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July 11, 2019

CT Water, SJW up local commitments amid new state deal

Photo | Contributed Killingworth Reservoir is among 253 in-state reservoirs and wells tapped to provide potable water.

Connecticut Water Service Inc. and a California water supplier inked an agreement with state officials last week they claim will enhance their regulatory bid to merge in a $1.1 billion deal.

The settlement agreement filed July 3 between the Connecticut Department of Energy and Environmental Protection (DEEP), the Office of Consumer Counsel (OCC), Clinton-based Connecticut Water and SJW Group legally ties the water companies to protect local jobs and control as they continue seeking regulatory approval from the Connecticut Public Utilities Regulatory Authority (PURA) to combine. 

The companies in a joint statement late Wednesday said the deal marks an “important step forward” in their quest to merge, which would create one of the nation’s largest purveyors of water.

In December, PURA preliminary denied the proposed combination, first announced in March 2018, over fears the deal would leave Connecticut Water in “worse condition both financially and managerially.” 

The two companies in April revised and refiled a second merger application with PURA and continue to meet with state regulators in attempts to ease their trepidation over the proposed deal.

Under the settlement inked with DEEP and OCC, the companies agreed to alter and add commitments they said will provide additional long-term customer and environmental benefits, strengthen local control and other financial protections for customers.

In particular, the latest commitments from Connecticut Water and SJW include the following:

  • Staffing levels at Connecticut Water and its local subsidiaries, the Avon Water Company and the Heritage Village Water Company, will remain at 221 employees for three years following deal’s competition.
  • No layoffs or involuntary terminations will occur in Connecticut for a three-year span after the deal closes.
  • The companies will provide one-time customer bill credits of approximately $2.3 million for customers of Connecticut Water and its subsidiaries. They will also provide rate credits of $3 million over a decade to customers of Connecticut Water and its subsidiaries. 
  • Base rates for Connecticut Water and its subsidiaries will not be increased before Jan. 1, 2021.
  • Connecticut merger-related savings will result in savings for local customers.
  • An independent party will conduct an annual customer satisfaction survey for the first five years of the combined company.
  • Connecticut Water and its subsidiaries will double their annual charitable giving to $120,000 for at least five years following the combination.

Although PURA will decide the next procedural steps, the companies said they expect the transaction to close in the third quarter of 2019. They originally expected the deal to be completed by year-end 2018.

“We are eager to move forward with the combination and deliver the immediate, quantifiable and significant benefits to all of Connecticut Water’s stakeholders,” the companies said.

According to the deal, SJW’s board of directors will include a majority of independent board members and three of Connecticut Water’s current board members. Connecticut Water and its four subsidiaries will also implement a local board of directors with at least five members.

The combined company would also hold at least one meeting a year in Connecticut Water’s service area in New England.

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July 11, 2019

Are the profits from consolidating several local water companies that interesting to an out-of-state company, or is there another attraction? I would hope that there are provisions in this deal to prohibit the California water company from diverting water from Connecticut?

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