Saying the town has faced high rate hikes and poor service from its privately owned water provider, Hingham officials will ask Town Meeting next month for almost a half-million dollars to continue studying whether the town should buy the Aquarion Water Co. as it battles the firm in court over how much the company is worth.
“Hingham residents have lousy service and pay too much for it,” said Hingham Selectman Bruce Rabuffo. “This is a big issue.”
Rabuffo said Hingham has a legal right to acquire the water infrastructure, which also serves Hull and part of Cohasset, under the 1879 state law that established the service, then called the Hingham Water Co. The statute says that the town has the right to buy the water service at any time based on a price formula, according to the town and Aquarion leaders.
However, Rabuffo said, Aquarion, which was bought by Macquarie Bank in 2006, has been making the town’s potential acquisition difficult by naming an inflated price for itself.
In 2012, Aquarion commissioned Willamette Management Associates, a business valuation firm, which estimated the company at $184.5 million. But town officials said the actual range is between $40 million and $70 million, based on analysis from valuation firm Duff & Phelps and other experts.
“If it really costs $184 million, I don’t think the numbers would justify for us to buy it,” Rabuffo said. “But if it’s where we think it’s going to come out, between $40 and $70 million, that’s a winner for us.”
The town took Aquarion to Suffolk Superior Court’s business litigation in July 2013, where a judge will determine what the company would cost Hingham. Rabuffo estimates that the case will continue for about another year.
“There are about 280 water companies in Massachusetts, and most are owned by the public,” Rabuffo said. “Aquarion has not disputed our right to buy, they’ve just stated they’re not for sale. If that’s going to be another fight, I don’t know.”
Asked whether the company wanted to sell, John Walsh, Aquarion’s vice president of operations, said the company was “interested in continuing to serve Hingham, Hull, and Cohasset.”
Hingham selectmen will ask Town Meeting on April 28 for $475,000 for engineering, valuation, and legal fees so the town can continue its assessment of possibly buying the water company. The request comes after Town Meeting approved $320,000 in 2012 for a study to analyze the cost, according to town documents.
Rabuffo noted that since the town has investigated purchasing Aquarion, the supplier has lowered rates intermittently. “One year ago, they reduced rates by a collective $900,000, but they didn’t commit to keeping rates at that level,” he said. Aquarion also announced on March 18 they expected to give $410,000 back to customers after the company received a refund from the Internal Revenue Service due to new tax regulations.
Walsh said since Aquarion acquired the water service in 2002, it has raised rates 1.8 percent each year, which he said is below the state average of 5.2 percent, citing data from engineering firm Tighe & Bond. “We’ve been able to keep rates in check through prudent and efficient capital,” he said.
However, Walsh said, the rates also include a 40 percent surcharge to cover capital costs of a $36 million water treatment plant built in 1996 by a predecessor company that provided the water service.
“The treatment plant added significantly to the bills,” he said. “It was very expensive to build, in part because of local zoning requirements in Hingham.”
In 2012, the average and median annual water bills in Massachusetts towns hovered just below $500, according to data from Tighe & Bond, which is available through the state’s Department of Environmental Protection. Aquarion customers in Hingham, Hull, and North Cohasset paid $940 annually in 2012, according to the data.
Walsh also said in a statement that Aquarion has received “accolades from officials in both Hingham and Hull about our service.”
“We have done a number of presentations to the Hingham Board of Selectmen, and from the feedback we’ve gotten over the past two years, some of it has been favorable,” Walsh said, noting that the company has also strived to improve communication between both customers and town officials.
But some customers say they are still unhappy with their service, pointing to recent years fraught with broken water mains, poor infrastructure upgrades, and high water rates.
Hull Town Manager Philip Lemnios said his community saw more than 20 water main breaks in 2013, and there have been several already in 2014.
“In January, we had basically closed down water to two-thirds of the town for several hours, which happened on a pipe that three weeks earlier Aquarion was telling us was in great shape,” Lemnios said. “They have not made any meaningful reinvestment. . . . They don’t want to do that because they’re putting private profits ahead of the public good.”
Walsh said the number of main breaks was not as high as it could have been. “We had 30 main breaks over 190 miles of pipes in Hingham and Hull in 2013, but the industry average is about 23 breaks for every 100 miles, or about 44 over 190 miles,” he said.
Lemnios mentioned that other towns’ Aquarion services, such as Oxford, are also in talks about trying to acquire their portion of the service. In a Nov. 21 ruling, Superior Court Justice Daniel Wrenn said Oxford’s water infrastructure is valued at more than $8 million, a price Oxford must pay if it is to acquire the system.
Lemnios said Hull has been kept in the loop during Hingham’s bid to potentially acquire the company.
The issue has also caught the attention of Cohasset officials.
“My main concern as a Cohasset selectman is that we get some improved service out of it without any rate increases,” said Board of Selectmen chairman Fred Koed.