THE STATE OF NEW HAMPSHIRE

BEFORE THE PUBLIC UTILITIES COMMISSION

Docket No. DE 11-250 

PUBLIC SERVICE OF NEW HAMPSHIRE 

Investigation of Scrubber Costs and Recovery 

Memorandum of the Conservation Law Foundation

 The Conservation Law Foundation (“CLF”) hereby provides its memorandum in 

response to the Chair’s request that the parties submit a brief regarding whether Public Service 

Company of New Hampshire (“PSNH”) has obtained the permits it needs prior to obtaining cost 

recovery on a temporary basis including Industrial Wastewater Indirect Discharge Permits under 

the New Hampshire Department of Environmental Services (“NHDES”) regulations. This issue 

came to light due to PSNH’s inability or unwillingness to respond completely and truthfully to at 

least three separate data requests and other inquiries seeking such information, including during 

cross examination during the hearing in this proceeding. As set forth in greater detail below, 

PSNH’s evasiveness results from the fact that it has not and is apparently unable to demonstrate 

that the one of the four major components of the wet flue gas desulfurization system (the “Wet 

FGD System”) at Merrimack Station, specifically, the wastewater treatment system, is used and 

useful, and thus ripe for cost recovery. 

Background 

 As part of discovery in this proceeding, various parties requested information from PSNH 

to determine whether PSNH has obtained all permits and approvals necessary to operate the Wet 
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FGD System. Data Request OCA-01, Question 2 (marked as Exhibit 4 at the hearing), stated 

that, 

The achievement of this requirement is contingent upon obtaining all necessary permits 

and approvals from federal, state and local regulatory agencies and bodies[,]” Please 

provide the status of all necessary permits and approvals.” 

As was clear from the answers of PSNH witness Smagula during the hearing, the response to 

OCA-01, Question 2 does not list a permit authorizing the disposal of wastewater from the wet 

FGD. Transcript page 63, line 16-20. Moreover, during the hearing, Mr. Smagula testified that 

“[t]here are no required permits necessary for disposal of wastewater from the scrubber.” 

Transcript page 64, line 1-2. 

 Mr. Smagula’s testimony is misleading at best, if not outright untrue. While evasive in 

responding to cross examination by CLF, PSNH ultimately conceded that it is using publicly 

owned treatment works (“POTWs”) to dispose of its wastewater (Transcript page 136, lines 14-

15) after it was not able to obtain a permit from EPA authorizing it to discharge treated 

wastewater into the Merrimack River (Transcript page 135). During the hearing, Mr. Smagula 

testified that wastewater is being shipped to municipal facilities in Hooksett, Allenstown, Lowell 

Massachusetts and the NHDES regional facility in Franklin. (Transcript at page 144). 

 Because PSNH did not disclose or otherwise provide materials regarding the permits it 

needs to dispose of the wastewater at these POTWs in the reports filed with the Commission 

(RSA 378:27) and because PSNH had not produced any evidence that it had obtained “all 

necessary permits and approvals from federal, state and local regulatory bodies and agencies” to 

operate the wet FGD system (RSA 125-O:13), PSNH failed to demonstrate that it is entitled to 

rate recovery, temporary or otherwise. See, RSA 125-O:18( allowing cost recovery for 
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“complying with the requirements of this subdivision” which includes the need to obtain all 

necessary permits); see also, Transcript page 160-166. 

 During the hearing, the Chair reserved as Exhibit 10 the response to a record request 

seeking an answer from PSNH as to whether it has sought, and secondly obtained a permit under 

the NH DES regulations addressing Industrial Wastewater Discharge Requests. (Transcript page 

166). PSNH responded to the Data Request on March 15, 2012 and included no less than seven 

specific documents from NHDES or various municipalities that were entitled either “permit” or 

“approval” authorizing the disposal of industrial wastewater from the Wet FGD at various 

POTWs. Mr. Smagula and PSNH took great pains to prevent the disclosure of these permits -in 

response to data requests from the parties, at the technical session of January 23, 2012 and during 

the hearing on Temporary rates in this proceeding– during which Mr. Smagula repeatedly 

referred to PSNH’s wastewater arrangements as “agreements” rather than “permits” or 

“approvals.” See, e.g., Transcript page 63, line 16-24; page 64, line 1-17 (explaining that 

wastewater is being disposed of pursuant to “agreements” and not “permits” and that 

“agreements” for disposal of Wet FGD wastewater are “not a permit that is required for the 

operation of this facility”). In addition, Mr. Smagula and counsel for PSNH repeatedly asserted 

that its response to OCA-01, Question 2 was complete and truthful even though it did not 

disclose that PSNH had applied for and obtained at least seven permits from state and local 

regulatory bodies to dispose of Wet FGD wastewater. Transcript page 67, line 12-19. 

