Court grants Aquarion’s request for a ‘stay’ of PURA’s rate cut

Contributed A crew installs a water main for Aquarion.

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A judge has ordered a stay of the Public Utilities Regulatory Authority’s (PURA) recent rate cut affecting Aquarion Water Co., an Eversource-owned utility that provides water service to 685,000 Connecticut customers in 56 towns and cities.

On Thursday, New Britain Superior Court Judge Matthew Budzik granted Aquarion’s request for a stay of PURA’s enforcement of the rate reduction, which PURA approved on March 15.

In the rate case, Bridgeport-based Aquarion requested a total annual revenue requirement of $236 million, which would have increased the average residential customer’s annual water bill by 9%, or $61 per year.

In its decision, PURA reduced the total revenue requirement to about $195.5 million, decreasing the average residential customer’s annual water bill by 11%, or about $67 per year.

Aquarion appealed the decision in Superior Court, claiming the reduction would cause irreparable harm.

PURA’s decision spooked investors and led credit-rating service Moody’s to lower the water company’s financial outlook to “negative” amid a regulatory environment it called “unpredictable.”

A spokesman for Aquarion, Peter Fazekas, said the change from a stable to negative outlook “poses significant risks for Connecticut customers as they will pay more for the necessary infrastructure for the reliable delivery of high-quality drinking water.”

The judge weighed his decision based on the “public interest in granting or denying the stay.”

“... The court concludes that the risk of a harmful rating stock to Aquarion customers would be too great if the court were to fail to grant a stay,” Budzik wrote in his decision.

According to the ruling, Aquarion must place any revenue received from ratepayers above the rates set by PURA on March 15 into an interest-bearing account with a licensed financial institution until a further order by the court.

Budzik emphasized that granting the stay “expresses no view on the eventual outcome of this appeal,” which is still in its early stages.

During a hearing on May 15, Aquarion argued that the stay was necessary in light of a legal precedent that prohibits PURA from imposing retroactive rate increases. That would mean even if Aquarion won the appeal, the rule against retroactive ratemaking would prevent the company from being able to recoup lost revenue retroactively.

PURA argued that Aquarion could not demonstrate irreparable harm because the rule against retroactive ratemaking does not bar the court from ordering surcharges or increasing rates, even if PURA lost the appeal. Also, state law allows PURA to order refunds, rate increase deferrals and surcharges under specific circumstances.

Budzik declined to take a position on the parties’ arguments regarding retroactive ratemaking, saying “it is unnecessary to do so, at least at this stage of the case.”

A status conference is set for June 13.

Aquarion on Friday issued a statement applauding the court’s decision.

“We are extremely heartened that the legal process has validated the important customer interests at stake in this case, and the detrimental impact of the decision on our ability to invest in our water systems so that Connecticut customers have clean, reliable water service,” said Don Morrissey, president and CEO of Aquarion. “This is a critical outcome for customers as it provides predictability and stability in their rates, while maintaining our financial integrity so that we remain well-positioned to address emerging issues on water quality. We look forward to the next steps in the process.”

PURA issued the following statement in response to the court’s order:

“The Court’s ruling to stay three of the 42 orders in the decision will have only a nominal impact. Specifically, instead of decreasing rates by approximately $2M annually, Aquarion will be required to place this amount into escrow during the pendency of the proceeding. Although ratepayers will not see (while the appeal proceeds) the reduction in rates ordered by PURA, ratepayers will also not see the substantial increase sought by Aquarion. Importantly, the $35M increase in rates requested by Aquarion will not go into effect nor will Aquarion be able to increase rates during the stay.

Further, Aquarion appealed only about 1/3 of the approximately $37 million of disallowed revenues in the decision – in effect, conceding that the majority of the decision is reasonable. The judge, in issuing the stay, made clear that the court was not expressing any view on the eventual outcome of the appeal, which are “extremely complex and technical regulatory” matters. Order, p. 3. The Authority remains confident that the court, upon reviewing the record, will sustain the Authority’s determinations.”