With a potential buyer, Concord Steam waits for state

  • The Concord Steam Corporation plant on Pleasant Street at night. (GEOFF FORESTER / Monitor staff) —GEOFF FORESTER/ Monitor staff

Monitor staff
Published: 3/24/2016 3:13:39 AM

A Chicago-based company wants to buy the embattled Concord Steam Corporation, as the state Public Utilities Commission is investigating the utility’s financial viability and the safety of its downtown plant. 

Concord Steam heats about 180 downtown buildings and schools. The utility’s prices are higher than the rest of the market for steam and other heat sources, in part because of the poor condition on its plant on Pleasant Street. So Concord Steam is planning a sweeping renovation for about $17 million, in hopes of reducing its rate by 35 to 40 percent.

In order for Concord Steam to secure financing for that project, however, its customers need to stick around. After years of waiting for promised savings, major clients like the state of New Hampshire and the city of Concord are still taking steps to switch from steam heat to cheaper alternatives. 

Stephen Frink, the assistant director of the PUC’s gas and water division, called the predicament “a death spiral.”

“A declining customer base forces the utility to increase rates, and more people leave, and they have to increase prices more,” Frink said.

The longtime utility’s future hinges in particular on the state of New Hampshire, its largest user. Twenty-eight state buildings, including the New Hampshire State House, are heated with steam. But Concord Steam will likely need to wait until fall for official word on a contract.

“There’s really not much we can do until the state makes a decision,” Concord Steam President Peter Bloomfield said.

If the state decides to leave, the loss would likely be a fatal blow to the utility. 

“If it fails, it certainly won’t be from lack of effort on their part,” Frink said of Concord Steam. “In spite of their higher rates than what the natural gas utilities have offered, I think it speaks to their customer relations and place in the community, that they’ve been able to keep the customers they still have.

“So I would never count them out, but they’ve never been in a more difficult position.”

New to the mix is Green City Power, a Chicago-based company that specializes in power plants that produce both electricity and heat across North America, Europe and Asia. Managing partners Tom O’Brien and Aaron Walters said they are looking at acquiring Concord Steam and completing the renovation at the plant. 

But they, too, are waiting.

“We are in a holding pattern,” O’Brien said. “In order for us to invest $20 million, we need to have a long-term contract with the city and the state. Without that, we cannot proceed. We are flexible and willing to be creative to find something that works.”

‘Magic words’

In December, the state fire marshal’s office found 14 violations of fire and life safety codes at Concord Steam’s Pleasant Street plant.

According to a letter documenting the inspection, five of those violations were found to pose “an immediate danger” and were required to be corrected as soon as possible.

District Chief Danielle Cole said the state fire marshal’s office conducted a follow-up inspection at the end of December, and Concord Steam has been working to correct those violations. 

The PUC opened an investigation into Concord Steam at the end of January, in response to a Monitor report about those fire and life safety code violations. At a February status conference, the commissioners reprimanded Concord Steam executives for failing to communicate those issues to the PUC.

“We’re beginning to be concerned that, unless we ask a very specific question exactly worded right, that we’re not going to get the information we need from your client. … That’s a big concern up here. And, if we need to use magic words in order to get accurate information, that’s going to be a real problem,” Chairman Martin Honigberg told Concord Steam’s attorney, according to a transcript of the status conference.

Concord Steam executives, however, said they were not aware of that reporting requirement. Since that status conference, both Frink and Bloomfield said Concord Steam has been cooperating and providing ample information to the commission.

In addition to the code violations, part of the investigation has been financial.

In 2007, Concord Steam began plans for a new plant in the city’s South End. The goal was to generate both heat and electricity – a practice called cogeneration. The plant would make money year round, not just during the winter, which would allow for dramatically lower rates.

But financing for that plant never materialized, and Concord Steam abandoned the project in 2013. Renovating the Pleasant Street plant, however, would still allow Concord Steam to generate electricity and reduce its rate for steam.

The utility could pay for that project through traditional financing, or it could sell to a company like Green City Power. O’Brien and Walters, the managing partners, said they would plan a similar future for Concord Steam as a cogeneration plant.

“We believe it’s an attractive opportunity for the state,” Walters said. “We believe it’s an attractive opportunity for the city. We believe it’s an attractive opportunity for the downtown.”

Bloomfield said he couldn’t elaborate on the ongoing conversations with Green City Power, but he noted the need for long-term contracts with major clients. 

“They’re interested, but until all the loose ends get tied up, they’re not going to get serious,” Bloomfield said. 

Waiting for a decision

The utility’s clients have been hearing promises of lower rates for eight years, however. Concord School District has negotiated a special 10-year contract with Concord Steam to heat its schools; it has not yet been approved by the PUC. Other accounts, however, are in jeopardy. 

Michael Connor, deputy commissioner of the Department of Administrative Services, said the state has no intention of signing a long-term contract with Concord Steam. Natural gas would likely cost one-third of what the state currently spends on steam, he has said. 

His department is in the process of hiring an energy services company to analyze a number of energy-saving measures, including a switch from Concord Steam. Those recommendations likely won’t make their way to the Executive Council for an official decision until the fall. 

“If they’re not interested, then we’re not interested,” Walters said of the state. 

In the meantime, Connor told the PUC that Merrimack County is also looking to switch; County Administrator Stephen Marro did not return a call for comment Wednesday. CEO Jim Doremus said the Concord Family YMCA has not decided to leave Concord Steam, but the nonprofit is still weighing its options.

And the Concord City Council budgeted $600,000 this year to switch its downtown campus to natural gas. The city held off on soliciting bids for that project, at the request of Concord Steam. But City Manager Tom Aspell said he can’t wait much longer; the request for proposals will be posted shortly. 

“If we don’t get started now, my feeling is that we can’t do it for this upcoming winter,” Aspell said. “I want to make sure we have heat.” 

Aspell had not heard of Green City Power and its interest in buying Concord Steam. 

“The state is going to make a decision,” he said. “ If they make a decision they’re not (staying on steam heat), the decision is essentially made for the future of Concord Steam.” 

If necessary, Frink estimated that process of winding down Concord Steam would take about 18 months. 

“You can’t just close a utility,” he said. “There would have to be some period that they would have to remain open to allow people to find alternative sources of heat. So they’re not just going to shut their doors and leave everybody high and dry.”

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

 




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