By TUX TURKEL, Staff Writer
Sunday, April 1, 2007
WHO'S WHO IN WATER CASE
HERE ARE some of the major players in the Fryeburg Water Co. case and their interests.
HUGH HASTINGS: Longtime president and shareholder of the water company. He helped set up a deal by which the company receives some money from bottled water sales, to help modernize the system.
JOHN HASTINGS: Superintendent of the water company, largest shareholder and son of Hugh Hastings. He is one-half of a partnership called Pure Mountain Springs, which sells water to Poland Spring, the bottled water giant.
ERIC CARLSON: A geologist who came up with the idea of selling the company's water to bottlers. He and John Hastings are the sole partners in Pure Mountain Springs.
HANNAH WARREN: Fryeburg resident and former planning board member who is an intervenor before the Maine Public Utilities Commission, which has been looking into rates at the water company.
PHIL AND BARBARA MERRILL: Lawyers representing Warren and other intervenors. Barbara Merrill is a former independent candidate for governor and is active in water rights issues in Maine.
OTHER WATER ISSUES DIVIDING FRYEBURG
WATER IS A POLARIZING ISSUE in Fryeburg. Here are some examples:
Three years ago, Poland Spring announced plans to build a truck-loading facility in town to handle water piped from a well in neighboring Denmark. The facility hasn't been built, and legal disputes with the town and local opponents have pushed the case all the way to the Maine Supreme Court.
Legislation was passed a couple of years ago to form the town-owned Fryeburg Water District, which now is considering buying the water company.
Opponents of new commercial water development publish a monthly newsletter called "Water Waves." They're worried about the impact on Lovewell's Pond, the town's largest water body.
The Fryeburg area also is home to larger efforts to tax bottled water in Maine. Despite failure in 2005 to tax bottled water, the group H2O for Maine is circulating a new petition to set up a board to oversee and protect freshwater resources. The board would be funded by a fee on each gallon of bottled water.
FRYEBURG - Great tasting, plentiful spring water. You can watch it rising from the earth and flowing into Ward's Brook, next to a well house that sucks the source from 75 feet under ground. Until a few years ago, Ward's Spring was the primary source for the 800 customers of the Fryeburg Water Co., a small, investor-owned utility that has served the area since 1883.
Today, the spring's main well house is reserved exclusively for the Poland Spring bottling company, and you don't have to wait long, day or night, to see water trucks topping up their 8,000-gallon tanks at the pump house. They carried away more than 168 million gallons in 2005.
Some of the revenue from those sales went to the little water company. But more than 70 percent - $715,518 - went to a privately held wholesaler owned by two men.
One of the men is the water company's superintendent and the son of Hugh Hastings, the president of Fryeburg Water Co. Hugh Hastings helped set up this arrangement in the late 1990s, when the water company was in debt.
"This has helped the town of Fryeburg a lot, whether people realize it or not," Hastings said recently, as two Poland Spring trucks filled up at the pump house.
Not everyone agrees. In late March, the water company settled a complex investigation into its rates by the Maine Public Utilities Commission. The settlement gives ratepayers a larger share of the millions of dollars being generated from the water bubbling up beside Ward's Brook.
This settlement is hardly the final word, however. The water wholesaler filed papers last week asking the PUC to reject the settlement, calling it unlawful and discriminatory.
Maine is blessed with billions of gallons of pristine groundwater, but there's controversy over who should benefit from it. The PUC case offers a glimpse into one such battle over water rights in western Maine. It's a small-town story with lessons, perhaps, for statewide skirmishes over this valuable, renewable resource.
Hugh Hastings was just out of school, in 1950, when he started with the water company. His father had been a director and company lawyer. Hastings worked his way up to president, struggling over the years to borrow enough money to upgrade water lines and wells.
In 1997, a geologist helping with well design commented on how good the water tasted. Had the water district considered selling water by the truckload to a bottler? the geologist asked.
Yes, Hastings replied, but it seemed expensive to get started. And the Maine PUC wouldn't allow ratepayers to shoulder the risk of a business venture.
So the geologist, Eric Carlson, formed a limited liability corporation with Hugh Hastings' son, John Hastings. The corporation is called Pure Mountain Springs. Hugh Hastings lent the entrepreneurs $150,000 to get started.
