Connecticut's largest water company seeking 42% rate increase after regulators block sale

Connecticut’s largest water company, Aquarion, announced its intention to seek a 42% rate increase after state regulators last month blocked a deal that would have transformed the company into a nonprofit quasi-public entity.

The proposed rate hike, worth $88 million annually, would be first in more than a decade for the company, which serves roughly 209,000 homes and businesses in Connecticut.

It comes on the heels of last month’s decision by the Public Utilities Regulatory Authority to reject the proposed sale of Aquarion to the South Central Regional Water Authority, a quasi-public utility based in New Haven. The sale would have created a sister utility, the Aquarion Water Authority, to operate the company’s assets.

While Aquarion’s owner, Eversource, is appealing the ruling, company officials said they’ve been left with no other choice than to raise rates in order to offset rising operating costs.

In a letter to PURA on Monday announcing the company’s plan, Aquarion Chief Operating Officer Lucy Teixiera placed the blame for the proposed rate hike squarely on regulators for rejecting the sale, which, Aquarion said, would have saved customers money.

“Aquarion’s sale to AWA provided PURA with a rare and unique opportunity to shield customers from these increasing costs,” Teixiera’s letter said. “A decision approving the transaction would have enabled AWA to own and operate Aquarion, thereby obviating the need for the immediate filing of this rate amendment with PURA.”

A spokesperson for Eversource declined to provide additional comment on the letter Tuesday.

Critics of the proposed sale — worth a total of $2.4 billion, including debt — argued that it would have saddled both RWA and Aquarion customers with higher costs, as well as the loss of oversight from PURA, which regulates only privately owned utilities. In addition, local officials in many of the towns within Aquarion’s service areas raised concerns about the loss of future tax revenues from the utility’s equipment.

The letter served as formal notice that Aquarion plans to submit an application for a rate increase within 60 days. If approved, the new rates would go into effect on Nov. 1, 2026.

As part of their bid to gain approval for the sale, RWA officials pledged not to seek an rate increase on Aquarion’s customers for at least six months. Beginning in 2027, they projected that the utility’s customers would see annual increases of between 6.5% and 8.35% over the next decade — a far slower pace of increases than the 42% hike sought Monday.

PURA’s decision to reject the sale focused largely on concerns over the new entity’s governing structure, rather than its finances or ability to provide safe, drinkable water to customers.

In a statement Monday, Attorney General William Tong compared Aquarion’s plans to the company’s last request for a $37 million rate increase in 2022.

Instead of approving that request, PURA ordered the company to cut its rates by nearly $2 million, a decrease of 11%. After failing to support its “bloated claims,” in that case, Tong said Eversource tried and failed to offload Aquarian.

“PURA was right to reject that bad idea as well,” Tong said. “Now they are back seeking an even bigger rate hike for Aquarion. We’re going to do what we always do — comb through every line and every page of their filings to ensure Connecticut families aren’t paying a penny more than they need to.”

Claire Coleman, the head of the Office of Consumer Counsel, which advocates on behalf of state’s utility customers, was also critical of Aquarion’s justification for the proposed rate hike.

“While OCC understands that ongoing investment is necessary to provide safe, reliable water service, the scale of the increase Aquarion is signaling is significantly above my team’s initial internal analysis as well as the company’s own recent estimates,” Coleman said in a statement. “Once the application is filed, our review will focus solely on what the evidence supports. The notice of intent reads more like a list of grievances than a legal filing, but rates are set by evidence, not indignation.”

In her letter to PURA, Teixiera pointed to factors to justify the proposed rate increase, including rising costs related to the treatment of PFAS chemicals and more than $448 million spent on water infrastructure since the company’s last rate case.

The letter made no mention of Marissa Gillett, the former head of PURA, who is at the center of a long-running dispute between the utility companies and their regulators in Connecticut. Gillett led the authority at the time that PURA ordered Aquarion to cut its water rates in 2023.

Later, the company participated in a lawsuit claiming that Gillett had abused her authority by issuing unilateral decisions and boxing out her fellow commissioners. Gillett resigned in October, shortly before attorneys in Tong’s office conceded that many of the utilities’ claims were true.