While it’s not likely to be widely understood, there may be a profound lesson in this week’s rejection by the state Public Utilities Regulatory Authority (PURA) of the bid by the South Central Regional Water Authority to acquire Aquarion Water Co.
The lesson is that most people involved with the issue concluded that ordinary government regulation of privately owned utilities is better than government’s direct operation of them.
The water authority is a state government agency providing water to 15 towns in the New Haven area. It was established by state law in 1977 and three years later acquired the New Haven Water Co.
Aquarion is the biggest water utility in Connecticut, serving 60 towns and about 700,000 people, and is a subsidiary of the state’s largest electric utility, Eversource. Like Eversource, Aquarion’s rates and services are regulated by PURA.
The big complaint against the regional water authority’s acquisition of Aquarion was that it might eliminate state government’s control over the water company -- even though the water authority is itself part of state government, with the water authority’s directors appointed by representatives of the municipalities the authority serves.
As long as Aquarion is a privately owned utility, PURA will regulate it. But if a government agency acquires Aquarion, PURA’s regulation would cease and the water authority could set rates for its greatly expanded service area however it wanted.
If a government agency acquired Aquarion, municipal property taxes on the utility -- revenue to the towns the company serves -- would cease as well.
The regional water authority claimed that as a government agency that doesn’t have to make a profit for investors, it could serve customers less expensively than Aquarion can. But critics noted that the authority was going to pay Eversource $2.4 billion for Aquarion and that much of the purchase money would be borrowed and thus incur huge interest costs for the authority, costs the authority almost certainly would recover through higher water charges to customers.
Most people involved with the issue came to think that if the water authority acquired Aquarion, its directors naturally would have more loyalty to the authority itself than to its customers, and that customers would be better protected by PURA. After all, PURA is often in the spotlight and is sensitive to utility customers, but the water authority board is seldom watched by anyone.
Leaders of the Republican minority in the General Assembly applauded rejection of the water authority’s bid for Aquarion.
Governor Lamont seemed to applaud it too, noting that interest expense on the purchase money borrowed by the water authority almost surely would drive up water prices. But last year the governor signed the legislation authorizing the authority to take over Aquarion. How, last year, did the governor think the water authority would repay the borrowed purchase money?
State Attorney General William Tong’s comment on the defeat of the acquisition was strange as well.
“This deal was a costly loser for Connecticut families and PURA was right to reject it,” Tong said. “Eversource desperately wanted to offload Aquarion, and they concocted this maneuver to extract as much cash as possible by guaranteeing the new entity free rein to jack up rates. Eversource is free to find a new buyer but should understand that any new attempt to end public regulatory oversight over water bills for hundreds of thousands of Connecticut families is going to be a non-starter here.”
But Tong is a Democrat and the bill authorizing Eversource’s supposed scheme to “offload” Aquarion on the water authority was abruptly foisted on the General Assembly by his own party’s legislative leaders over Republican opposition during a special session last year. As they often do in special sessions, Democratic leaders forced the bill through without normal review and public hearing, which might have avoided a lot of wasted time.
This high-handedness didn’t seem to bother Tong back then, and this week, like the governor, he conveniently seemed to forget where the enabling act came from.
Chris Powell has written about Connecticut government and politics for many years.
