Berkshire County — In the latest chapter of the ongoing saga of Housatonic Water Works, the Massachusetts Attorney General’s Office (AGO) has filed its opposition against previous motions made by the towns of Stockbridge and Great Barrington requesting that the Department of Public Utilities (DPU) roll back the company’s rate increases and investigate the company.
The motion by the AGO was made on the same day, Monday, March 3, that West Stockbridge joined in Stockbridge’s motion.
The three towns’ respective motions are in response to HWW delaying the installation of a manganese filtration system, which is part of a rate-increase settlement plan approved by the DPU in July 2024. As part of the plan, HWW customer rates would increase by over 90 percent over the span of five years.
When HWW filed its notification of a delay in the manganese filtration project on January 24 with the DPU, company attorneys squarely blamed the Great Barrington Board of Health’s Order to Correct, issued against the company on August 22, 2024, for the delay.
On February 5, Stockbridge filed a motion with the DPU requesting that HWW reverse its planned rate increases and that the DPU investigate the long-troubled utility.
On February 13, the state’s Department of Environmental Protection (MassDEP) sent a letter to the company stating that HWW must go forward with its manganese filtration project, and on February 14, Great Barrington officially joined with Stockbridge’s motion.
On Monday, March 3, Attorney General Andrea Campbell filed her office’s opposition to Stockbridge’s and Great Barrington’s motions with the DPU.
In her filing, Attorney General Campbell writes:
Regarding the Phase 1 rate increase, there is no legal basis to suspend or otherwise claw back the funds collected pursuant to this increase. The increase was tied to costs associated with a capital project to address HAA5 [manganese] levels in the water, placed in service in 2023, and to put the company in a better position to attract financing for the remaining capital projects. In fact, the department found that the settlement (including the Phase 1 rate increase) ‘is consistent with department precedent, is in the public interest, and will result in just and reasonable rates.’
The towns’ request—to suspend the Phase 1 rate increase—should be appropriately pursued through either another rate case or through the ongoing appeal to the Supreme Judicial Court of the Department’s Order by Great Barrington and West Stockbridge. If that appeal is successful, the case would be remanded to the Department for further investigation and findings.
Attorney General Campbell blames the delay of HWW’s installation of its manganese filtration system on the Great Barrington Board of Health’s Order to Correct:
The board’s order appears to have impaired the company’s ability to secure funds for construction, an impairment that is likely to remain until the board’s order is definitively invalidated or rescinded. Granting the towns’ motion for enforcement would do nothing to alter this current predicament or to secure the clean water the ratepayers of HWW deserve.
While the towns question the company’s pursuit of funding and call for the department to investigate, the appropriate venue for such an investigation is in the department’s prudence review of the completed capital project.
To open an inquiry into the company’s prospective capital project management would likely violate the department’s prior determination that ‘it is inappropriate for the Department to substitute its own judgment for the judgment of the management of a utility.’
Rather, the settlement was designed specifically to allow after the fact scrutiny into the company’s efforts to finance and construct the capital projects needed to bring adequate water quality to the company’s customers.
The company — not the ratepayers — bears the risk of cost disallowance should its efforts be found imprudent.
Attorney General Campbell argues that, while she opposes Great Barrington’s motions:
… [The Attorney General’s Office] is genuinely concerned about the delays surrounding the construction of the manganese filtration system and acknowledges the imperative need to provide HWW customers with significantly improved water quality.
The [Attorney General’s Office] entered into the settlement agreement with the understanding that the most expeditious way to secure clean drinking water for Housatonic was — and remains — for the company to obtain financing and begin construction on the manganese filtration system as quickly as practical.
This understanding is embodied in the implementation timelines incorporated into the settlement, timelines which the company has not met. Notwithstanding any role the Board’s order has played in this delay, it is not lost on the AGO that the year-long construction timeline described for the manganese filtration system, in the company’s notice of delay, does not align with the roughly six-month construction timeline agreed to in the settlement agreement.
Accordingly, the AGO will thoroughly investigate the delay during the prudence review for the project and associated Phase 2 rate increase and, where appropriate, argue for the Department to deny or reduce the requested cost recovery in response to any failings by HWW.
Also on March 3, HWW filed objections of its own with the DPU against Great Barrington’s motions. Attorney Jesse Reyes, senior counsel from Boston law firm Womble Bond Dickinson LLP, filed the opposition on behalf of the company.
In his filing, Reyes calls Great Barrington’s request that the DPU suspend the Phase 1 rate hikes “an improper collateral attack on the department’s order approving the settlement agreement”:
Procedural issues aside, the motion misrepresents the basis of the Phase 1 rates. The company’s cost recovery under the Phase 1 rate increase has nothing to do with the cost of the manganese filtration project.
Those rates, determined by the department to be just and reasonable, include the revenues the company requires to recover its base distribution cost of service, including the cost of service for capital improvements that were already in service and, for example, have successfully brought the level of haloacetic acids in the water into compliance with state and federal requirements since October 2023.
In fact, a portion of the approved cost recovery for the company’s base distribution cost of service has been deferred to the Phase 2 rate increase, which will not happen until the manganese filtration project is in service and the department has reviewed and approved the project’s incremental costs. The deferral results in an annual revenue requirement deficiency of $82,069 until the Phase 2 rates take effect.
Reyes argues that HWW is in compliance with the settlement agreement and Great Barrington Board of Health’s Order to Correct because “it has sought and obtained all available sources of public financing for the manganese filtration project” and that manganese filtration project has been delayed “as a direct result of meritless litigations” pursued by the towns.
The delay in the manganese filtration project does not represent a breach of the settlement agreement, because the settlement agreement contemplated that project schedules could face delays.
The settlement agreement noted that, at the time, ‘[t]he project is currently expected to be in service in the fourth quarter of 2024.’
This was a reasonable expectation based on what was known by the company when the settlement agreement was executed on April 26, 2024.
The Town of Stockbridge’s accusation that the company has made ‘few efforts to move the ball forward on Phase 2’ is false. The project had been in the planning stage well before the company filed its rate case in 2023.
The company’s engineers conducted a water treatment feasibility study for manganese removal in March 2021.
Pilot studies were conducted and were to be submitted to the MassDEP for approval to proceed with finalizing the manganese removal system design, and based on the timetable of the MassDEP approval process, the company reasonably expected to complete the project in late 2024, but acknowledged that the ongoing rate proceeding could push the implementation into 2025.
The company was in contact with CoBank regarding financing before filing the rate case and periodically during the process. All that was needed for the company to maintain the schedule expected in the settlement agreement was department approval by August 1, 2024.
The financing process proceeded as was then expected. As indicated above, CoBank provided indicative terms for a loan agreement on August 16, 2024. However, the company had no reason to anticipate that the Board of Health would subsequently issue its overreaching orders. Thus, the resulting delay is not a result of imprudence in presenting an expected implementation schedule, because the Town of Great Barrington’s actions were not reasonably known at the time.
Click here to view the Office of Attorney General’s Filing with the DPU. Click here to view HWW’s filing.
