION: What is happening to my water company?

ANSWER: The city of Nashua has been granted permission by state regulators to take Pennichuck Water Works by eminent domain for $243 million. The price includes a $40 million mitigation fund to protect the customers served by Pennichuck Corp.’s four other subsidiaries, which would not be subject to the takeover.

Q: Why?

A: This is the latest development in a six-year battle between the city and the water utility. On July 25, based on 12 days of hearings last fall, the New Hampshire Public Utilities Commission ruled a takeover is in the best interest of the public.

Nashua began pursuing a takeover in 2002, when Pennichuck Corp. announced it had reached an agreement to be acquired by Philadelphia Suburban Corp. for $106 million. Unhappy about the prospect of an out-of-state company controlling the local water supply, Nashua initiated an eminent domain case and continued on even after the sale fell through.

Q: Why has this dragged on for six years?

A: Taking a company by eminent domain is no easy process. The city sought – and received – voter approval in 2003, then unsuccessfully tried to work out a private purchase agreement. Since then, various facets of the case have been argued in Hillsborough County Superior Court, the New Hampshire Supreme Court and before the PUC.

Q: Does the company get a say in this?

A: Pennichuck is appealing this latest decision. On Monday, the water company filed a motion for rehearing before the PUC, which is the required first step. If that is rejected, the company can appeal to the state Supreme Court.

Q: What are some arguments in favor of a takeover?

A: The city argues Pennichuck has compromised the water supply over the last 20 years by selling off land near the watershed – made up of several ponds along the Nashua-Merrimack border – for development. It has also said the utility could be operated less expensively without having to pay dividends to shareholders or big executive salaries.

Q: What are some arguments against a takeover?

A: Nashua has never run a water utility, and Pennichuck is critical of the company the city has hired to handle daily operations, which is owned by a French company. Pennichuck also questions Nashua’s ability to run the utility smoothly, given a history of political infighting.

Q: Do I get to vote on this?

A: No. If Pennichuck doesn’t win its appeal, final approval will be up to a two-thirds majority vote of the board of aldermen. Voters got their chance to speak up in a 2003 citywide referendum. By a count of 6,525-1,867, Nashua voters gave the city the go-ahead to pursue buying the water company.

Q: Would my rates go up?

A: The city says no, they should remain stable or go down. The PUC, as part of its July 25 order, required Nashua to provide the same level of service to existing Pennichuck customers at the same rate.

Q: Would my tax dollars pay for this?

A: No, your water bill would. The city would pay for the purchase through a revenue bond. The city would borrow the $243 million – $40 million of which is a mitigation payment to Pennichuck to protect customers of its other two water companies – agreeing to use only the money collected in rates to pay off the bond.

Pennichuck Corp.

Q: What if I have a well?

A: You would be unaffected. Your tax dollars wouldn’t go toward paying for Pennichuck.

Q: How does the city plan to run a water company?

A: Day-to-day operations would be in the hands of a water system management company called Veolia North America, a subsidiary of French Veolia Environnement that specializes in running water systems for cities and towns. The city of Nashua put the contract out to bid in 2005 and selected Veolia. The city’s contract with the company has yet to be signed while the case is pending.

Q: How much will that cost?

A: Veolia’s base fee is nearly $5 million a year. But that doesn’t include a variety of costs, including emergency services and major improvement projects. The company is also being paid a transition fee of $1.34 million.

Q: Who picks up the tab?

A: Veolia’s service fee would also come from money the city collects in water rates. The $5 million contract would be one of many factors – including overall budget and projected improvement costs – the city would consider in setting its rates.

Q: Would anyone oversee Veolia?

A: Yes. The city has a yet-unsigned contract with a Framingham, Mass., consultant called R.W. Beck, which would serve as a watchdog, of sorts. The company specializes in business and technical consulting, and on its Web site, it lists water as one of its areas of expertise.

Q: How much would that cost?

A: The 2005 contract describes a fixed fee of more than $230,000 and recurring fees of more than $315,000, as well as other reimbursements and fees. But the contract also says the compensation would be adjusted for inflation beyond July 2006.

Q: How would the city pay for future plant upgrades?

A: It could decide to take out more revenue bonds. However, a city doesn’t have unlimited access to borrowed money.

Q: Could my water quality change?

A: Short of a crystal ball, no one knows. Pennichuck already gets high marks from the U.S. Environmental Protection Agency for water quality, although some city supporters say the consequences of land being developed near the watershed could eventually change that.

Q: Whom would I call if I have a complaint about my water service?

A: Veolia would set up a Web site and a 24-hour hotline.

Q: I’m a Pennichuck customer who lives outside Nashua. How would this affect me?

A: The PUC ruling requires the city to give the same treatment to all water customers, including those outside the city. Pennichuck Water Works serves about 24,000 customers in Nashua, Amherst, Hollis, Merrimack and Milford.

Q: What role would a regional water authority play, if any?

A: In 2003, the New Hampshire Legislature approved enabling Nashua and surrounding towns to form a regional water district. The city says it’s still committed to the idea of a regional water authority, but not sure exactly what the authority’s role will pan out to be.

Q: Under what circumstances, if any, would the city have to come before the PUC for approval of rate increases or other changes?

A: The basic rule is that municipal water works aren’t regulated by the PUC, except when the utility runs systems for other towns and the rates differ by more than 15 percent. In its petition for eminent domain, the city agreed to allow the PUC to maintain oversight, but the PUC didn’t make that a requirement of its order.

Q: How many acres will the city acquire if it buys Pennichuck, and where is that land located?

A: The city would acquire about 500 acres – a thin strip around the ponds and some wetlands. Until the early 1980s, Pennichuck owned about 2,000 acres near the watershed. But a controversial PUC decision allowed the company to create a real-estate business called Southwood and develop 1,500 acres “not critical” to the watershed. More than 1,000 of those acres have been sold or developed, leaving about 450.

Q: Why is Southwood controversial?

A: Nashua claims Pennichuck put the quality of the water in danger by selling off land near the watershed for development. The city fought hard against the creation of Southwood in the 1980s, but lost. Pennichuck says all the development was done responsibly.