Ansonia vs RWA 102110

8/8/2019 Ansonia vs RWA 102110

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Recently, the City of Ansonia has asked for assistance from Attorney General Richard Blumenthal and

the Connecticut Department of Public Utility Control in controlling our very high fire service costs that

the city pays to its water utility.

As ofthis date, we have received no assistance from either. However, we will keep trying.

The people of Ansonia have been very supportive of our efforts on this matter . They understand clearly

that this is a struggle between average citizens in a small town with the power of greedy corporate

insiders who pulled the levers of money, connections and government to reap huge personal profits at

the expense of the public interest.

Some history is in order.

For generations of Ansonia families and businesses, their water service was provided by the Ansonia -

Derby Water Company. Water for consumption, washing, and industry and fire protection was provided

by the local company which was run by local people with a strong interest in the community. Thecompany maintained a strong relationship with the volunteer fire department of the city which

protected the people and neighborhoods of Ansonia.

As the Ansonia - Derby Water Company turned into Birmingham Utilities the strong local relationship

began to change. Several corporate insiders took over the Birmingham Board of Directors during the

1980s and profits and personal gain appeared to move ahead of local concerns on the company's list of

priorities.

It must be kept in mind that Birmingham (nee Ansonia - Derby Water) continued to provide water

service to the neighboring communities of Ansonia and Derby. Then, the profit maneuvering began.

Birmingham went way outside of its long-time service territory and acquired a small water company in

eastern Connecticut. We heard about things like "economies of scale and efficiencies" and other fancy

rationalizations for the acquisition.

A water company may reasonably seek to expand its service territory to contiguous areas because there

are possible economies of scale or efficiencies that can be achieved. For example, if the water company

serving Ansonia and Derby thought it could also serve neighboring Seymour and Woodbridge by

connecting the systems, retaining the workers, employing existing financial and administrative functions

and eliminating duplication and overlap, then efficiencies, cost reductions and other public benefits

might be achieved.

However, this appears to be unlikely in the Birmingham Corporation's acquisition adventure to the east.

The service area it acquired is based in Marlborough, Connecticut.

Marlborough is a lovely town . It is also 54 miles away from Ansonia and Derby.

54 miles?


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This begs the question of what the DPUCthought was being achieved for the long-time ratepayers of

Ansonia and Derby when it approved this acquisition.

Was this acquisition designed to lead to efficiencies and economies of scale that would benefit the

service and costs to the existing ratepayers of each of -the companies?

First, let's look at rates.

Following the acquisition, and before the sale of Birmingham to the South Central Regional Water

Authority (RWA), the DPUCwas asked and did approve a 19.6% rate increase for residential customers

and a whopping 25.22% rate increase for fire protection rates.

This rate increase took place in November 2006 despite the objections at the public hearing expressed

by Mayor Della Volpe, Representative Gentile and Senator Crisco and others at the DPUC public hearing

on the matter in Ansonia in July of that year .

Therefore, it is clear that the acquisition of the eastern division (Marlborough) did not achieve any

efficiencies or economies of scale. However, it did help cause a large rate increase for the loyal

customers in Ansonia and Derby and led to a ridiculous hike in fire protection rates.

Less than one year after this big rate hike for local customers and local fire protection, Birmingham sold

its company to the South Central Regional Water Authority and to the Connecticut Water Company .

Now, this sale must be examined carefully on several fronts:

1. The DPUC basically acknowledged that the previous acquisition of the Marlborough division by

Birmingham made no sense for ratepayers and for improved water service or cost savings. If it

had, why would that division (Marlborough) have not been included in the sale to the RWA?

Why was it sold to Connecticut Water instead? Was it too far away for the goals of cost savings

and improved water service? Why did the RWA not buy Marlborough as well?

The bottom line is this:

Birmingham bought Marlborough for reasons other than what it presented to the DPUC

at the time of acquisition and in doing so deliberately misled its long and loyal local

customers and ratepayers.

The DPUCapproved the acquisition of MarlboroLigh by Birmingham and yet by allowing

Birmingham to spin it back away from the local company in it's hugely profitable sale

implicitly acknowledged that it belonged to a company with contiguous service areas in

eastern Connecticut. Should this have not been considered in the first place before

Birmingham, with DPUC approval, foisted a massive rate increase on the backs of

Ansonia and Derby ratepayers - a rate increase that only later became clear was

necessary to bolster Birmingham's asset base for a planned sale that made certain

insiders rich.


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The people of Ansonia were misled by Birmingham's board of directors and were forced to pay a huge

rate increase to help pay for an acquisition of another water company 54 miles away in order to boost

the profitability to those same directors in a sale that must have already been contemplated at the time

of the acquisition.

The insider wheeling and dealing was breathtaking in its greed, audacity and complete disregard for the

public interest.

Despite rosy predictions and false assurances of support from Birmingham, Ansonia ratepayers received

the following from the Birmingham acquisition of Marlborough and subsequent transactions:

A massive rate increase for residential customers

A giant hike in fire protection rates

No economies of scale or corporate efficiencies

Removal of our customers' ability to appeal to the DPUCas a forum for grievances as the DPUC

has no legal jurisdiction over public water authorities Representation on the RWA representative Policy Board where Ansonia has 3 votes out of 118.

It should be noted that the RWA is charging Ansonia these fire protections rates since that is what it

assumed when it took over the Birmingham Company. How can Ansonia reasonably expect other

communities, who have a combined 115 votes out of 118, to vote to raise their fire protection rates in

order to lower ours?

Ansonia's annual fire protection rates from RWA cost taxpayers nearly three times what it costs to

finance the city's entire volunteer fire department.

Ansonia has been misled by Birmingham, the RWA and let down by state officials and regulators. We are

seeking the intervention from the Attorney General and the DPUC,we are prepared to approach the

United States Securities and Exchange Commission, our United States Senator and Member of Congress

and other authorities.

We are not going away.

Our next paper will list critical questions that need to be answered involving the insider maneuvering by

Birmingham and the nature of the transactions that made huge profits for the few at the expense of the

many.

We are not going away.

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Ansonia vs RWA 102110