Posted by Dennis Herrick on May 14, 2009 at 08:18:32:
FairPoint dips into state's cut
Instability eats up money for N.H.
By CHELSEA CONABOY
Concord Monitor staff
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May 14, 2009 - 7:31 am
FairPoint Communications will use $50 million set aside for use only in New Hampshire to deal with its financial trouble company-wide, including in Vermont and Maine. The New Hampshire Public Utilities Commission on Tuesday gave the company permission to use the money to boost liquidity and cope with financial instability. In return, the company has pledged to spend an additional $65 million on capital projects in the state by the end of 2012.
While the company cast the deal as one that would be good for the state in the long run, others said it was another sign of trouble for the company.
The approval letter, signed by the commission's general counsel, Anne Ross, said it is "reasonable" to release the money, given the company's first quarter results.
FairPoint purchased the landline network in the three northern New England states in March 2008 and took over operations at the end of January. Since then, it has struggled to provide adequate service, prompting an unprecedented number of complaints to the state from frustrated customers.
Recent company filings show customer service is improving. In its federal filing last week, however, FairPoint said it lost $8.78 million in the first quarter, could be at risk of failing to meet an interest requirement on its debt this quarter and is considering hiring a financial adviser to look at the possibility of restructuring.
Jeffrey Allen, FairPoint executive vice president for external relations, said the money will give the company flexibility.
The $50 million was paid into a fund last year by Verizon and earmarked for use in New Hampshire for capital and operating expenses.
Allen said the state recognized the old Verizon infrastructure was deteriorating and wanted to make sure there was enough money available to address issues that might arise. One use could have been further expansion of broadband service, beyond the company's current commitment of providing access to 95 percent of customers within five years.
Allen said the company is working toward that target and has so far met another requirement to make $52 million in capital improvements in New Hampshire during each of the first three years after the sale. The details of how FairPoint is meeting each of those requirements are confidential.
When the sale was debated last year, regulators in each state required some deal sweeteners for their customers. Maine received a rate decrease. Vermont saw investments for service infrastructure. The $50 million was a bonus for New Hampshire.
Allen said this week's deal is good for New Hampshire because it will result in a bigger return.
"It's a good thing for us to have a higher level of investment in the state," he said.
The original settlement agreement specifically said the $50 million could not be used for repaying debt. Allen said the company will use the money only for general capital and operating expenses. However, he said, it will help to free up other cash on hand to be used for debt repayment.
Consumer Advocate Meredith Hatfield repeated what has become a common refrain for her in recent months: The commission's actions leave her with more questions than answers.
"How do we know the ratepayers are going to get what was promised?" she said.
Hatfield wants to know more about what the money will be used for and whether the commission considered putting conditions on the deal, such as prohibiting the company from paying dividends or bonuses until the money is returned to the state.
Asked how she could be sure FairPoint will return the money to the state, the commission's executive director, Debra Howland, said the commission will continue to monitor the company's progress.
"Clearly there will be reporting requirements as we move forward," she said.
State Sens. Jacalyn Cilley of Barrington and Deborah Reynolds of Plymouth, both Democrats, sent a three-page letter to commissioners in March asking them to look into various financial, labor and management issues. Yesterday, they expressed deepening concern about the company's future.
Cilley said she thought the $50 million was supposed to be a safety net.
"I don't know how fast they can burn through $50 million, and then where are we?" she said.
Reynolds said she doesn't think the commission would have released the money unless it was necessary.
"It's just another sign that the company is troubled financially," she said.
Comments
Suckers
By Anonymous on Thu, 05/14/2009 - 07:42
I wonder what's next? Can you spell: b-a-i-l-o-u-t?
disgusted with fairpoint
By Anonymous on Thu, 05/14/2009 - 07:40
sure, give 50m to a company that STILL cant even get billing and payments corrected with its customers..way to go
Say So Long to the $50M
By skipmrgn on Thu, 05/14/2009 - 07:29
Here's yet another sign that the PUC is brain dead. When FairPoint files for Chapter 11 bankruptcy, the $50 million will be gone and the promise of $65 million (from where, exactly?) will remain even more unlikely than it is today. Add to this fiasco a complete lack of transparency - phantom improvements in broadband access and alleged progress in meeting capital investment targets - by virtue of confidentiality of the details (for what reason, exactly?) and you have a picture of a regulatory agency that has failed the people completely and utterly. Cheers to the consumer advocate and the small number of legislators who are finally asking tough questions. My question this week is the same as last week: why isn't Governor Lynch taking a wrecking ball to the PUC and firing someone - anyone! - for failing to protect the ratepayers of the state? Where is the state accountability in this sorry matter?
PUC's competence in making the right decisions.
By Anonymous on Thu, 05/14/2009 - 07:23
It would seem that based on the debacle with allowing Fairpoint to take over Verizon's land lines, the PUC has neither the competence nor the desire to protect the interests of New Hampshire tax payers. They continue to make one bad decision after another.
Incredible
By Anonymous on Thu, 05/14/2009 - 06:24
The NH PUC continue to dig themselves deeper and deeper into the hole with Fairpoint. If anyone from the PUC is reading this, I wish your position was elected. Then, the people of NH could properly reward you for the horrible disservice you have done to our region.