 What is most notable about Exhibit 10 is not the extent to which PSNH had assiduously 

avoided acknowledging the need for permits to dispose of Wet FGD System wastewater, rather it 

is the fact that PSNH is actively disposing of wastewater “with two out-of-state privately 

operated wastewater disposal facilities.” As set forth in greater detail below, PSNH’s lack of 
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candor in this matter raises a reasonable ground for questioning the statements in reports filed 

with the Commission regarding whether the Wet FGD System is “used and useful” and also 

whether the public interest requires the Commission to prescribe temporary rates during the 

duration of this proceeding. RSA 378:27. 

Argument 

A. PSNH has not demonstrated that the wastewater treatment facility built as part of 

the Wet FGD System is currently “used and useful.”

The general rate-making principle is that expenditures for an item may be included in a 

public utility's rate base only when the item is “used and useful” in providing service.” Smart 

Grid Policy, 128 FERC 61060, 61348 n.132 (July 16, 2009) (citing NEPCO Municipal Rate 

Committee v. FERC, 668 F.2d 1327, 1333 (D.C. Cir. 1981), cert. denied, 457 U.S. 1117 (1982)); 

see also In re Public Service Co. of New Hampshire, 114 B.R. 820, 846 (D.N.H. 1990) 

(“Whether an item will be permitted to be included in rate base will depend on whether and to 

what extent expenditures were “prudently incurred” and whether the resulting asset is “used and 

useful” in providing service to the public.”). While these statements about the used and useful 

standard indicate a somewhat narrow policy, the Commission has considerable discretion in 

deciding whether a rate base charge qualifies as used and useful, and the used and useful 

determination is fact-based. See Appeal of Conservation Law Found. of New England, Inc., 127 

N.H. 606, 637 (1986) (“Here again, there is no simple formulation that describes the standard of 

usefulness.”); Legislative Util. Consumers' Council v. Pub. Serv. Co., 119 N.H. 332, 343-44 

(1979) (“’Used and useful’ is not a rigid concept; rather, it is an elastic one. . . . Allowing the 

Commission flexibility in applying the ‘used and useful’ test serves to promote the public 

interest . . . by allowing an energy policy that can achieve an adequate and reliable supply of 
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electric power.”) (citing Pub. Serv. Comm'n v. Fed. Power Comm'n, 511 F.2d 338, 353 (D.C. 

Cir. 1975); Baltimore Gas & Elec. Co. v. McQuaid, 220 Md. 373, 379 (Md. 1959)). 

The new Wet FGD System wastewater treatment facility is one of four large project 

“islands” that make up the Wet FGD System. Exhibit 2, page 3. The facility was designed to 

treat Wet FGD System wastewater prior to it being discharged into the Merrimack River. 

Transcript page 135. Because PSNH was unable to obtain authorization from EPA for its initial 

plan, PSNH began to install additional equipment at its wastewater treatment facility “to reduce 

the waste stream volume.” Exhibit 2 page 5; Transcript page 135. In fact, the additional 

equipment and modifications being made to the wastewater treatment facility will not only 

reduce the discharge, but will eliminate the discharge. Exhibit 7 (“To process wastewater 

effluent going forward, additional treatment equipment is being installed to reduce the quantity 

of wastewater significantly resulting in one that does not need to discharge.”); see also Transcript 

page 124-129. In effect, PSNH is in the midst of modifying the wastewater treatment system 

into a zero liquid discharge (“ZLD”) system, one of the first in the country to be deployed. 

PSNH’s progress in modifying the wastewater treatment facility is regularly addressed in 

quarterly reports prepared for the Commission by Jacobs Consultancy and included in the record 

in Docket DE 08-103. More recently, staff has proposed including them in this docket in 

accordance with Commission Order 25332, dated February 6, 2012. 

