Aquarion Court Decision Offers Hingham Differing Interpretations

A Worcester County Superior Court judge recently set an $8.1 million price for Aquarion's water system in Oxford. The decision means that if the town chooses to go ahead with its purchase, it will pay significantly more than officials had hoped, but less than Aquarion originally proposed.

Though the cases differ in size and scope, the decision last month bodes well for Aquarion in its litigation with Hingham, said John Walsh, the company's vice president in charge of operations in Connecticut, Massachusetts and New Hampshire.

"We are pleased that the court ruled in our favor," Walsh said in an interview Monday. "It was what we expected based on our interpretation of the charter."

However, the decision could also be taken as an encouraging sign for Hingham, Board of Selectmen Chair Bruce Rabuffo said. 

"Aquarion was looking for [approximately] $13.8 million, but the judge threw out a lot of points," Rabuffo said. 

Oxford and Aquarion agreed on a starting price of $5,930,534, though both parties felt the price was not ideal and should have been adjusted to determine the actual cost of the system.

The judge, Daniel M. Wrenn, added approximately $40,000 in actual costs for Aquarion, but remained very close to the starting price. Then he factored in a decision in the company's favor related to shareholder investments, which added a little more than $2.1 million to the price.

Oxford and Hingham's system are different – here Aquarion serves significantly more customers, and its infrastructure is more substantial – but Walsh said the Worcester County decision buoys' Aquarion's case in Hingham because of how it interpreted costs.

For instance, the judge ruled in the Oxford case that Aquarion was entitled to an additional $47,298 in "husbandry" expenses – those incurred for two studies and on overhead costs for capital projects. 

Wrenn also ruled, for example, that Aquarion was entitled to the costs associated with engineering reports and studies even if they did not result in capital improvements, and also that "it would be unreasonable to require Aquarion to produce original receipts for assets that could have been purchased as far back as 1904."

"[The decision] doesn’t change our approach," Walsh said, "it strengthens our faith in our interpretation of the charter formula in Hingham."

But the judge also sided with Oxford in some places. He ruled, for example, that Aquarion was not entitled to intangible assets to the tune of $725,267 because the company failed to present sufficient proof.    

One issue that could be decided in the Hingham case will be how to address depreciation of assets, Rabuffo said. Depreciation is not mentioned in the 1879 statute that created the pricing formula, and if made part of the calculation it could bring the cost for the town down.

Rabuffo also said he did not believe the Oxford case addressed long-term debt, which is a factor in Hingham.

"In Massachusetts, these water company decisions are unique almost to every town," Rabuffo said. "Our statute is very different from the Oxford statute." 

The Town of Hingham filed suit against Aquarion in July to determine the cost of purchasing the water system, which serves customers in Hingham, Hull and Cohasset. That followed a vote by the Board of Selectmen the previous month to go ahead with an acquisition of the system, in a bid to save ratepayers money over the decades ahead.

The lawsuit sits now before the Business Litigation Session of the Superior Court of Suffolk County after the town tried unsuccessfully to bring it directly to the state's Supreme Judicial Court.

Aquarion and Hingham officials differ widely in their prices for the system, based on divergent interpretations of the town's statute. The company says the total value of the system is nothing short of $185 million, while the town has argued it is worth $60 million.

In the town's complaint, officials argued that based on the 19th-century formula, the system is worth $28 million, plus $32 million in long-term debt, according to a press release issued earlier this year by the Board of Selectmen. 

Rabuffo said that the town's lawyer, Kerry Ryan, was speaking Monday evening with Aquarion's attorney about the case.

“We’re hoping to keep this above board and not go down into the trenches," Rabuffo said. It’s a business decision.”