Oxford makes progress in its water company takeover quest

The Town of Oxford had two good reasons to celebrate during the holidays. First, the Town was awarded a $2.2 million grant for a sewer extension, which means that IPG Photonics will expand its world headquarters here rather than in another state. (See story, homepage)

Second, the Town received a favorable court decision in its suit to purchase the water utility currently owned and operated by Aquarion Water Company, moving the proposed plan “a big step forward,” according to Board of Selectmen Chair Jennie L. Caissie. The intent of the purchase is to reduce water rates for Oxford residents and businesses. In his original proposal to town voters in early 2009, Town Manager Joseph Zenesky wrote that the acquisition would “result in a major savings to Oxford ratepayers.” Voters approved the purchase for an estimated acquisition cost of $6.7 million at the May Town Meeting that year.

Aquarion’s response was: “Simply put, the company’s Oxford operations and assets are not for sale.” The ensuing lawsuits and legal wrangling have been going on since then. “Aquarion has done everything in its power to thwart the process,” said Mr. Zeneski, even though a (2009) court decision allowed the purchase. In that 2009 decision the judge also ruled that it was not necessary for Aquarion to undertake a Main Street water main replacement project, which Aquarion would add to the purchase price.

“That would be like me selling you a house for $200,000,then adding $50,000 worth of upgrades and asking you to reimburse me,” said Mr. Zeneski.

Aquarion maintains that the cost of acquisition will be higher than $6.7million and that the cost to operate the system will be much more than the town realizes after all the factors, including loss of tax revenue and litigation costs, are included.

The history of Oxford’s water system goes back more than one hundred years, to 1904, when the Oxford Water Company, a private corporation, was created by the Massachusetts Legislature and approved by the Town’s voters. It did, however, provide for the Town to “take” the franchise, property, rights and privileges at any time by purchase for the actual costs, or by eminent domain.

Over the years, the Town considered taking over the water company several times. During one of those times, in 1984, the court confirmed that the Town could buy the franchise and property of the Oxford Water Company for the “actual costs.”

Aquarion acquired the Oxford Water Company in 2002, and today serves 2614 customers with over 41 miles of water mains. The water supply comes from the French River Basin watershed, via three groundwater wells. The company owns one 215,000 gallon distribution storage tank and leases two others from the Town. Aquarion also operates the water systems in Millbury, Hingham, Hull and Cohasset in Massachusetts, and many others in New Hampshire and Connecticut.

In a rate hearing before the Department of Public Utilities in May of 2011, Harry C. Hibbard, vice president of Massachusetts operations at Aquarion, was asked about the Oxford lawsuits. This is what he said about the costs associated with the litigation.

“Because the Company (Aquarion) has been incurring substantial ongoing expense related to this litigation and the expense is expected to continue for an unknown period of time, the Company is requesting that the department (DPU) authorize it to establish a deferred account for these costs and include the costs in rates…the cost associated with defending this litigation is a necessary cost of doing business, particularly given that the suit was filed against the Company with the stated intent of forcibly taking the Company’s assets in one of its service territories. In addition to being a necessary and prudent cost of conducting business, defense of the suit by Oxford is in the best interest of its customers because the loss of the Oxford system would incrementally increase the operating costs borne by the Company’s remaining customers and the Company strongly believes that ownership and operation of the Oxford system would ultimately be detrimental to the service provided to water customers in the Town.”

“In others words,” Mr. Zeneski said, “we are subsidizing Millbury.” He also described how the list of assets provided by Aquarion included items in Hingham.

Last month’s decisions addressed several of the parts pertaining to the current lawsuit “Town of Oxford vs. Aquarion Water Company of Massachusetts, Inc.” For one of them, Aquarion’s Motion to Dismiss, in which the company argued that the Town should be forced take the property by eminent domain rather than purchase it for actual costs, Superior Court Justice David Ricciardone wrote that this was a distinction without a difference, and denied the motion.

On the others, which were motions by both parties for summary judgment, Justice Ricciardone supported the Town’s position by determining that the 1984 decision is binding and by defining “actual costs.” He deferred on an issue of the time value of certain investment costs. He also denied Aquarion’s Motion for Partial Summary Judgment.

The legal controversy could continue for some time yet, but Mr. Zeneski is hopeful that the matter will be settled soon with an expedited appeals process.