It is apparent that PSNH is experiencing some difficulty in tying the new ZLD system 

into the already constructed Wet FGD wastewater treatment facility. The June 2011 Jacobs 

Consultancy Report (at page 66-67) states that work on the engineering, construction and 

procurement of the ZLD upgrade began in February 2011 when a PO was opened with Aquatech. 

The Jacobs Consultancy July 2011 Quarterly Report (dated September 20, 2011)(at page 9), and 
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the October 2011 Quarterly Report (dated December 22, 2011)(at page 9) both reference 

“coordination” and “interface issues” with the “base Wastewater Treatment System” being 

experience by PSNH. In effect, this strongly suggests that PSNH is in the midst of reengineering and reconstructing the Wet FGD System wastewater treatment facility due to its 

failure to obtain a NPDES permit revision from EPA. Issues related to the prudency of PSNH’s 

activities with regard to Wet FGD System wastewater disposal will be addressed during the 

permanent rate portion of this proceeding. PSNH, however, is seeking to recover in temporary 

rates, the cost of the new existing wastewater treatment facility (Transcript page 144, line 17-24; 

page 145, line 1-14) which is now being extensively modified, and the cost of disposing of 

trucking and disposing of wastewater at private out-of-state facilities necessitated during times 

that the Wet FGD System wastewater treatment facility is not operational due to the ongoing 

reconstruction and re-engineering of the facility. Transcript page 122, line 16-24. 

Based on recently provided Exhibit 10, it appears PSNH has obtained permits necessary 

to dispose of Wet FGD System wastewater at nearby POTWs. In order to lawfully dispose of 

such wastewater, it must conform to the water pollutant constituents and concentrations set forth 

in PSNH’s Industrial Discharge Request Application and in accordance with the Industrial 

Pretreatment Standards set forth in 40 CFR Part 423.16, which are either referenced or delineated 

in the various municipal permits PSNH has obtained, and in its application to NHDES for 

Industrial Wastewater Discharge Approval (which pages were not provided by PSNH). Having 

apparently obtained permits to dispose of wastewater at various nearby POTWs, PSNH should 

explain why it is necessary to ship wastewater for treatment and disposal at private, out-of-state 

facilities, the amount of wastewater being disposed of at such facilities and the cost. Upon 

information and belief, the only justification for such costs is that the wastewater fails to comply 
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with the industrial pretreatment standards set forth in 40 CFR Part 423.16 and in PSNH’s permit 

applications for disposing of wastewater at POTWs. 

Conclusion 

PSNH repeatedly concealed the arrangements it has made to dispose of wastewater after 

concluding that its original facility for such purposes was inadequate, and is concealing the 

details of its trucking wastewater out of state to private disposal facilities. It continues to 

withhold information regarding the quantity of wastewater being disposed at various facilities 

and the cost. Yet PSNH is seeking temporary rates to cover both the cost of the wastewater 

treatment facility and the disposal of wastewater at out of state at private facilities. These 

developments raise serious questions regarding the extent to which the Wet FGD System 

wastewater treatment facility is being used (i.e., is used and useful) and whether the public 

interest is served by providing recovery in temporary rates for such costs. Although these 

issues will be addressed during the permanent rate phase of this proceeding in accordance with 

Order No. 25,334, the foregoing facts and analysis provide reasonable grounds for questioning 

the figures in the reports filed by PSNH with the Commission under RSA 378:27. 

 Respectfully submitted, 

 CONSERVATION LAW FOUNDATION 

 By: 

 N. Jonathan Peress 

 New Hampshire Advocacy Center 

Conservation Law Foundation 

 27 North Main Street 

 Concord, New Hampshire 03301-4930 

Dated: March 20, 2012 Tel.: (603) 225-3060 

 Fax: (603) 225-3059 

 njperess@clf.org 

 
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CERTIFICATE OF SERVICE

 I hereby certify that on the 20th day of March 2012, a copy of the foregoing 

Memorandum was sent electronically or by First Class Mail to the service list. 

 

 N. Jonathan Peress 

New Hampshire Advocacy Center 

Conservation Law Foundation 

 27 North Main Street 

 Concord, New Hampshire 03301-4930 

 Tel.: (603) 225-3060 

 Fax: (603) 225-3059 

 njperess@clf.org