The water company, meanwhile, agreed to sell water to Pure Mountain Springs at a special rate. Soon after, Carlson was able to strike a deal with Poland Spring, a subsidiary of Nestle Waters North America Inc.
In 2005, with the consent of the PUC, the water company agreed to let Pure Mountain Springs use its primary well at Ward's Spring exclusively to supply Poland Spring. In return, Pure Mountain Springs developed a new well nearby, for the water company's customers.
AWASH IN PROFITS
What started as a modest business venture piggybacking on the town's water supply has grown into a very successful, stand-alone operation. Pure Mountain Springs pumped more than 450 million gallons of water over the past four years and generated roughly $3 million in revenue from Poland Spring, based on calculations made in the rate case.
Of that $3 million or so, the water company received roughly $800,000, the calculations show. More than $2 million went to John Hastings and Eric Carlson.
This profit sharing is good for everyone involved, Hugh Hastings insists. The water company is operating in the black and has money to upgrade its system, which also serves parts of East Conway, N.H. The deal has helped keep rates low for customers, he said.
But some customers aren't happy, and they complained to the PUC.
"I'd like to see rate equity," said Hannah Warren, a former planning board member who is opening a bakery in town. "Pure Mountain Springs is charging a premium to Poland Spring. Why shouldn't ratepayers see that same premium?"
Warren was represented at the PUC by Phil Merrill and his wife, Barbara, a former state representative and candidate for governor. Through discovery and testimony, the Merrills have highlighted the tight-knit ownership structure of the Fryeburg Water Co., and questioned what influence it might have had on revenue sharing with Pure Mountain Springs.
For instance: The water company has 33 shareholders, and roughly half of them are related to the Hastings family. John Hastings, the superintendent and half owner of Pure Mountain Springs, is the largest shareholder. During testimony last month at the PUC, Hugh Hastings, who also owns shares in the water company, acknowledged that his brother, Peter, who is a lawyer, was hired to negotiate with Pure Mountain Springs.
This type of arrangement isn't unusual in small towns, Hugh Hastings explained, adding that the dealings are always honest and above-board.
John Hastings said the unrest puts him in a difficult position. As superintendent and top shareholder, he wants the water company to do well. As partner in Pure Mountain Springs, he makes money on every gallon sold to Poland Spring.
People think he's making millions of dollars, John Hastings said, but they don't realize the expenses Pure Mountain Springs has incurred buying land and installing monitoring equipment to protect the aquifer around the new well.
"We've done a lot for the town and have quite a lot of expenses that nobody sees," he said.
'OUTRAGEOUS' DEAL
But water is an emotional issue in Fryeburg, and it's not surprising that the settlement reached last month in the Fryeburg Water Co. case is being contested.
The deal between the water company, the intervenors and the state's Public Advocate delays any rate increase for customers for two years, and raises the rate the company is charging its only bulk water customer, Pure Mountain Springs. If Pure Mountain Springs sells the same amount of water it did in 2006, the water company will get an extra $130,000 in revenue this year.
This agreement has angered Eric Carlson, the managing partner for Pure Mountain Springs. Carlson, who also is senior vice president at the Woodard & Curran engineering firm in Portland, said he didn't even find out about the settlement until after it was finalized.
In a letter filed last week at the PUC, Pure Mountain Springs complained that the $130,000 adjustment amounts to a 58 percent rate hike. The corporation already pays 43 percent of revenue for the Fryeburg Water Co., $222,493 last year. Over the past 10 years, the letter said, the corporation has contributed roughly $900,000 to the water company to upgrade its lines and equipment.
"The extraordinary rate increase to a single customer proposed in the stipulation is outrageous, unlawful and blatantly discriminatory and should be rejected by the commission," the corporation's attorney wrote.
The settlement objection is just the latest twist for Hugh Hastings. Now 80 years old, he can remember getting by with an uncovered reservoir that after a rainstorm made drinking water look like tea. He's proud of what he has accomplished to modernize the water system for the people and businesses of his town.
"I expected to save people served by the Fryeburg Water Co. some money and I have done that," he said. "But I didn't expect the controversy."
Staff writer Tux Turkel can be contacted at 791-6462 or:
tturkel@pressherald.com
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Also if there is a long-term drought, creating a major risk of forest fires in an area, what measure does the state legislature propose to restrict the water bottlers in that area from pumping water and thus further increasing the risk of forest fire?report abuse
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