Draft report due in mid-October

By Joe Kelly

Major announcements are expected in the coming weeks on a contentious and consequential regulatory decision: Is it in the public interest for the Aquarion Water Company—the largest provider of water in Connecticut and one of the largest privately-owned water utilities in the nation—to shed its for-profit status and instead become a non-profit, quasi-public entity?

That question has loomed since January when Eversource Energy, which has owned Aquarion since 2017, announced that it was getting out of the water business and accepted a $2.4 billion bid originated by the New Haven-based South Central Connecticut Regional Water Authority (RWA). The deal would create a new entity, the Aquarion Water Authority (AWA), that would operate alongside the RWA.

Over the summer, Connecticut’s Public Utilities Regulatory Authority (PURA), which is charged with approving or rejecting the transaction, held hours of hearings and received thousands of pages of written filings. PURA is expected to render a draft decision around Oct. 22 with a full decision by PURA commissioners in November.

Supporters argue that allowing Aquarion to become a public authority will give it access to better financing terms, eliminate the cost of payouts to investors and make it possible to achieve new economies of scale through collaboration with the New Haven-based RWA. Taken collectively, the savings could amount to some $350 million a year, according to an analysis provided to PURA.

Opponents, many of whom live in Fairfield County, paint a different picture. They say rates are bound to go up because the deal will make Aquarion no longer subject to the rate-setting oversight of PURA. Instead Aquarion’s rates would be set by something called a Representative Policy Board (RPB), consisting of delegates from the 59 municipalities (including Norfolk) that rely on Aquarion for water.

That same structure exists today at the New Haven-based RWA. Critics reminded PURA that RWA water rates are a third higher than those charged by Aquarion. They also pointed out that the RWA’s policy board has gone along with every proposed rate hike for the last 25 years.

One critic is Charles Firlotte, Aquarion’s president and chief executive officer from 2003-2019. He now represents 25 towns in Fairfield County that are trying to derail the planned transaction. Firlotte argued before PURA that the financing costs of the sale alone will drive rates up. “How do you shell out $2.4 billion and not increase rates?” Firlotte asked at one hearing.

Land conservationists have also expressed concerns that the heavy debt burden associated with the acquisition could lead the newly founded authority to sell off some of the thousands of acres that provide conservation or watershed-protection functions. The organization Save the Sound argued that if PURA allows the plan to go through, those lands should be protected via conservation easements or sold to state, municipal, or land trust entities.

Rochelle Kowalski, who would be AWA’s chief financial officer, said there is no question that rates would rise—initially by 8.35 percent. She noted that if the deal does not go through Aquarion has already declared its intention to seek an even larger rate boost. Kowalski said the AWA’s rate increase would help fund a 10-year, $2 billion capital improvement plan to update water systems and facilities. She acknowledged that the new authority could sell land but said the proceeds must go into an account dedicated to the purchase of new land.

Another issue for critics is property taxes. Aquarion now pays millions of dollars in local property taxes. As a quasi-public authority, it would instead pay a reduced amount through Connecticut’s PILOT (payment in lieu of taxes) program. For towns in heavily populated Fairfield County, the loss of tax revenue could be substantial. It is also a potential issue in the Northwest Corner, though not Norfolk. Aquarion owns the land for the water tower off Laurel Way and, through its purchase of the Torrington Water Company, just over 200 acres of undeveloped land in South Norfolk, generating a tax bill of a few thousand dollars. Wangum Reservoir, the source of Norfolk’s water, is located over the border in Canaan where Aquarion pays just over $68,000 a year in property taxes, making it the third biggest taxpayer in that town. According to Kowalski, in its testimony before PURA, the water authority committed to paying taxes at the same level as Aquarion does today.

Finally, critics of the plan say the 11-member governing board overseeing the newly established water authority is weighted in favor of representatives from the RWA. Kowalski said this was done at the behest of financial institutions and bond-rating agencies and the imbalance could be rectified after a transition period demonstrating that the new authority is being successfully managed.