January 14, 2011

Nashua, Derry to discuss impact of proposed Pennichuck deal

Union Leader Correspondent
DERRY -- Though Nashua’s proposed acquisition of Pennichuck Corp. could be a long way off, city officials will begin next week to address the impact the plan could have on water customers in Derry.
Nashua officials will attend a workshop meeting with the Derry Town Council at 7 p.m. Tuesday, where councilors and town residents will get a chance to address city leaders. 
“I think Nashua is doing the right thing coming to talk to us and answer our questions early on,” said Derry council Vice Chairman Neil Wetherbee on Thursday. “But what the final deal and what the ramifications will be for Derry? We probably won’t know that for another year.” 
On Tuesday, Nashua alderman authorized the city to issue up to $220 million in bonds to purchase Pennichuck. In an agreement reached last fall, Nashua would pay $138 million — or $29 per share — to acquire the publicly traded water company. 
But little should change for the 1,100 Derry households on the Pennichuck system, said Deputy Public Works Director Thomas Carrier. 
“If you’re a Pennichuck customer, the day after Nashua takes over there should be no noticeable change on the short term,” said Carrier. “That’s what we’ve been told.” 
Pennichuck has two different rate structures in Derry, one for the Pennichuck Water Works system and one for the older Pennichuck East Utility system. 
Pennichuck Water Works customers pay $3.12 per 100 cubic feet of water usage plus a monthly base charge of $20.14, Carrier said. Pennichuck East Utility users pay $5.61 per 100 cubic feet of usage plus $16.49 per month, he said. 
By comparison, residents using the Derry municipal water system are paying $2.47 per 100 cubic feet of usage with a $22.88 quarterly charge, he said. 
In the big picture, Nashua officials say, the acquisition will mean lower rates for customers, as the system is no longer run for profit. There has been some speculation about whether or not Nashua will eventually sell off pieces of the system to other municipalities, an option that Carrier said councilors have been weighing for years. 
“It’s part of our master plan that if systems were to become available that the town would take them over and be the sole water provider for the town,” he said. “And there hasn’t been any movement from that policy by the council.” 
In 2010, the state Department of Revenue Administration calculated the market value of Pennicuck systems in Derry at $2.82 million, he said. The town’s assessor placed that value at $2.3 million in 2010 and Pennichuck paid the town $62,343 in property taxes last year, he said. 
That tax revenue would be lost if the system were owned by Derry, Carrier said. And the town would also lose out on the thousands of dollars it makes by selling water to Pennichuck each year. 
Last year, Pennichuck paid Derry $107,000 to use an amount of municipal water in several of its Derry systems. 
With the extension of a new water main to the Drew Woods-East Derry system last summer, Carrier expects to gross $210,000 in Pennichuck sales next year, with a net revenue of $150,000 after payment to Manchester Water Works. 
But council Chairman Brad Benson said Thursday that he expects the council to consider eventually buying out the Pennichuck systems in Derry to extend the lower municipal water rates to all residents. 
“It would seem to me that the taxpayers of Derry should have all the benefits of the town of Derry and not have the city of Nashua owning some of our water systems,” Benson said. “It won’t be immediate, but it’s an action that could take place in a short period of time.” 

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