AV Water attorney: Receivership process could complicate negotiations to sell the Morningstar water system

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AZTEC — Stonetown Animas Lenders LLC has filed the legal papers to take control of the troubled AV Water Co.'s assets, including two water systems.

The company filed for receivership on Tuesday in district court. If a judge rules in favor of Stonetown, the company will appoint a receiver who would take over operations of the Morningstar water system, which serves Crouch Mesa, and possibly the Harvest Gold system, east of Bloomfield.

Zoe Lees, an attorney for Stonetown, told the New Mexico Public Regulation Commission today that the company filed for receivership to prevent assets from losing value.

"Frankly, Stonetown has an interest in having the utility managed well," she said during the meeting, which was streamed online.

Lees explained AV Water took out a $5.7 million loan from Stonetown several years ago. The company currently owes $2.7 million to Stonetown, she said, and since June 5, Stonetown has not received payments on that loan. Around the same time that AV Water defaulted on payments, the New Mexico Environment Department issued boil water advisories for both Morningstar and Harvest Gold. The boil water advisory for Morningstar was lifted in September, but customers on the Harvest Gold system remain on the advisory.

AV Water is currently operating without a general manager after Fred Whistle’s resignation. PRC staff informed commissioners of Whistle’s resignation during the meeting today . When reached today by The Daily Times, Whistle declined to comment on his resignation.

PRC staff also questioned whether water in the Harvest Gold system is receiving the required treatment since the company’s operator was out of work for medical reasons. AV Water attorney Germaine Chappelle said the operator was receiving medical care outside of Farmington for a few days but has since returned to work.

NMED Drinking Water Bureau Chief Stephanie Stringer said the Harvest Gold system continues to have high turbidity readings and the boil water advisory will not be lifted until the water from the system consistently tests below turbidity limits for 30 days.

One way the company can lower turbidity levels is to abandon the water treatment plant and connect Harvest Gold to the nearby Bloomfield infrastructure. Blanco Mutual Domestic Water Users Association has received state funding to make that connection, but is concerned about using the public funding on a private water utility because of the Anti-Donation Clause in the state's Constitution.

Blanco applied for the funding because it is interested in incorporating the Harvest Gold system into its water system. While it is interested in acquiring the system, Blanco sent a letter to the PRC earlier this week highlighting numerous concerns. The PRC met today in Santa Fe to discuss the potential of Blanco becoming an independent operator for Harvest Gold.

The PRC gave Blanco about a week to determine whether it is would be willing become an independent operator for the system.

Lees said Stonetown supports having Blanco take over the Harvest Gold system. She said Stonetown is willing to have the assets in Harvest Gold "carved out of the receivership." The PRC asked Lees to provide them with information about whether Stonetown would allow Blanco to take the Harvest Gold system without any liens.

Chappelle said Stonetown filing for receivership could complicate the sale of the Morningstar system. Chappelle said AV Water has received an offer from EPCOR and sent EPCOR a counter offer for the Morningstar system.

EPCOR is based in Canada and operates utilities in Arizona, New Mexico and Texas. In New Mexico, EPCOR operates water utilities in Clovis, Edgewood and Thunder Mountain, according to its website.

During its meeting next week, the PRC will also discuss whether to allow AV Water to collect bill payments from Harvest Gold residents. PRC commissioner Patrick Lyons expressed concerns about preventing AV Water from collecting bill payments.

He said if the company is unable to collect payments from customers it may not be able to continue paying for Cascade Bottled Water Co., which is currently delivering drinking water to those customers.

"I just don't think that it's a good idea to cut billing completely out," he said.

The PRC meets at 9:30 a.m. Wednesdays in Santa Fe. The meetings can be watched live at nmprc.state.nm.us.

Hannah Grover covers government for The Daily Times. She can be reached at 505-564-4652.

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