🔒Eversource’s $2.4B sale of Aquarion will create a new nonprofit water authority in CT — Backers say the deal could save $350M long term; others fear it will increase consumer costs

The Aquarion Water Authority’s (AWA) pending acquisition of Eversource-owned Aquarion Water Co. — which involves converting the company into a nonprofit, quasi-public entity — is expected to save at least $350 million over the first 10 years, once the deal is finalized.

The projected savings will largely stem from AWA’s ability to obtain capital at a lower cost, backers say.

That’s one of the interesting insights outlined in a change-of-control application submitted to the Public Utilities Regulatory Authority, which is reviewing and must approve the deal before it’s finalized.

In January, Eversource, which is publicly traded and owned by investors, announced that it had reached an agreement to sell Aquarion Water Co. to the newly created, quasi-public Aquarion Water Authority, following a competitive bidding process.

The deal, valued at about $2.4 billion, is expected to close in late 2025.

When the sale is completed, AWA will operate as a standalone entity alongside another quasi-public water system, the New Haven-based South Central Connecticut Regional Water Authority (RWA).

AWA will serve roughly 685,000 people in 59 Connecticut municipalities. It will share resources with the RWA, which serves 20 towns and cities, including a board of directors and executive staff.

The two water authorities believe they will benefit from economies of scale and stronger purchasing power.

Under the not-for-profit model, AWA will also be able to access tax-exempt debt to help mitigate the costs of capital expenditures and rate increases, said Rochelle Kowalski, chief financial officer of the RWA, who will hold the same title for the AWA.

That’s a key attraction of the deal for the Aquarion Water Authority, which will finance the acquisition largely by issuing tax-exempt bonds, she said.

“There will be a sliver of taxable debt issued to cover non-allowable costs associated with the acquisition,” Kowalski said. “No state money is being used to finance the transaction.”

However, not everyone is convinced the deal will be a good one for ratepayers.

A contingent of towns, mostly in Fairfield County, say the sale may cause rates to increase for consumers and reduce local property tax revenues.

There’s also concern about the debt load AWA will be taking on to finance the deal.

Six towns, including Fairfield, have been granted intervener status in PURA’s review of the transaction.

A hearing is scheduled for June 25.

Cheaper capital

Kowalski said AWA’s ability to issue tax-exempt debt for capital improvements will allow it to finance infrastructure improvements at a lower cost than a private company, which should mean lower rate increases for consumers in the long run.

That’s important because maintaining and upgrading Aquarion’s massive infrastructure will require significant capital costs.

Aquarion has a large footprint in Connecticut, operating eight reservoir systems, 251 wells and 18 interconnections, from which it purchases water.

It also operates nine surface water treatment plants that can treat up to 165 million gallons per day from reservoir systems; 72 groundwater treatment facilities that treat water from wells; along with roughly 3,300 miles of water mains, 88 water storage tanks and 87 pump stations.

Since 2017, Aquarion said it has invested more than $900 million in utility facilities, information systems and other capital assets, according to its change-of-control application filed with PURA.

However, the Aquarion Water Authority will be managing a smaller business than Eversource-owned Aquarion. That’s because the AWA plans to sell off Aquarion’s business outside of Connecticut (in New Hampshire and Massachusetts) to New Hampshire-based public utility holding company Unitil Corp. for $100 million.

That deal was announced last month and will close when the Aquarion sale is completed.

Regardless, through 2029, AWA said it plans to invest roughly $39 million in technology and other infrastructure, including PFAS mitigation.

In addition to tax-exempt debt, AWA, similar to RWA, will partially fund capital improvements through the revenue it generates, Kowalski said.

“RWA has a long-standing record of utilizing tax-exempt financing and continues to increase the portion of its capital program funded through internal funds, demonstrating the benefits of local control and regulation in the water utility sector,” Kowalski said.

Public vs. private

The conversion of Aquarion from a publicly traded company to a not-for-profit, quasi-public entity means it will join nearly 150,000 other water utilities in the public sector.

Most U.S. water companies are owned by quasi-government entities, Kowalski said.

The U.S. has nine publicly traded water companies — Aquarion is currently the largest in New England and seventh-largest overall.

Some believe the quasi-public, nonprofit model is advantageous for consumers.

According to information from the state’s Consumer Counsel Claire Coleman, customers of private, investor-owned water companies pay higher rates for water, largely because private companies are required to pay four taxes — the state’s corporation business tax, federal income tax, local real estate and property tax in all towns where they own property, and sales tax — that don’t apply to not-for-profit water authorities.

Even still, there are some concerns about the deal.

At the beginning of the 2025 legislative session, Sen. Ryan Fazio (R-Greenwich) and Rep. Tracy Marra (R-Darien) proposed legislation that would have effectively blocked the sale of Aquarion Water Co. to a quasi-public entity.

Fazio and Marra told the CT Mirror earlier this year that they feared the change in ownership would make water bills more expensive.

Their proposal was referred to the Planning and Development Committee, where it died.

Fazio and Marra did not return requests for comment on this story.

Meantime, Fairfield First Selectman William A. Gerber, whose town is among the interveners, in a May 22 letter to constituents described the deal as a leveraged buyout — a way of acquiring a company by using a significant amount of borrowed money — and “extremely risky for Aquarion customers.”

He raised concerns about the $2.4 billion sales price and how AWA would be able to repay it without significantly increasing rates on consumers.

Gerber, a Democrat, noted that over the past four years, Aquarion has generated profits running from $33.1 million to $44.6 million.

“RWA has presented in their PURA filings virtually no meaningful evidence this deal works from a bottom line or cash flow perspective,” Gerber said. “Until proven otherwise through transparent disclosures by RWA, one must assume that $2.4 billion in debt, all falling on AWA customers to repay, will eventually lead to massive rate increases and significant cuts to taxes Aquarion currently pays to municipalities. RWA’s promises of holding rates and taxes steady are as empty as they are vague.”

Other interveners in PURA’s regulatory review of the deal include the towns of Shelton, Wilton, New Canaan, Westport and Ridgefield.

Regulatory filings show they are worried the sale will substantially decrease tax revenue because towns that host Aquarion infrastructure would receive payments in lieu of taxes from the new nonprofit owner, instead of tax payments based on assessments and periodic property revaluations.

Aquarion is one of the highest taxpayers in Fairfield, where it contributes about $1.8 million in annual tax revenue to the town.

Notably, the deal has been well received on Wall Street.

Financial analysts at Guggenheim Securities said Aquarion’s $2.4 billion sales price was about $200 million higher than they anticipated. It includes about $1.6 billion in cash and $800 million of net debt that will be extinguished at closing.

It’s unclear whether entities aside from AWA placed bids for Aquarion. An Eversource spokesperson said the bids were confidential.

RWA’s acquisition of Aquarion would mark the third time the water company has traded hands in 20 years.

Eversource originally bought Aquarion in 2017 in a deal valued at $1.675 billion. Prior to that, Aquarion was owned by Macquarie Bank, which purchased it for $860 million in 2006.