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April 3, 2019

SJW, CT Water refile merger application with state regulators

alex_ugalek | Connecticut Water Service has three utilities serving customers in 59 Connecticut communities.

As expected, SJW Group is again asking state regulators to bless its proposed $1.1 billion acquisition of Connecticut Water Service Inc., offering a second slate of commitments Wednesday aimed at easing concerns about local control and other potential impacts.

SJW Group, headquartered in San Jose, Calif., and the Clinton-based water utility said Wednesday they jointly filed a second merger application with the Public Utilities Regulatory Authority (PURA).

Many of the commitments are similar to ones the two companies proffered to PURA in December, after the agency signaled it would reject the deal.

The new application is the latest development in an unusually contentious proceeding that lasted much of the second half of 2018 at PURA’s New Britain offices.

The end result was PURA rejecting the deal in a draft decision, arguing the public benefit was unclear.

PURA worried that the deal would leave Connecticut Water in "worse condition both financially and managerially." The regulator also detailed concerns about a lack of binding commitments to maintain a Connecticut headquarters and protect jobs here, and the potential inability for several water utilities Connecticut Water owns here to continue to exercise local control.

Connecticut Water and SJW withdrew their application the following month, but not before making a slate of last-ditch offers, which ultimately failed to convince PURA to reconsider. Eversource, which opposed the deal, argued that new pledges didn’t constitute “new evidence” in the proceeding and were an attempt by the companies to establish an “open-ended negotiation.”

Many of those last-ditch promises, or at least ones similar to them, are contained in the new merger application, which outlines 72 commitments the applicants say would be binding.

Included once more are promises to preserve a Connecticut headquarters, not make any layoffs for three years, offer a bill credit to customers (worth $2.3 million), and freeze customer rates until at least 2021.  

There are some new promises in the application.

One would increase from one to three the number of Connecticut Water board members appointed to SJW’s board of directors. The action would mean the majority of SJW’s board would be independent board members.

The boards of the Connecticut companies would also be allowed to develop, approve and implement their own annual capital budgets, and would be required to submit their spending plans to SJW’s board within two months of approval.

In addition, the companies say they won’t seek to recover, through a future rate case, merger transaction costs and other related fees and payments.

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