Opponents of a sale that would combine two state water companies have floated legislation to kill the transaction by threatening financing for the $2.4 billion deal that transfers Eversource’s Aquarion Water to the nonprofit South Central Connecticut Regional Water Authority.
There has been growing opposition to the sale across Aquarion’s mostly western Connecticut customer base after acknowledgements by the seller and prospective buyer that a sale means higher rates. Aquarion rates are projected to rise sharply regardless of a sale, but there is disagreement over whether they increase faster with the sale or without it. To block the sale, the Legislature has to unwind a law it enacted less that two years ago that approved it.
If the sale were blocked, that would likely prolong a years-long regulatory and legal fight over the future of Aquarion, the state’s biggest water utility.
One of the Regional Water Authority’s reservoirs in Connecticut. The quasi-public utility announced a deal to buy the investor-owned Aquarion Water Company. (South Central Connecticut Regional Water Authority)
Eversource began looking for a buyer for Aquarion after what the company called a devastating 2023 decision by the Public Utility Regulatory Authority that slashed water rates to a level below what they had been a decade earlier. The decision also prohibited Aquarion from billing customers for hundreds of millions of dollars it invested in water system infrastructure.
The regional water authority emerged as prospective buyer. Under the agreement, Aquarion would be transferred to a newly created and nonprofit called Aquarion Water Authority, or AWA, affiliated with and sharing resources with the South Central Connecticut Regional Water Authority. The Regional Water Authority would borrow the money to cover transaction, consisting of $1.6 billion in cash and $800 million in debt.
What followed was a confusing series of contradictory decisions by all three branches of state government — driven in some cases by growing and politically potent frustration with ever-increase rates for utilities of all sorts.
The legislature hurriedly endorsed the sale during a special session in 2024, adopting enabling legislation required to to allow an unregulated, nonprofit company to buy a regulated water utility. The legislation laid out in detail a governance structure that satisfied lenders financing the transaction by giving the borrower, the South Central Connecticut Regional Water Authority, control over decision making for three years after the deal closed.
In November, PURA, an executive branch regulatory agency with authority over transactions involving utilities, blocked the sale. PURA decided the Legislature got it wrong. It said a sale was not in the public interest because, among other things, Aquarion customers would initially be under-represented in combined company decision-making under the legislature’s governance structure.
Last month, a Superior Court reversed PURA. The court said PURA overstepped its constitutional authority by substituting its view of the public interest for that of the legislature. The court sent the question back to PURA with instructions that effectively require the regulators to approve the sale.
The contradictory circle was closed last week when the legislature weighed in again with the new, proposed bill that revises the enabling legislation by shifting a majority voice in decision making from the regional water authority to Aquarion. Advocates of a sale predict the change could effectively kill the deal because no lender would give money to the regional water authority if it doesn’t control how it is spent.
State Rep. Joe Gresko, a Stratford Democrat and sole signatory on the proposed legislation, said the bill is intended to send a message to PURA. with the power to again kill the transaction, that the legislature is against it.
“This walks back the bill we did in special session a couple of years ago,” Gresko said. “The intent is to have PURA at least look at the language in the proposed bill and say to themselves, ‘Hmm, maybe before we make a final decision on this, it is obvious the legislature is having second thoughts on the specifics of this potential transaction. Maybe we hold off until the legislation is passed and then we make a decision based on that.”
After blocked sale, CT water company seeks 42% increase in rates. Request draws condemnation.
No one doubts that water rates are going to increase, but opponents of the sale are betting that if they win and Aquarion remains a regulated utility, PURA will keep the hikes to a minimum.
That argument is challenged by PURA critics, who point to a succession of what a court has called questionably legal regulatory decisions and the appointment of new PURA commissioners following the September resignation of Chairman Marissa Gillett. Those critics contend decisions like the one that cut Aquarion’s rates in 2022 were reached improperly and have simply postponed inevitable – and now much larger – rate increases.
“I find it odd that we have spent so much time going after PURA and being critical of its regulatory authority over utility companies and we are essentially advocating that they have greater control over water,” said House Republican Leader Vincent. Candelora of North Branford.
Candelora advocates a sale and calls legislative opponents short sighted. He said Aquarion has been financially weakened under PURA’s rate regime and can best rebuild in partnership with the regional water authority.
“I think there is a very short term, populist political gain taking a position to oppose this sale,” he said. “But in the long run, I think you need to take a step back and look at Aquarion, where they are financially and what is the best path for getting water service through two-thirds or half of Connecticut.”
Immediately after PURA blocked the sale in November, Aquarion said it needed an $88 million increase in what it charges for water in the 57 communities in which it operates. The company said it had been granted its last rate increase in 2013 and those rates were cut by PURA in 2022.
“Since that time, Aquarion has had serious concerns that PURA’s determination in the 2022 rate case would, ultimately, cause a negative impact for customers by pushing costs ‘down the road’ and, unfortunately, this is the case,” Aquarion said at the time.
By the end of October, Aquarion said it had spent more than $488 million on improvements to its water delivery system without being able to recover the expenditures through rates. It said it expects to spend substantially more to meet new health and environmental standards, including measures to protect customers from polyfluoroalkyl or PFAS substances.
The regional water authority said that it would limit an initial rate increase to Aquarion customers to $18 million in 2027. But Attorney General William Tong, who opposes the transaction, said that under the terms of the proposed sale, subsequent annual rate increase of from 6.5% to 8.35% are projected through 2035 if the sale closes.
In a letter to dozens of political and civic leaders last week, top executives of Aquarion and the Regional Water Authority attempted to mollify critics of a sale.
At the top of the list was a promise to continue to pay property taxes currently assessed against Aquarion, a major source of local tax revenue. As a non profit, the regional authority is exempt from property taxes.
The executives also promised to establish a $10 million rate stabilization fund “to offset future rate impacts” and to preserve “in perpetuity” $16.8 million in annual rate credits already embedded in Aquarion rates.
If the sale were blocked and returned to court or PURA, the property tax and credit offers would be rescinded, an authority spokesman said.
“The purpose of the letter is to be proactive and transparent about the current offer and to make clear that Aquarion and the AWA are working collaboratively with all parties to share clear, factual information about the offer as the basis for constructive discussions with the towns,” said Rochelle Kowalski, the regional authority’s chief financial officer.