Imperiled $1.1B CT Water deal hits another regulatory setback

BY Matt Pilon

Photo | Contributed
Photo | Contributed
Killingworth Reservoir is among 253 in-state reservoirs and wells Connecticut Water Service Inc. taps to provide potable water to about one in 10 Connecticut residents.
Threatening to sink SJW Group's proposed $1.1 billion acquisition of Clinton-based Connecticut Water Service, the Public Utilities Regulatory Authority has declined to reopen its review of the deal in order to consider new information the two companies hoped would change the regulator's mind.

Now, PURA's preliminary denial of the deal, which said the proposed combination would leave CWS in "worse condition both financially and managerially," is set to become final on Jan. 16, pending any written exceptions and requests for oral arguments the applicants would have to file by Wednesday.

SJW issued a statement Friday expressing disappointment in the ruling and said it is reviewing its options.

"We continue to believe that the transaction is in the public interest and will provide significant
benefits to all stakeholders, including employees, customers and local service area communities
throughout Connecticut," SJW said.

Should PURA's rejection become final, the companies could reapply in the future, PURA spokesman Nicholas Neeley said.

In its Friday ruling, PURA denied a motion from SJW and CWS to reopen the record in their change-of-control proceeding in order to admit new evidence. PURA had taken the "unusual step" of allowing the companies to submit new materials and testimony for consideration to "demonstrate to PURA that the proposed transaction meets all statutory criteria and is in the public interest."

"However, the applicants appear to have misconstrued [PURA's] ruling as an invitation to negotiate the terms of the proposed transaction and to offer concessions," PURA wrote.

The information submitted by the applicants provided limited "new" evidence, PURA said, adding that the companies' commitments to Connecticut jobs and presence do not count as new evidence for the purposes of the regulatory proceeding.

"[PURA] has expended extensive resources reviewing three iterations of this merger application," PURA wrote. "The Authority expects parties submitting merger applications to have finalized all material details of the transaction prior to submission of an application."

It's a potential win for Eversource, which last year submitted unsuccessful bids of its own to acquire Connecticut Water. Eversource had urged PURA not to reopen the record to admit the new evidence, arguing that it would set a precedent allowing applicants to use the PURA process as an "open-ended negotiation."