Does Nestle’s Infiltration Of Maine’s PUC Make An Unconflicted Decision About Its Water Operations Impossible?

Nestle is not a corporation that treads lightly on a place — especially Maine, where its tentacles infiltrate the politics so deeply, it seems it’s not possible for a decision to be made by political people untouched by the company. Witness this story from the Press Herald:

FRYEBURG – When the Maine Public Utilities Commission this week takes up a controversial 25-year contract between the company that owns the Poland Spring brand and the family-controlled utility that supplies its water, it will do so under troubling and unprecedented circumstances: All three PUC commissioners, as well as the state’s public advocate, have ties to the company.

If you can’t tell, this is my shocked look.

“Every commissioner on the PUC has been touched by Nestle,” said Fryeburg resident Scot Montgomery, who manages a restaurant kitchen in the nearby White Mountains and has been involved in local water issues. “Everyone who’s supposed to be looking out for the ratepayers, communities, and resource seems to have this other interest.”

Bingo.

While many at the state and PUC level go to great pains to say they believe the commissioners and public advocate aren’t biased, it’s largely impossible to believe that someone who once had a financial interest in Nestle’s success can now be expected to turn around and render an unconflicted decision.

And let’s be clear — in public proceedings, the mere appearance of a conflict of interest should be avoided. In this case, the conflicts are real (and financial in at least one case), yet at least one commissioner has yet to recuse himself despite having had a hand in preparing the very same situation he’s being asked to vote on.

The Fryeburg Deal: Controversial From The Start

The Press Herald’s Colin Woodward writes one of the most cogent explanations of Nestle’s involvement in Fryeburg’s water system, which isn’t without its shadier elements:

Fryeburg Water Co., which serves Fryeburg and East Conway, N.H., is unusual in that it is a privately held water utility. (About 15 percent of the nation’s water utilities are privately held.) It was founded in 1883, but by the 1990s the majority of the shares were held by members of the Hastings family, whose patriarch, Hugh Hastings, has served as company president since 1969 and as an officer since 1950.

Recognizing that Fryeburg had excellent water — the result of quartz-rich geology and clean, copious runoff from the Presidential Range in the White Mountains — Hastings hoped some could be profitably sold to bottlers. But in the interest of fairness, the PUC prohibits utilities from selling water to any entity at a higher price than it charges its ordinary customers, so Hastings and a business partner, Eric Carlson of the engineering firm Woodard & Curran, came up with a workaround.

In 1997, Hastings and Carlson created a company, Pure Mountain Springs, that bought water from the utility at its ordinary rate and sold it to Nestle Waters at a much higher — but undisclosed — rate. Pure Mountain Springs was headed by Hugh’s son, John, who shared ownership with Carlson. PUC filings show Hugh Hastings maintained power of attorney over his son for the first five years of the company’s operation.

Between 2003 and 2007, previous PUC proceedings revealed, this pass-through entity had revenues of $3 million and paid Fryeburg Water Co. $700,000 in rents and water fees. Hastings wrote in 2004 that the initial capital financing was “over $100,000.”

“Fryeburg’s water had the right geological recipe for Poland Spring,” said Mark Dubois, Nestle Waters’ Maine-based natural resource manager. “But it also had entrepreneurs who saw the spring and invested in their business and started selling that water to us. Here was a willing seller; we were a willing buyer.”

Cliff Hall, a longtime opponent of Nestle’s operations who served on Fryeburg’s Board of Selectmen from 2007 to 2010, takes a dimmer view of the situation. “They set up a nepotistic arrangement which bypassed the (utilities) laws that say if you take an excessive amount of money, you’re supposed to reinvest it in infrastructure,” he said. “It seems to me this was a dummy company set up … to take the money and put it back in the Hastings’ trust.”

Others share these concerns. “A public utility is supposed to do the best they can for the customers, the public and the municipality,” adds Bill Harriman, one of four Fryeburg-area residents who have formally intervened in the current PUC case. “And if you look at what these guys were doing back then, they weren’t looking out for the people of Fryeburg.”

Which brings us to the heart of the issue. Nestle — one of the world’s largest (and most distrusted) corporations — is a lot better at watching out for itself than the small towns it preys on.