Fryeburg Water Company cleared from reimbursing East Conway customers for rusty water

By David Carkhuff

Fryeburg Water Co., will not be required to pay financial reparations to customers in East Conway who have complained for years about water-quality problems, the New Hampshire Public Utilities Commission announced in a Dec. 9 order.The water company could have owed up to $28,000, based on a two-year limitation on reparations and the estimated $14,000 a year in revenue that is attributed to East Conway customers, according to Office of Consumer Advocate staff attorney Rorie Hollenberg. The actual amount, if granted, probably would have been less, she said, because some of the water was used outside.Water used inside, such as that involved in washing clothes, was the focus of complaints because of intermittent rustiness and staining, she noted.The amount of reparations would have been decided at a future hearing if the commission had decided it had the authority to order financial reimbursement. But the commission wrote in an 11-page order that state law did not allow reparations to customers in this case."The order denied the reparation," Hollenberg noted.The commission wrote in its Dec. 9 order, "Fryeburg (Water Co.) concludes that there is no evidence or basis for the commission to find that Fryeburgs rates are illegal or unduly discriminatory under RSA 365:29, and the petition for reparations should be dismissed as a matter of law. The OCA (Office of Consumer Advocate) argues that the commission has authority to order reparations for inadequate water service because the law requires utilities to provide adequate service at just and reasonable rates. ... While we agree with the OCA and staff that the commission may initiate a reparations proceeding on its own initiative, we find that the commissions authority under RSA 365:29 is limited to ordering reparations when an 'illegal or unjustly discriminatory rate, fare, charge or price has been collected,' which is not the case in this proceeding.""It looks as though the reason they decided they don't have the authority is because of the language of the statute and the way they read the statute, they don't interpret the rates being paid by the East Conway residents as being unfair and discriminatory," explained Hollenberg, who defends customer interests before the PUC.In the wake of customer complaints about brown-colored and foul-smelling water from a Fryeburg Water Co., pipe, the commission ordered the utility to make bottled water available free to all East Conway customers at a central location. New Hampshire's utility regulator issued this recent order in response to long-standing complaints about the quality of water passing through a 7,600-foot unlined cast iron water main reaching across the Saco River to customers in East Conway and West Fryeburg.Hollenberg's office argued that state law gives the PUC authority to order reparations to the 67 East Conway customers for inadequate water service. "The OCA contends that the legislature granted the commission powers to award reparations if, in the exercise of its judicial function, the commission finds that a utility has been unjustly enriched at the expense of the rate-payers," the PUC reported in its order.But Fryeburg Water Co., argued successfully that a financial penalty was not appropriate in this case."Fryeburg (Water Co.) points out that no party has contended that the water service received by East Conway customers violates New Hampshires primary drinking water standards or any laws related to water quality," the PUC reported. "Fryeburg (Water Co.) insists that the problem consumers find with the water is not that it fails water quality standards, but that the water delivered through the 1883 cast iron main is inconsistent with 'modern aesthetic expectations' for bottled water quality from the tap. Fryeburg (Water Co.) insists that to bring the water to consumers expectations would cost $480,000 or more, and that the fundamental issue in this docket since its initiation in February 2004, has not been whether Fryeburg (Water Co.) is unwilling to provide a higher level of service, but whether and how customers should pay for the costs of such service without exposing Fryeburg (Water Co.) to an unreasonable risk that it will not recover its capital investment in the necessary facilities plus a reasonable return."The last substantive PUC order issued in June acknowledged a problem with water quality for East Conway customers and found that the 1883 pipe was the cause, Hollenberg noted. Now, the PUC wants to see if citizens will form a water district as a possible prelude to buying the utility."The good news is we start the proceeding on the issue of what remedy is necessary," Hollenberg said.At 10 a.m. on Jan. 23, the PUC has scheduled a pre-hearing conference to discuss updates on the future of the water company. On Jan. 17, Fryeburg voters will decide whether they want to form a water district, which could lead to these customers taking over the utility.Another item for discussion at the PUC's Jan. 23 conference is a letter of intent for Pennichuck Corp., to buy the water company.Pennichuck Corp., has agreed to buy the East Conway-West Fryeburg portion of the Fryeburg Water Co., the two parties announced in August. Pennichuck Water Service, a subsidiary of Pennichuck Corp., plans to own and operate the water mains and services that serve about 80 customers in the communities of East Conway and West Fryeburg, Maine, the company announced. The plan remains tentative and does not represent an active PUC file."There's nothing been filed at this point as far as Pennichuck's purchase of the East Conway portion of the Fryeburg Water Co.," Hollenberg acknowledged.Pennichuck filed a separate and unrelated application for approval to purchase water systems including an ailing water system at Birch Hill in North Conway.On Feb. 2, the PUC plans a substantive hearing to review the Birch Hill and associated purchases by Pennichuck.If approved by regulators, Pennichuck would gain more than 1,100 new home and business customers by buying the Locke Lake water system in Barnstead, Birch Hill water system in Conway and Sunrise Estates water system in Middleton.Residents of Birch Hill, off West Side Road in North Conway, formed a district on Dec. 10, 2003, in a bid to make improvements to their water system, then owned and operated by Consolidated Water Co., of Moultonborough.