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
Behold the Pennichuck Corporation of Nashua, New Hampshire!
Our state’s biggest water utility is, in its own peculiar way, every bit as distinctive as our first-in-the-nation primary, our state motto, and our mountain with the world’s harshest weather.
In its current form, Pennichuck was forged out of a titanic struggle between the City of Nashua and the utility’s management that culminated in a transition, as Professor Janice Beecher of Michigan State University has memorably phrased it, “from profit to polity.”
Essentially, the City tried but failed to take Pennichuck by eminent domain. City officials were miffed about a 2002 deal to sell the company to a much bigger water conglomerate based in Philadelphia.
The deal never went through, city officials initiated eminent domain proceedings at the Public Utilities Commission (PUC) in 2004, and when the dust settled in 2012 Nashua had simply bought the Pennichuck Corporation outright.
How weird! New Hampshire is dotted with municipal water departments – Manchester Water Works being a prime example – in which a city or town directly owns and operates the systems. New Hampshire also has profit-maximizing water utilities – think of Aquarion on the seacoast, whose parent is the regional mega-utility Eversource.
Pennichuck, in its current guise, is not like any of these. It is, technically, an investor-owned public utility whose sole shareholder is a municipality – the City of Nashua.
Since Pennichuck is owned by the City of Nashua, it has no equity capital on its books. Translation: It has no investors in the conventional sense – shareholders who expect to make money on their investment.
Thus Pennichuck credibly claims that it saves customers money by not having to satisfy the demands of profit-seeking investors. Indeed, how refreshing it is to be in PUC cases with a company that is not constantly whining about the needs of its investors for a “reasonable” (by which they always mean “lavish”) return on investment.
Thus Professor Beecher’s conclusion, in her comprehensive 2021 paper about the rebirth of Pennichuck, that “[b]y all appearances and records of accountability, despite the rhetoric and rancor, the model appears to be well-functioning.”
That was then. This is now.
Three years after Professor Beecher pronounced the new Pennichuck a raving success, we are confronting a challenge that the architects of the 2012 deal swept under the rug. It has to do with the fact that Pennichuck is actually not one but three separate utilities.
One subsidiary, Pennichuck Water Works (PWW), serves mostly customers within the City of Nashua itself. A second, Pennichuck East Utility (PEU), predominantly serves communities in the Nashua suburbs. The third, Pittsfield Aqueduct Company, serves Pittsfield.
Here’s the problem: PWW is thriving; PEU is in a financial crisis.
Specifically, owing to inflation alongside the vicissitudes of necessary upgrades and maintenance of the PEU system, that utility – if it remains as a freestanding subsidiary of Pennichuck – needs (according to a filing made in late 2023) a 24 percent rate increase. That would raise the water bill of a typical PEU family by $248 a year, to $1,275.
Pennichuck’s plan for dealing with this crisis involves merging the three operating subsidiaries and imposing a single rate schedule that will apply across the empire. Under this plan, rates for PEU customers – all those suburbanites – would actually decrease.
For some of those customers – the so-called “non-core” PEU customers whose service is not tied to the City of Nashua’s water treatment facilities – the rate decrease would be substantial — almost 31 percent for a typical residential customer.
Meanwhile, under the consolidated rate plan, “core” customers of PWW – again, those customers relying on the city’s treatment facilities – would see an increase of 14 percent on a typical residential bill.
If you’re like me, your eyes tend to glaze over when lots of numbers slug around. So let me lay it out in plain terms. Pennichuck proposes to solve its PEU rate crisis by having poor inner-city dwellers in Nashua subsidize wealthy single-family homeowners in the Nashua suburbs.
Needless to say, officials in Nashua are not happy about these developments.
You would think that, since the city owns the company, Nashua could have made sure a reverse-Robinhood plan like this never saw the light of day. But you’d be wrong.
The City of Nashua has no direct control over the Board of Directors, which is the ultimate authority at the Pennichuck Corporation. Directors serve staggered three-year terms; though the City must approve their election, the Board itself nominates directors for election and reelection.
These measures were designed to protect Pennichuck customers who do not live in Nashua. Ironically, they provide Nashua residents with little protection from efforts by the utility to aid suburban customers at Nashua’s expense.
Still, the plot thickens.
The utility’s articles of incorporation reserve to the city the right to veto any plans to merge Pennichuck’s subsidiaries. That’s a key aspect of the rate consolidation plan Pennichuck has filed with the PUC – so, in effect, the City can scotch the entire thing even if the regulators give their blessing.
You would think, in these circumstances, that the executive team at Pennichuck would have vetted this whole thing with city officials in advance to gain their buy-in. Think again.
There is astonishingly little informal contact between the leaders of the Pennichuck Corporation and the City’s elected officials. The key players are Mayor Jim Donchess, Board President Lori Wilshire, Alderman Pat Klee (who chairs the Board’s Pennichuck Water Special Committee), and Corporation Counsel Steve Bolton.
All four seem bewildered about why their utility is pressing forward with a rate consolidation plan that looks dead on arrival at Nashua City Hall. My best guess is that Company thinks that if it gets our office (representing residential customers), the Department of Energy (which, despite its name, also oversees water utilities), and the PUC to bless this deal as conducive to the greater good, the City will somehow be forced to buckle.
If that’s the plan, so far it is not working. How regrettable.
Twenty-six years ago, the PUC approved a deal brokered by then-Governor Jeanne Shaheen in which Public Service Company of New Hampshire (PSNH, known today as Eversource), the state’s biggest electric utility, swallowed up the Connecticut Valley Electric Company (CVEC), the state’s smallest. That, too, was a rate consolidation plan in which the many (Eversource serves 70 percent of the few) bailed out the few – in this instance, economically challenged Claremont and its environs.
Rates for CVEC customers went down; the rest of PSNH’s customers paid a little extra. The PUC’s order approving the deal said that it would be “inconsistent with the public interest . . . to leave the Claremont area with the economic burden of being the only area in the state saddled with unreasonably high electric rates.”
An epithet familiar to those who hang around the PUC’s hearing room is “subsidy” – heard whenever anything in the realm of public utilities smacks of anyone ever being required to pay for something that does not directly benefit them instantly. One hears that talk when the subject is net metering, ratepayer-funded energy efficiency and, now, a water utility serving the Nashua suburbs.
But, for essentially the same reason everyone pays school taxes even though not everyone has kids in the public schools, public utilities do not design unique rates for each customer so as to guarantee each of us pays only the costs we demonstrably cause the utility to incur in serving our homes. Also, it would cost a fortune to administer such a system. Robinhood-ism, and reverse Robinhood-ism, are features rather than bugs of our civilization.
This situation in greater Nashua screams out for compromise. The much-hyped transition of the Pennichuck Corporation from profit to polity means nothing, and will likely have to be ditched, if the polity cannot find a way out of this crisis.
