Westport First Selectwoman Jen Tooker and a Metro Council of Governments (MetroCOG) representative seemed to lay out all that southwestern Connecticut municipalities think is wrong with the proposed $2.4 billion sale of Aquarion Water Co.
They surmised that the legislative process that created the Aquarion Water Authority (AWA) to “buy” Aquarion Water through the South Central Regional Water Authority (RWA) was specious and the financing that will be used to carry out the transaction will saddle the new authority with such debt that it will have no choice to substantially raise water rates.
And that was just for starters as the chief executives of Fairfield (Bill Gerber), Wilton (Toni Boucher), Trumbull (Vicki Tesoro), Stratford (Laura Hoydick), Ridgefield (Rudy Marconi), and others joined state Sen. Tony Hwang (R-Fairfield), Sen. Ryan Fazio (R-Greenwich) and other state legislators June 25 in a virtual hearing hosted by the Public Utilities Regulatory Authority (PURA).
“My concerns about this project range from the legislative process, which led us here, to the question about how this transaction will be financed,” Tooke said. “And the inevitable increase that customers will see to the inadequacies of the PILOT (payment in lieu of taxes) programs and PILOT payments drastically affecting property taxes to the governance structure of the new entity and the effect on customer service and infrastructure investment.”
She was most concerned about how water rates will be determined going forward since the approval of the deal will mean PURA would no longer oversee the water company.
“AWA will not be under the supervision of you, PURA, which has been stated many times in the last half hour,” Tooker added. “It will be under the supervision of the RWA representative policy board. PURA has proven to be an effective and, most important independent, guardian for ratepayers overseeing Aquarion. That independence will no longer exist under the new governance structure.”
Charles Firlotte, a former president and CEO of Aquarion Co. who spoke on behalf of MetroCOG, didn’t mince any words when he testified at the June 25 hearing.
“This application is so fundamentally flawed that I don’t know where to begin,” Firlotte said. “I was always of the understanding that for an acquisition to be approved it should have a net benefit to the customers or do no harm – a rendition of the Hippocratic Oath, if you will.
“This application egregiously fails on both counts. The first objection has to do with the identification of the applicants’ positioning as the Aquarion Water Authority as the applicant and the acquiring authority.
“The Aquarion Water Authority is nothing more than a sleight of hand, if you will, to convince the public and municipalities that PURA’s approval is a foregone conclusion. And that Aquarion is somehow in charge of its own fate and that the RWA recedes in the background as some friendly partner-to-be.”
Firlotte explained that he believes the RWA orchestrated the application and will control Aquarion’s asset base if PURA approves its application. “The Aquarion Water Authority is simply a piece of enabling legislation that was cooked up in the middle of the night devoid of public input and voting on by legislators who were insufficiently informed about what they were voting for,” he added.
Sen. Hwang, who voted against the legislation in 2024, lent support to Firlotte’s theory about the sleight of hand.
“This sale was quietly authorized during the June 2024 legislative session through an omnibus bill with no stand-alone debate or public discussion on this issue,” Hwang said. “I voted against this bill due to its lack of transparency.”
Firlotte and Wilton First Selectman Toni Boucher pointed out the unfair makeup of the new government entity that would oversee AWA. “The newly proposed government entity would have 11 members of the governing board, of which RWA would appoint six and Aquarion would have only five, even though Aquarion would be two and three times the size,” Firlotte said.
Representatives of AWA and the RWA, who also spoke at the hearing, defended the acquisition and governance makeup.
“The Connecticut legislature created the AWA as an entity alongside the RWA with the same governance structure, power, and duties of RWA,” said Sunder Lakshminarayanan, interim president of Aquarion Water Authority. “The AWA’s ownership of Aquarion will benefit significantly from working alongside the RWA as a sister company.”
Rochelle Kowalski, senior vice president, CFO and head of corporate development for AWA and RWA, gave her reasons for how the deal would benefit all water customers.
“Both Aquarion and RWA are well-known for their exemplary water quality, customer service, environmental stewardship, strong emergency response efforts and affordable water rates,” Kowalski said. “The AWA acquisition will benefit the public because it will provide for local representation for the municipalities it serves.”
She added that water rates for both authorities will continue to be set separately and that the change in control will benefit Aquarion because it will lower the cost of capital investments in infrastructure improvements.
“The AWA will be able to issue tax-exempt debt that will help to keep future rates lower than under the current ownership structure,” Kowalski said.
The value of the deal includes approximately $1.6 billion in cash and $800 million of net debt that will be extinguished at closing.
The next step is a virtual July 17 evidentiary hearing overseen by PURA Chair Marissa Gillett. That will be followed by a draft decision on Oct. 22 and a final decision on Nov. 19.
The combination of paying for that debt and possibly losing the tax revenue to a PILOT system is what really has Wilton’s Boucher worried.
“As the first selectman of the Town of Wilton, with slightly under 20,000 people who stand to lose over $100,000 in property taxes, I am really concerned about the financial impact on the budget and taxes in our community,” she said. “The minority on the board would be making the decisions for the majority. It stands to reason we all can see rate increases in the future. This is a huge economic decision for our part of the state.”
