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Liberty Utilities to buy Concord Steam; customers must find new source of heat

  • Concord Steam Corp. plans to shut down in May 2017. Liberty Utilities has agreed to buy the company for $1.9 million. GEOFF FORESTER / Monitor file

  • Plant operator Neil Stewart of Manchester opens an access door to one of the boiler furnaces at the Concord Steam Corp. plant in Concord on Tuesday, June 9, 2015.(ELIZABETH FRANTZ / Monitor staff)

  • A turbine is seen at the Concord Steam Corp. plant in Concord on Tuesday, June 9, 2015.(ELIZABETH FRANTZ / Monitor staff)

  • Hoses carrying gas are seen connected to a boiler furnace at the Concord Steam Corp. plant in Concord on Tuesday, June 9, 2015.(ELIZABETH FRANTZ / Monitor staff)



Monitor staff
Thursday, July 21, 2016

Concord Steam Corp. could go cold at the end of May 2017, if the state approves a plan for Liberty Utilities to buy the company for $1.9 million.

The deal would end what officials called the steam plant’s “death spiral,” but would also force as many as 180 downtown buildings to find alternative heat sources.

The two companies announced the agreement in a filing to the state’s Public Utilities Commission on Thursday. The PUC will have final say on the proposal, which includes an emergency request for a whopping 23 percent rate increase for Concord Steam customers.

“Unfortunately, despite our best efforts, we are unable to see a future in which we can continue operations,” Peter Bloomfield, president of Concord Steam, said in a press release. “It is paramount to all of us at Concord Steam that, as we begin the process of winding down operations, our customers have a smooth transition to new services from a reliable provider. To that end, we recently approached Liberty Utilities to see if there was a way to work with them on an orderly transition for our customers who wish to use their services.”

The companies promised Concord Steam customers who sign on with Liberty Utilities would not see an interruption in service. That move would occur over the next year.

“Shutting down a utility can be a disruptive process for everyone involved, which is why it is so important that Liberty Utilities stepped up and agreed to work with us,” Bloomfield said. “This will ensure that customers will have the option to receive low cost, reliable natural gas service, without interruption.”

Concord Steam currently has 84 commercial and institutional clients, as well as one residential customer. Service areas include the State House, Concord High School, many Main Street buildings and the city hall campus. While natural gas rates are cheaper than steam, both public and private customers would need to swallow the cost of converting their heating systems. It is unclear what the price estimates for that work would be.

“We know that the upfront cost of converting from steam to natural gas can be expensive,” David Swain, the president of Liberty Utilities in New Hampshire, said in the press release. “Many of these buildings don’t have furnaces or boilers, so we are currently looking into financing options for these customers to assist with the conversion costs.”

Concord Steam’s 14 employees would be encouraged to apply for positions at Liberty Utilities, though jobs are not guaranteed.

The PUC will next schedule a hearing on the proposal and emergency rate increase, but the initial reaction was positive. Stephen Frink, the assistant director of the PUC’s gas and water division, called the agreement a “win-win,” saying he has serious concerns about Concord Steam’s financial viability.

“The alternative would be much worse,” Frink said. “There is no doubt that if they continue providing service, it’s going to be much uglier. I think this is a good arrangement.”

A scramble

As its plant on Pleasant Street has aged, Concord Steam’s prices have risen above the market for other heat sources. In hopes of cutting rates by 35 to 40 percent, Concord Steam has long planned sweeping renovation to cost at least $17 million. As part of that work, the company also pledged to fix serious life safety and fire code violations documented last year by the state fire marshal’s office.

Those promises have been unfulfilled, however, and longtime clients were already headed out the door. The city of Concord, Merrimack County and the Concord Family YMCA made plans to switch from steam heat to natural gas. The PUC challenged a proposed contract between Concord Steam and Concord School District. The state, which represents 40 percent of the company’s business, made moves to leave as well.

In one of the documents filed Thursday with the PUC, Concord Steam reported it expects to lose 12 percent of its production load by the end of 2016. To account for that decline in revenue, Concord Steam has asked the PUC to approve an emergency rate increase of 23 percent.

“Unless it receives the near-term rate relief, the company will experience operating losses which will strain its ability to provide service to remaining customers,” the filing stated.

Frink called the problem “a death spiral.” As rates go up, customers would continue to leave. With fewer customers, Concord Steam would need to ask for yet another rate increase to survive. The spiral would continue.

“They’d always be behind the ball,” Frink said.

So the company reached out to Liberty Utilities, and those negotiations produced the agreement filed Thursday. To avoid future rate increases and financial stress, Concord Steam would cease operations May 31, 2017. Liberty Utilities would pay $1.9 million to take over all steam customers who chose to switch to natural gas, though those users are free to choose another heat source.

“It will be relatively easy for us to bring those customers on, the ones that are interested in coming over,” Liberty Utilities spokesman John Shore said.

The greatest challenge would be 24 state buildings heated by steam. The Department of Administrative Services has solicited bids for energy-saving measures in all its buildings, including a transition away from steam. But that switch wasn’t expected to take place until spring 2019.

“A year is not realistic to accomplish this,” deputy commissioner Michael Connor said. “We envision at least a couple years to be able to do something of this magnitude. . . . We’re kind of scrambling to see what we can do at this point in time.”

Liberty Utilities, however, has proposed a solution. Once Concord Steam dissolves, the state would still own the Pleasant Street plant. The agreement would allow the state to run the plant for up to two more years, heating its own buildings while they are changed over to natural gas systems.

“We’ll be working as closely as we can with the state, and trying to help them with their conversion in any way we can,” Shore said.

‘The end of an era’

The Pleasant Street plant dates to the mid-1800s, and Concord Steam has operated there since 1938. The utility is the last regulated steam operation in New Hampshire, and because of a non-compete clause in the proposed agreement, the plant and its infrastructure could never be used to sell steam heat again.

Mayor Jim Bouley called the closure “the end of an era.”

“Most importantly, the city understands the current customers will still be provided with steam for the upcoming 2016-17 heating season, and I would encourage property owners currently on steam to review their conversion options as soon as possible to ensure that they are prepared to make whatever transition they deem best for their investment by next spring or summer,” Bouley said.

Concord Steam’s accounts include a number of private properties in the downtown core. With a dozen buildings on steam heat, developer Mark Ciborowski is another one of the most significant.

“This is not a shock that Concord Steam didn’t make it, but I thought it might be another year or a couple years,” Ciborowski said. “I thought we might have a little more time.”

Ciborowski was still considering his options, but he had already started planning the switch to natural gas for some buildings. Boilers can cost between $20,000 and $25,000, he said, and he was hopeful Liberty Utilities would help new clients finance the conversions in some way.

“That’s an enormous capital cost,” he said.

Two other major users – Brady Sullivan Properties and dArthur Aznive – did not return requests for comment Thursday.

The city has already approved $600,000 to convert its campus to natural gas. The bid for that work is scheduled to go out in the fall.

The Concord School District will likely need to float a bond to cover the conversion costs, business administrator Jack Dunn said. The board will likely hear a presentation at its September meeting with price estimates to convert four schools on steam heat to natural gas.

“We’re going to need heat,” Dunn said. “Hopefully, it’s not a bad winter.”

(Megan Doyle can be reached at 369-3321, mdoyle@cmonitor.com or on Twitter @megan_e_doyle.)