Lyme — Town leaders in Lyme last month sent TransCanada Hydro Northeast, owners of the Connecticut River dam in Wilder, a $507,000 bill for repairs to road damage that the town blames on the dam.

Town roads near the Connecticut River for years have experienced erosion and flooding that officials say is caused by water level fluctuations from the dam.

Besides the cost of repairs, residents and town road workers have been taking long detours to use River Road, the northern end of which is still closed due to water damage, Selectboard Chairwoman Sue MacKenzie said.

“Having the road closed is a major inconvenience for the residents,” said MacKenzie, who also lives on River Road. “In order to get to Lyme, now we have to drive to Hanover, to River Road in Hanover, and then turn around and go back again.”

Lyme officials sent their letter, which asks TransCanada for about $460,000 for River Road and $40,000 for other, smaller projects, on Oct. 5.

TransCanada sent a short response about a month later.

“We are not aware of any prior discussions or agreements to reimburse the town for these costs,” Erin O’Dea, legal counsel for the energy company, said in the Nov. 14 letter. “Please give me a call if you would like to discuss this matter further.”

Jennifer Link, a spokeswoman for the company, declined to address the invoice directly, but said in a statement, “Our focus has and continues to be on being a responsible owner and operator of our facilities on the river and working with the town of Lyme.”

Earlier this fall, TransCanada made an agreement to sell its five Connecticut River dams to the Boston-based equity firm ArcLight Capital Partners.

While the deal is pending, TransCanada is seeking to renew its federal license for the Wilder dam and others.

Towns such as Lyme, along with the Connecticut River Watershed Council, have been seeking more restrictive terms for the new license. The potential new provisions could force the dam owners to establish a mitigation fund for damage to surrounding communities, and change the dams’ operations to decrease their environmental impact.

As it stands, the Wilder dam and TransCanada’s other holdings operate on a “peaking” model, by which the dam operators alter how much water the facility holds based on the market price of energy, according to Andy Fisk, executive director of the watershed council.

“When you do that, the water level in the reservoir goes up and down,” Fisk said, and when the water level changes by several feet in the space of day, rather than at the slower natural rate, he said, “you increase the rate of erosion.”

Fisk said the current “best practice” was to use a “run-of-river” hydroelectric model, where a dam does not create a large reservoir and instead allows a river to flow more naturally.

He recognized that changing the business model could hurt the dam owner’s profits, but said the licensing process was meant to address both energy needs and environmental concerns.

“This is all about balance,” he said. “How do you keep these facilities running economically while minimizing their impact?”

TransCanada, surrounding municipalities and the watershed council have been trading filings in the federal license case in an effort to determine the dam owner’s level of responsibility for shoreline erosion.

TransCanada disputes the degree to which fluctuations in water level from the dam contributes to erosion. In federal regulatory filings, the company’s representatives acknowledge that the dam’s operations can put stress on riverbanks, but they also contend that rainfall and other natural occurrences are a greater cause of erosion.

With a response dated Oct. 31 from TransCanada, the ball is now back in the community advocates’ court.

As this process plays out, Lyme is struggling to raise money for necessary repairs, according to MacKenzie. Earlier work on River Road was reimbursed in part by federal grants, she said, “but grants are no longer available.”

Meanwhile, erosion is threatening to cause more damage in other areas, she said. “They need to be taken care of posthaste.”

Rob Wolfe can be reached at rwolfe@vnews.com or 603-727-3242.