A Connecticut judge on Thursday said that the Public Utilities Regulatory Authority erred in its November decision to block the sale of the Aquarion Water Company and sent the deal back to regulators for further deliberations.

The decision, from New Britain Superior Court Judge Matthew Budzik, provided a lifeline for Eversource’s bid to sell Aquarion to the South Central Connecticut Regional Water Authority, also known as the RWA, in a deal worth roughly $2.4 billion.

That deal would turn Aquarion — the state’s largest water utility — into a quasi-public authority operated in a similar manner to the RWA, with both entities sharing a board of directors and top staffers. But despite the purported benefits of public ownership, the deal attracted broad criticism from state officials and local leaders who argued that it would result in lost tax revenue, oversight from regulators and ultimately higher costs for consumers.

Budzik’s ruling remanded the case back to PURA, leaving open the possibility that its commissioners could still reject the sale along narrower grounds.

“Today’s clear decision from the court provides a path forward which we believe should be focused on collaboration and reaching a practical resolution that supports long-term infrastructure investment, protects customers, and ensures safe, reliable water service across Connecticut,” the RWA and Aquarion said in a joint statement. “We appreciate the Court’s direction and will continue engaging with PURA and all stakeholders as this matter moves forward.”

PURA was represented in the case by state Attorney General William Tong’s office. Tong, a Democrat, has been a staunch opponent of the proposed sale.

“We are reviewing the decision and evaluating next steps,” Tong said in a statement Thursday. “But this remand does not change the fundamental truth of this transaction — it’s a costly loser for Connecticut families and it shouldn’t happen.”

PURA’s decision to block the sale rested entirely on regulators’ objections to the structure of the newly-created Aquarion Water Authority, which was established to manage the water company’s assets. In particular, the authority’s commissioners found the 11-member board created to separately oversee each utility was “unworkable” due the conflicting interests it would create among board members. The decision also cited concerns that Aquarion’s customers would lack an independent voice to advocate on their behalf, similar to the state’s Office of Consumer Council.

While the commissioners specifically said in their written order that both the RWA and the new authority had the financial and technical capabilities to operate a water utility, they ultimately determined that those managerial problems were too big to overcome.

Both Aquarion and the RWA sued to overturn that decision, arguing that PURA went outside the scope of its authority to reject the sale.

Specifically, their attorneys argued that the governing structure of new Aquarion Water Authority was dictated by a state law passed during a special session of the legislature in 2024 to facilitate the sale of the private utility.

Attorneys representing PURA, the consumer counsel and several municipalities opposed to the sale argued that regulators are empowered to second guess lawmakers who wrote the law establishing the new water authority — and to determine whether the structure they came up with serves the public’s interest.

During a hearing in the case on Wednesday, however, Budzik appeared skeptical of that argument. “PURA works for the legislature, not the other way around,” he said.

Ultimately, Budzik said in his written decision Thursday that while PURA does not have the authority to overrule acts of the legislature, at least one of the concerns cited in the authority’s decision to block the sale does fall within regulators’ purview.

That issue had to do with the RWA’s Office of Consumer Affairs, which lawmakers tapped as the entity to advocate on behalf of Aquarion’s customers following the sale. Budzik said that while PURA could not deny the sale based solely on objections to that decision, the commissioners could object to the amount of funding or staff allocated to that office. Currently, the office is staffed by one part-time attorney to advocate on behalf of RWA’s 121,000 customers.

“How these permissible regulatory concerns might ultimately affect the approval or disapproval of the application given that the court has overturned other aspects of the decision is a matter for PURA to decide in its regulatory discretion,” Budzik wrote.

Opponents of the sale reacted with some relief Thursday that Budzik’s decision did not order regulators to approve the transaction, as attorneys for the utilities had requested.

“We appreciate that the Court refused to order PURA to approve the application, and instead remanded the case to PURA for further proceedings,” read a statement from First Selectperson Christine Vitale of Fairfield, one of the towns that was involved in the appeal. “We will continue to fight against this unacceptable transaction — which will guarantee unregulated increases in water rates — and we look forward to continuing to advance our arguments to PURA that this transaction is unacceptable to the town and clearly not in the public interest.”

Consumer Counsel Claire Coleman said in a statement that Budzik’s ruling will allow PURA to continue considering the public’s interest in its review of the Aquarion deal and future utility acquisitions.

“On remand the OCC will continue the approach we took in the original proceeding to protect the wallets of Aquarion customers and ensure that if a transaction is to move forward, it is not just for the benefit Eversource’s bottom line, but it is a good deal for customers,” Coleman said.

While both PURA’s decision and the subsequent appeal focused largely on the governing structure of the new authority, critics of the sale have focused their arguments on the potential cost and impact to Aquarion’s customers. (As part of the deal, Aquarion plans to sell off its assets in New Hampshire and Massachusetts to the utility company Unitil.)

As part of the application submitted to PURA, officials at both Aquarion and RWA had pledged not to seek a rate increase for at least six months following the sale. After that initial period, officials projected that Aquarion would require annual rate increases of between 6.5% and 8.35% over the next decade in order to maintain its operations.

That would effectively double the cost of water for Aquarion’s customers, critics said.

But supporters of the deal, including Eversource, pointed out that utility’s last rate increase came in 2013, even as the costs for things such infrastructure maintenance and treatment of PFAS chemicals have risen substantially.

The last time Aquarion sought a rate increase, in 2023, PURA instead cut the company’s revenues by $2 million.

In December, Aquarion officials announced their intention to seek a 42% rate increase — worth roughly $88 million — if the sale of the company is not approved. That amount was higher that the $64 million estimate of needed revenues that company officials gave to PURA during its consideration of the proposed sale.