PUC staff throws cold water on Pennichuck takeover

The city of Nashua’s plan to acquire Pennichuck Water Works is not in the public interest, staff of the Public Utilities Commission has concluded, adding support to opponents of the takeover.

The 70-plus pages of staff testimony do not bring the case to a close, as the full commission has yet to rule on Nashua’s proposal. However, it is a serious blow to the city’s case, because its staff recommendations are heavily weighed by the commission.

As part of the PUC staff’s testimony, Mark Naylor, director of the agency’s gas and water division, said the takeover of Pennichuck’s assets would have an adverse impact on the rates of other regulated water utilities owned by Pennichuck. He also said the commission staff is concerned about how effectively customer service and billing would be handled by the city, and that there are “real harms” that would result from the takeover of Pennichuck Water Works.

“Acquisitions of small troubled systems will end. PWW’s role as an effective catalyst in problem-solving and promoting regional cooperation will end. The proposed taking will in fact inflict economic loss to Pennichuck’s investors. Can this be what the Legislature intended?” Naylor testified.

The city and water company have spent millions of dollars litigating a possible takeover of the utility by the city.

Naylor also said that eliminating Pennichuck Water Works through eminent domain would be a step backward for regional cooperation.

“Nashua will not fulfill this role; it does not have any incentive to do so and its statements in this proceeding make that clear,” Naylor said in his testimony.

Mayor Bernie Streeter, prime backer of the takeover, was not deterred in his support of the move.

Streeter, reached via e-mail by The Telegraph while on vacation in Aruba, said he supports the board of aldermen’s continued backing of the acquisition.

“It’s the decision of the PUC commissioners – not staff – that counts,” Streeter wrote. “And our case continues to be extremely strong in spite of staff comments.”

Streeter said the staffers’ recommendation stems from their having “a special place in their hearts for PWW, in that PWW, using Nashua ratepayer funds, has bailed out a number of failing water companies in our state,” Streeter wrote in an e-mail. “The PUC staff has been very happy over that.”

Streeter added that city residents, in a special election, voted 77 percent in favor of the acquisition and that more than 85 percent of all U.S. cities and towns own their own water companies. “Their rates are a lot less than investor-owned water companies,” Streeter wrote. “Manchester’s water rates, for example, are 45 percent less than ours.”

Streeter said the city’s testimony will clearly indicate that its plan to manage the company “by engaging one of the best water company management companies in the world is beyond approach and that the company is vastly over-valued.”

But Don Correll, who officially stepped down as CEO of the facility to become CEO of New Jersey-based American Water Works on the day the PUC staff testimony was made public, said, “I don’t think the company could have gotten a better going-away present today. There is absolutely no way to justify continued spending on the takeover by the city.”

Correll said he thinks “everybody needs to sit back and digest what has just happened.”

A determination of public interest is the critical first step in the case before the commission, Correll said. If the commissioners accept the staff’s recommendations, he said, they would never have to decide what price Nashua would have to pay for the utility.

The towns of Merrimack and Milford have filed testimony with the commission, saying a takeover would harm their residents, water customers and businesses.

Pennichuck and the city are far apart on the value of the water works. Pennichuck has placed a price tag of $248 million on it, while city consultants priced it at $145 million, including takeover costs and construction work.

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