This story has been updated.
Connecticut utility regulators voted to block the sale of the Aquarion Water Company to a quasi-public entity on Wednesday, following months of criticism from opponents who said the deal threatened to raise water rates for nearly 250,000 customers.
The Public Utilities Regulatory Authority voted 4-0, denying the utility’s sale to the South Central Regional Water Authority, known as RWA. PURA’s decision cited concerns with the proposed structure of a newly created entity to oversee Aquarion and its ability to meet its “managerial responsibility” to customers.
Eversource, Aquarion’s owner, announced its plans to sell the water company to RWA in January as part of a deal worth $2.4 billion. The transaction involved $1.6 billion in cash and $800 million in debt.
RWA Chief Financial Officer Rochelle Kowalski said in a statement Wednesday that the authority is reviewing PURA’s decision. “We believe the conversion of Aquarion to a not-for-profit, public authority would have been in the best interest of customers, communities, and employees, providing local control and significant long-term benefit,” Kowalski said.
The sale would have handed control of Aquarion — the state’s largest water utility — over to a new quasi-public entity, the Aquarion Water Authority, which would operate as a sister entity alongside RWA. The two water authorities would have shared a board of directors, chief executive officer and CFO.
Rates for the Aquarion Water Authority would have been controlled by a separate board made up of members from each of the cities and towns within its service area.
Critics of the deal had argued it would remove PURA’s oversight of Aquarion, which could lead to escalating costs for consumers. Under state law, PURA only approves rates for investor-owned utilities, not those that are publicly owned.
Utility officials projected that Aquarion’s customers would have seen annual rate increases of between 6.5% and 8.35% over the next decade under the new quasi-public authority, according to filings submitted to PURA.
Additionally, opponents raised concerns that RWA would have had to borrow money to finance the sale, resulting in billions of dollars in interest payments passed along to customers.
“This deal was a costly loser for Connecticut families and PURA was right to reject it,” Attorney General William Tong said in a statement Wednesday. “Eversource desperately wanted to offload Aquarion, and they concocted this maneuver to extract as much cash as possible by guaranteeing the new entity free reign to jack up rates. Eversource is free to find a new buyer, but should understand that any new attempt to end public regulatory oversight over water bills for hundreds of thousands of Connecticut families is going to be a non-starter here.”
Speaking to reporters on Wednesday, Gov. Ned Lamont said that the cost of the sale appeared to be the biggest deal breaker for regulators.
“It was a big purchase price, and the acquirer would have to pay off that purchase price, which may be reflected in higher rates going forward,” Lamont said. “I think PURA wants to make sure that that does not happen.”
Republicans had also lambasted the proposed sale, which came as a result of Democratic lawmakers pushing through controversial legislation last year allowing the RWA to pursue a bid of the company.
“We thank PURA for voting down this atrocious deal which would have caused a tsunami of unending water rate spikes in cities and towns across Connecticut,” Senate Minority Leader Stephen Harding, R-Bookfield, said in a statement along with with several of his Republican colleagues Wednesday.
“This deal should have never been rammed through the state legislature by majority Democrats last year,” the GOP statement added.
Eversource spokeswoman Jamie Ratliff also referenced the 2024 law in a statement following Wednesday’s decision. The company did not mention any future plans regarding its ownership of Aquarion.
“The special act approved by legislators in 2024 indicated that the state was interested in an expanded non-profit model,” Ratliff said. “However, once tested, that same special act proved difficult to overcome for PURA to move away from an investor-owned model.”
Pushback to the proposed deal came from many corners, including consumer advocates, state lawmakers, environmental groups such as Save the Sound and local officials, who raised concerns about impact of the sale on local property taxes. (Nonprofits and public entities are generally exempt from paying property taxes in Connecticut.)
In 2024, Aquarion paid a total of $19.4 million in local property taxes in Connecticut, according to Ratliff. As part of the proposed sale, the applicants had agreed to pay no less than that amount through a payment in lieu of taxes, or PILOT, agreement.
Still, municipal leaders argued that those PILOT payments would not reflect the cost of future improvements to Aquarion’s extensive water system, resulting in a loss of future revenues.
In its final decision on the proposed sale, PURA cited no concerns with the new authority’s finances or technical ability to provide “safe, adequate and reliable” service to customers. Instead, it was concerns about the structure of the authority itself, and the loss of outside oversight, that led regulators to block the sale.
“This was the result of an imperfect process, it’s an imperfect product and an imperfect governance structure,” said Commissioner Holly Cheeseman, who is one of three new members of PURA’s board appointed by Gov. Ned Lamont last month.
“We can’t go back,” she added. “We can only rule on the application before us.”
The other PURA members who voted to block the sale were Vice Chair David Arconti, Commissioner Michael Caron and Commissioner Janice Beecher. The newly appointed chair of PURA, Thomas Wiehl, did not participate in Wednesday’s vote due to his prior involvement in reviewing the deal as an attorney for the Office of Consumer Counsel.
CT Mirror reporter Mark Pazniokas contributed to this story.