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April 30, 2019

Companies make case for CT Water, SJW merger

Photo | Connecticut Water A Connecticut Water truck.

Executives of the Connecticut Water Service Inc. and California water supplier SJW Group made a renewed case for their stalled $1.1 billion merger at a hearing before the Public Utilities Regulatory Authority in New Britain on Monday, effectively launching a new bid to win over the same regulatory body that thwarted their combination less than six months ago.

In opening statements, Eric Thornberg, CEO of SJW, offered a mea culpa for falling short during the first merger attempt and failing to appreciate PURA’s reservations surrounding the deal.

“I accept the responsibility for not getting it right, nor understanding the depths of your concerns,” Thornberg told regulators. “When we read the final decision we realized how far off we were.”

Thornberg said SJW and Connecticut Water retained outside counsel to determine if there was still a path forward for the two companies, and officials on both sides agreed they could satisfy PURA’s requirements for a successful and mutually beneficial buyout.

Connecticut Water President David C. Benoit said the initial proposal lacked specificity about how the combined companies would be managed.

This time, Benoit said, the two utilities have laid out a slew of legally binding commitments to fully illustrate the value of the acquisition, including a customer bill credit, a freeze on base rates until January 2021, an expansion of the water supplier’s customer assistance program, and a pledge not to recover merger-related costs from consumers.

These promises, Benoit said, are meant to ensure “immediate and long-term benefits” for customers and safeguard the best interests of Connecticut.

SJW, which owns water suppliers in California and Texas, first attempted to purchase Connecticut Water last year, but PURA blocked the merger in a December ruling that raised concerns about Connecticut Water’s continued autonomy under a new corporate parent.

Regulators also faulted the two companies for, in their view, failing to clearly articulate how the acquisition would benefit consumers, a point that reemerged as members of the public were invited to give their testimony before PURA commissioners.

Paul Zagorsky, a New Britain resident and member of the conservationist nonprofit Save Our Watersheds CT, accused the would-be partners of making insignificant changes to its purchase agreement designed to enhance “curb appeal.”

“I looked at the first application to go around, I looked at the second, and I really haven’t seen a lot of changes,” Zagorsky said. “It’s kind of, we’re going to dress it up, we’ll make some cosmetic changes to it and therefore everything’s OK. The bottom line is, the package is the same, the dressing is different.”

Invoking precedents ranging from the 1,485-year-old Code of Justinian to a 1983 California Supreme Court case concerning appropriative water rights, Zagorsky said the two companies had failed to square their vision with the doctrine of the public trust, which holds that no entity owns water, only the right to transport it.

“It’s not that (mentions of the public trust) are sorely lacking, there is absolutely no reference to it,” he said.

Keith Ainsworth, a lawyer representing the Rivers Alliance of Connecticut, told regulators that the buyout requires more protections to ensure that drinking water and freshwater streams and habitats are not compromised. The members of the Rivers Alliance would also like to see a member of a nonprofit conservation group appointed to a position on the combined company’s board of directors, Ainsworth noted.

“We need someone who is looking out for the public interest from a nonprofit perspective as opposed to for-profit,” he said.

The Rivers Alliance of Connecticut has made an application to intervene in the proceedings, Ainsworth added. Such status would give the organization the right to be heard by PURA as the state continues its review of the new merger proposal.

Regulators said they would reconvene hearings in the case starting on May 22.

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