SOURCE: Pennichuck Corporation

Pennichuck Corporation

June 11, 2010 16:01 ET

Pennichuck Corporation Subsidiary Seeks Rate Increase

Pre-Hearing Conference Set for July 14

MERRIMACK, NH--(Marketwire - June 11, 2010) - Pennichuck Corporation (NASDAQ: PNNW) today announced that its Pennichuck Water Works, Inc. regulated utility subsidiary ("Pennichuck Water") has filed for rate relief with the New Hampshire Public Utilities Commission ("NHPUC"). This rate request seeks a permanent annual increase in revenues of $3.9 million, or 16.23%, plus a step increase of $0.9 million, or 3.68%. Pennichuck Water has also requested an increase in temporary rates pending the establishment of permanent rates. Any increase in rates will be subject to the approval of the NHPUC. A pre-hearing conference at the NHPUC is scheduled for July 14, 2010.

This rate relief is being sought to recover the cost of and earn a return on Pennichuck Water's capital improvements since its last rate case, including the last $4 million to complete the upgrade of its water treatment plant in Nashua, New Hampshire. The step increase is intended to recover the cost of and earn a return on certain capital improvements made and that will be made in 2010. Capital improvements covered by this rate case filing total approximately $15 million. Pennichuck Water is also seeking to recover, (a) the revenue loss which resulted from water usage volume declines over the past two years, (b) increased state utility and property tax expenses, and (c) eminent domain defense costs. Water usage volumes have declined since 2007 due to the combined effects of the economic recession, cool and wet weather affecting peak summer usage and continued customer conservation efforts related to water saving appliances and the like.

By order of the NHPUC in 2005 and upon conclusion of the eminent domain case, Pennichuck Water is authorized to identify defense costs incurred since March 24, 2004 and submit such costs for determination of recoverability through rates. Since the litigation phase of the proceeding has now been completed, Pennichuck Water is seeking to recover approximately $5.4 million in eminent domain defense costs incurred to-date, on a pro-rata basis over a ten-year period. Subject to approval by the NHPUC, that would mean a recovery of approximately $536,000 per annum for ten years. Notwithstanding the foregoing, there can be no assurance that the NHPUC will approve the recovery through rates of any eminent domain defense costs or on terms consistent with those requested in this filing. For financial reporting purposes, all eminent domain-related costs have been charged to expense as incurred. 

In this filing, Pennichuck Water is also requesting approval of a Water Investment and Conservation Adjustment ("WICA") surcharge to cover the replacement and rehabilitation of approved water infrastructure projects. This new program should, (i) speed up the replacement of aging infrastructure, (ii) reduce deterioration of allowed returns between rate case orders, and (iii) spread required rate increases more gradually over time for the benefit of water system customers. A WICA charge would allow Pennichuck Water to gradually increase its rates between rate cases based on approved in-service projects, up to a maximum of 2% per year and 7.5% in total between rate cases. Pennichuck Water is proposing that the first year of the WICA program be 2011. 

Commenting on the need for rate relief, Duane C. Montopoli, Pennichuck's President and Chief Executive Officer, said, "A water utility is largely a fixed cost business which means that the ongoing operating cost of maintaining adequate supply capacity is largely unchanged by fluctuations in actual usage. However, since water rates are set based on recent past usage volumes, when usage volumes decline, water rates must be increased to recover the same level of costs. In this regard, it is noteworthy that Pennichuck Water's operating expenses, other than property taxes over which we have little control, have remained essentially flat since the last rate case."

Commenting further, Mr. Montopoli, said, "We continue to believe that a negotiated sale of the stock of Pennichuck Corporation to Nashua in full settlement of our eminent domain dispute may be in the best interests of all stakeholders and, accordingly, we remain willing to consider any and all acquisition proposals the city may wish to make. However, unless and until the parties are able to reach agreement on such a settlement, it continues to be normal business operations at Pennichuck and that includes periodic rate case filings as necessary."

Completing his remarks, he added, "A Pennichuck Corporation stock sale would require the negotiation and resolution of many complex issues and, therefore, no assurance can be given that the city and the Company will ultimately be able to reach agreement on such matters. Also, in addition to approval by the city's Board of Aldermen, the consummation of such a transaction would be subject to approval by the NHPUC and the Company's shareholders, and would depend on the availability of financing to Nashua. Finally, there can be no assurance that the Company's Board of Directors will ultimately conclude that a sale of the Company to the city is in the best interests of the Company's shareholders."

Pennichuck Corporation is a holding company involved principally in the supply and distribution of potable water in New Hampshire through its three regulated water utilities. Its non-regulated, water-related activities include operations and maintenance contracts with municipalities and private entities in New Hampshire and Massachusetts. The Company's real estate operations are involved in the ownership, management and commercialization of real estate in southern New Hampshire.

Pennichuck Corporation's common stock trades on the Nasdaq Global Market under the symbol "PNNW." The Company's website is at www.pennichuck.com.

This news release may contain certain forward-looking statements with respect to the financial condition, results of operations and business of Pennichuck Corporation. Forward-looking statements are based on current information and expectations available to management at the time the statements are made, and are subject to various factors, risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to, the outcome of requests for rate relief from the NHPUC from time to time, the implications of the New Hampshire Supreme Court's March 25, 2010 decision affirming the eminent domain order of the NHPUC in favor of the City of Nashua, New Hampshire; the impact of an eminent domain taking by Nashua on business operations and net assets; the possible application of RSA 38:13 to a negotiated sale of the stock of Pennichuck Corporation to Nashua under the 2007 special legislation that authorizes the city to purchase and hold the stock of Pennichuck Corporation in settlement of the municipalization proceeding; legislation and/or regulation and accounting factors affecting Pennichuck Corporation's financial condition and results of operations; the availability and cost of capital, including the impact on our borrowing costs of changes in interest rates; and the impact of weather. Investors are encouraged to access Pennichuck Corporation's annual and quarterly periodic reports filed with the Securities and Exchange Commission for financial and business information regarding Pennichuck Corporation, including a more detailed discussion of these and other risks and uncertainties that could affect Pennichuck Corporation's forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statement.

Contact Information

  • For More Information, Contact:
    Thomas C. Leonard
    Senior Vice President and Chief Financial Officer
    Phone: 603-913-2300
    Fax: 603-913-2305