The Water Smells: A David and Goliath Story

Print More

Donald M. Kreis, NH Consumer Advocate

Power to the People is a column by Donald M. Kreis, New Hampshire’s Consumer Advocate. Kreis and his staff of four represent the interests of residential utility customers before the NH Public Utilities Commission and elsewhere.

By DONALD M. KREIS, Power to the People

Early this year, a resident of Tioga Drive in Belmont wrote a letter to the Public Utilities Commission (PUC).

“I have battled Stage IV breast cancer and just two years ago was run over by a truck and was in the hospital for four months,” she wrote.  “I am self employed and can only work so many hours a week because of my injuries.  I have a 15 year old son and it is hard enough trying to make ends meet!”

You can certainly understand why she took the time to describe her plight to the utility regulators.  Her friendly neighborhood investor-owned water company, Abenaki, is seeking a whopping big rate increase of 427 percent.

No, that’s not a typo.  I meant 427 percent.  And if that number isn’t staggering enough, consider that these customers, many if not most of whom live on fixed income, can expect monthly water bills of roughly $366 if Abenaki’s rate request is approved.

“Regrettably, yes,” said the utility when we asked their representative to confirm that we weren’t hallucinating.  Even wealthy homeowners can’t afford water bills of that magnitude.  And you might be wondering: What can one expect for that kind of money?

“The water smells all the time and I cannot drink it because half the time it’s brown and not to mention all the interruptions so with that being said these families and myself should not have to suffer and pay extra for nasty nasty water,” wrote the customer mentioned above, on behalf of herself and her 21 neighbors taking service from Abenaki Water Company’s Tioga-Belmont water system.

Now you might be wondering: What is Abenaki and its Connecticut-based parent, New England Service Company (NESC) doing about this?  It’s fleeing.

Specifically, NESC is asking the PUC to bless the deal it struck with Aquarion Water Company – a wholly owned subsidiary, by the way, of the regional electricity monolith Eversource, New England’s largest utility by far – to sell NESC and all its subsidiaries to Aquarion.

It is cold comfort to the residents of Tioga Drive that the “book value” of NESC is $16.79 million.  In other words, that is what NESC’s regulated water utility subsidiaries in Connecticut, Massachusetts and New Hampshire are collectively worth, for rate-setting purposes.

Downright insulting to the folks on Tioga Drive is the fact that Eversource, through its subsidiary Aquarion, has agreed to pay $40.56 million for NESC, including its troubled New Hampshire subsidiary Abenaki.  That’s an acquisition premium – free money, essentially, compared to what their company is really worth according to regulators – of $23.77 million.

No, that’s not a typo.  It’s $23.77 million, free and clear, to the owners of Abenaki Water Company despite its dismal record of service in New Hampshire since it first bought up some water systems here almost a decade ago.

Abenaki is one of New Hampshire’s smallest utilities, with 720 water customers in Bretton Woods, Bow, Gilford, and Belmont as well as 158 customers taking sewer service in Belmont.  That’s quite an archipelago, and it has proven to be difficult to serve.

At what might reasonably be construed as the opposite end of the Abenaki customer spectrum from the folks on Tioga Drive in Belmont is the Mount Washington Hotel and Resort in Bretton Woods, owned by Texas-based Omni Hotels & Resorts.  The fabled grand hotel is by far the biggest customer of Abenaki’s Rosebrook division – and so you’d think that Abenaki would be unctuously catering to the needs of such a huge, powerful, and prestigious customer.

Nope!  Abenaki and the Mount Washington Hotel have been squabbling for years.  Consider, for example, the events of Easter Sunday, 2019 – a busy day for a grand hotel.  The water main serving the hotel broke, water gushed everywhere, and Abenaki promised help – on Tuesday.  The hotel had to perform the repairs itself, the utility has refused to pay, and Omni’s complaint is still pending at the PUC more than two years later.

Meanwhile, the intentions of Abenaki, its parent company NESC, and Aquarion became clear as a mountain spring when the PUC conducted a hearing on the proposed sale on June 28 and 29.  Aquarion CEO Donald Morrissey admitted that his company is paying a premium to acquire NESC because it wants to increase its footprint across New England.  Translation:  NESC’s Connecticut subsidiaries look especially appealing because Aquarion already has a substantial presence there.

As for Abenaki, Morrissey described his Company’s would-be acquisition in the Granite State as “effectively a basket case – borderline non-viable.”

It is no wonder, then, that Aquarion plans simply to absorb into its Connecticut and Massachusetts utilities the NESC subsidiaries it so desires, while leaving Abenaki as a freestanding and struggling company that will not be absorbed into Aquarion Water Company of New Hampshire, which already serves 9,600 customers in New Hampshire.

Aquarion is promising its prospective Abenaki customers precisely nothing in exchange for the right to buy out their utility – not better service, not rate relief, just a lot of puffery about a “relentless commitment to excellence.”  Abenaki is likewise promising precisely nothing – it is simply plowing ahead with its rate case while its shareholders prepare to pocket that $23.77 million acquisition premium.

In these circumstances, you might expect exacting and skeptical regulatory scrutiny.  A legal battle is brewing over that very question.  But it’s not the PUC’s fault.  Thank the Legislature.

Back in 1999, at the behest of the then-consolidating but still regulated telephone industry, the General Court adopted a statute (RSA 369:8, for those keeping score) instructing the PUC to rubber-stamp utility mergers if the parties the transaction can show “no adverse impacts” from the transaction.

In my view, RSA 369:8 was intended to cover situations in which one utility conglomerate sells itself to another such company, effectively just swapping one group of shareholders for another on terms acceptable to both the new and the old owners with no discernable changes for New Hampshire customers.  That, for example, is how Eversource obtained swift approval of its 2017 acquisition of Aquarion from an ownership group associated with a big investment bank in Australia.

But should this statute, drafted by lobbyists for Verizon before it was allowed to pull out of landline telephone service in our state more than a decade ago, become a vehicle for letting New England Service Company skedaddle, pile of cash in hand, after its ill-fated eight years in New Hampshire, leaving people like the struggling residents of Tioga drive with ridiculously expensive brown water?  And should the new owners at Aquarion and its parent company Eversource not be required to promise anything to Abenaki’s customers here in New Hampshire, so they can shore up their water empire in Connecticut in Massachusetts?

We will soon find out.

Update:  Within hours of the publication of this column, the PUC issued its order in the docket opened to consider the complaint of the Mount Washington Hotel against Abenaki Water Company.  The Commission found in the hotel’s favor and ordered the utility to pony up the cost of the repairs.

Comments are closed.