By BEA LEWIS, for THE LACONIA DAILY SUN
CONCORD — Just days after Gov. Chris Sununu said in his inaugural speech that the state must rethink its energy policy to prevent more businesses from leaving to find cheaper electricity, New Hampshire's two largest utilities are set to renew their argument that they are being overtaxed.
The New Hampshire Electric Cooperative Inc. and Eversource Energy are scheduled to make oral arguments before the state's highest court on Jan. 12, in the appeal of their years-long tax abatement fight.
The municipalities involved in the appeal which include the Lakes Region towns of New Hampton and Northfield, argue that the appraisals of utility owned property provided by both companies as well as by the New Hampshire Department of Revenue Administration aren't reliable, don't provide an opinion of value of the actual assets in each separate community and that the DRA's "net book approach...allowed property to escape taxation."
At stake for the two utilities is the potential savings of millions of dollars in taxes if they are able to prove that their respective properties have been overvalued. And on the flip side of the coin, for small towns, a loss of tax revenue could result in a tax hike for other local property owners or a cutback in municipal services.
Attorney Margret Nelson, who represents NHEC, said the question of how to properly value utility property for local assessment purposes has sparked considerable debate and litigation, dating back to at least 1957, when Public Service Company of New Hampshire filed suit against New Hampton.
In the wake of the state's restructuring how utilities are regulated, the Public Utilities Commission has made it clear that it opposes allowing utilities to pass on "acquisition premiums" to its customers, the amount paid above net book value for utility assets.
The appeal Nelson said, will allow the court to address when and how multi-jurisdictional utility property which is part of an integrated system, operating as a single economic unit, should be valued and how to properly measure the impact of regulation that affects the property, taking into account the market conditions and regulatory constraints in effect during the tax years under appeal.
The NHEC argues there is no consistent and fair method for valuing its electrical distribution property and that the burden of steadily increasing and inconsistent municipal assessments must be borne by its members.
The New Hampshire Electric Cooperative filed a tax abatement appeal with the Board of Tax and Land Appeals involving 11 municipalities for tax year 2011 and 12 communities for tax year 2012.
In all 23 appeals, the parties stipulated that in 2011 that the communities of Andover, Brentwood, Colebrook, Epping, Grafton, Lempster, Lyme, New Hampton, Plainfield, Thornton and Unity had collectively leveled assessments totaling about $27,011,000 for property with a market value of $25,865,600.
For tax year 2012, the town of Northfield was added to the appeal and the total assessment for the 12 communities was $30,945,800 on property with a market value of $29,637,900.
In the Lakes Region, New Hampton assessed NHEC owned property at $2,630,200 in 2011 and $2,801,100 in 2012. Northfield assessed NHEC property at $3,646,400 in 2012.
During a nine-day hearing in January and February 2015, the NHEC argued that the assessments were disproportional as they are a nonprofit, member-owned and controlled electric distribution utility.
They relied on the opinion of George Lagassa, an experienced appraiser who concluded the highest and best use of the property was as part of an integrated electric distribution system.
Using sales comparison, income and cost approaches to value and reconcile those values, Lagassa arrived at what the NHEC asserted was credible estimates of the market value of the property.
Six communities, Andover, Epping, Lempster, Lyme, Plainfield and Warren, acknowledged overassessments occurred and agreed tax refunds were due for 2011 and 2012.
The municipalities argued that the Lagassa's appraisals didn't provide credible opinions of market value and that appraisals done by the DRA shouldn't be considered as proof of disproportionality because each municipality has the lawful authority to set assessments independent of the values arrived at by the state.
The bulk of the towns have relied on assessments of utility property done by professional engineer George Sansoucy of Lancaster.
In July 2015, the Board of Tax and Land Appeals ruled in favor of the towns, concluding that the unit method of valuation sought by Eversource and NHEC – a method through which they seek to reduce their property taxes by one-half to two-thirds – does not represent the fair market value of the utility properties.
In its brief filed with the New Hampshire Supreme Court in September, Eversource asserts that it faces regulatory restrains on income and operations and that "dramatically inconsistent assessment, including assessments more than doubling in one year in one community," necessitated the appeal.
Eversource additionally claims that the market value of utility property established by the DRA for the state utility tax and assessments of the same property completed by individual municipalities "vary widely."
NHEC said it was compelled to appeal to the Board of Tax and Land Appeals as the state was still struggling with the impacts of the global recession which began in 2008, and the co-op is experiencing little or no growth in its
customer base, while the bulk of the tax assessments on the poles, wires and substations it owns in the 118 communities it serves are increasing.
NHEC claims the municipal assessments and appraisals are "methodologically flawed" resulting in values being set that eclipse market value and that are both excessive and disproportional.
As the outcome of the case could have far reaching ramifications on utility property appraisal in the future Unitil Energy Systems Inc., Northern Utilities Inc., and Granite State Gas Transmission, as well
as the DRA have each filed an Amicus Curiae or "friend of the court" brief.
Such briefs provide the chance for non-parties to a suit to address questions of law or fact which are relevant to the resolution of the appeal, which will not be adequately addressed by the litigants.