8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8‑K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): February 7, 2018 (February 6, 2018)

Commission File Number 0-8084

Connecticut Water Service, Inc.

(Exact name of registrant as specified in its charter)

Connecticut (State or other jurisdiction of incorporation or organization)	06-0739839 (I.R.S. Employer Identification No.)
93 West Main Street, Clinton, CT (Address of principal executive office)	06413 (Zip Code)

(860) 669-8636

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, address and former fiscal year, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company         o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.            o

Item 1.01    Entry into a Material Definitive Agreement

CWC Rate Reopener – Settlement Agreement

On February 6, 2018, The Connecticut Water Company (“CWC”), a wholly owned subsidiary of Connecticut Water Service, Inc. (the “Company”), filed a petition with the Connecticut Public Utilities Regulatory Authority (“PURA”) to reopen CWC’s most recent rate case proceeding for the limited purpose of approving a Settlement Agreement entered into by CWC and the Connecticut Office of Consumer Counsel (“OCC”) on February 6, 2018 (the “Agreement”).

The Agreement contemplates a change in CWC customer rates effective for bills rendered on and after April 1, 2018 made up of the following two components: (1) the revenue requirements associated with a $36.3 million addition to rate base to reflect necessary upgrades to the Company’s Rockville Water Treatment Facility; and (2) the folding in to base rates of the Company’s present Water Infrastructure Conservation Adjustment (“WICA”) charge. In addition, the Agreement provides that:

(1)upon implementation of new rates under the Agreement, until such time as new rates are adopted in a general rate case, through a temporary modification of the earnings sharing mechanism, CWC customers will receive one hundred percent of any earnings in excess of levels allowed by law rather than limiting such customer credits to 50% as contemplated by applicable law;

(2)     CWC agrees it will not file for a general increase of CWC’s base rates to be effective before January 1, 2020;

(3) The pending proceeding initiated by PURA in Docket No. 09-12-11RE03, Application of The Connecticut Water Company for Amended Rates – Federal Tax Cuts and Jobs Act shall be closed; and

(4) CWC shall continue to make investments in infrastructure replacement consistent with its approved WICA plan. The Company shall be allowed to continue to pursue recovery of eligible projects through WICA.

The Agreement provides that, if the PURA does not fully approve the Agreement in its entirety, it shall be deemed withdrawn. Accordingly, the Agreement has no operative effect unless and until it is approved by the PURA. The Company is not able to predict with certainty the ultimate timing of the PURA’s final action on the Agreement. No assurance can be given that the PURA will approve the Agreement and permit some or all of the terms contained in the Agreement requested by the parties.

Copies of CWC’s Petition to Reopen Rate Proceeding and Approve Settlement Agreement and the Settlement Agreement are attached hereto as Exhibit 10.1 and are hereby incorporated herein by reference.

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Item 8.01Other Events

Press Release

On February 7, 2018, the Company CWS issued a press release related to the Settlement Agreement and CWC’s related PURA petition, which is attached to this report as Exhibit 99.1 as is incorporated herein by reference.

Item 9.01Financial Statements and Exhibits

The following documents are filed herewith as exhibits hereto:

(d) Exhibits

10.1	Petition of CWC to Reopen Rate Proceeding and Approve Settlement Agreement, with Settlement Agreement between The Connecticut Water Company and the Connecticut Office of Consumer Counsel, each dated February 6, 2018, filed herewith.
99.1	Company press release regarding rate case settlement agreement for CWC, dated February 7, 2018, filed herewith.

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EXHIBIT INDEX

Exhibit No.	Description
10.1	Petition of CWC to Reopen Rate Proceeding and Approve Settlement Agreement, with Settlement Agreement between The Connecticut Water Company and the Connecticut Office of Consumer Counsel, each dated February 6, 2018, filed herewith.
99.1	Company press release regarding rate case settlement agreement for CWC, dated February 6, 2018, filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

	Connecticut Water Service, Inc. (Registrant)
Date: February 7, 2018	By: /s/ David C. Benoit David C. Benoit Interim President and Chief Executive Officer, Senior Vice President – Finance, Chief Financial Officer and Treasurer

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EX-10.1

STATE OF CONNECTICUT

PUBLIC UTILITIES REGULATORY AUTHORITY

APPLICATION OF THE CONNECTICUT    :    DOCKET NO. 09-12-11RE04

WATER COMPANY TO AMEND RATE         :

SCHEDULES                    :    February 6, 2018

PETITION TO REOPEN RATE PROCEEDING AND

APPROVE SETTLEMENT AGREEMENT

The Connecticut Water Company (“CWC” or the “Company”), hereby requests, pursuant to Sections 4-181a, 16-9 and 16-19 of the Connecticut General Statutes, that the Public Utilities Regulatory Authority (“PURA” or the “Authority”) reopen Docket No. 09‑12-11, Application of The Connecticut Water Company to Amend Rate Schedules, for the limited purpose of approving a settlement agreement negotiated by and between the Company and Consumer Counsel Elin Swanson Katz (“Consumer Counsel”) attached hereto as Exhibit A (the “Settlement Agreement”). The Settlement Agreement contemplates a change in customer rates effective for bills rendered on and after April 1, 2018 made up of the following two components: (1) the revenue requirements associated with a $36.3 million addition to rate base to reflect necessary upgrades to the Company’s Rockville Water Treatment Facility; and (2) the folding in to base rates of the Company’s present Water Infrastructure Conservation Adjustment (“WICA”). Both components have been calculated to reflect the recently enacted lower federal statutory income tax rate. In addition, the Settlement Agreement provides that if the Company earns in excess of its allowed return on equity prior to their next general rate case, any and all overearnings will be given to customers. Further, it requires the Company to forego the right to file for a general rate case (except in extraordinary circumstances) that would have new rates in effect before January 1, 2020.

A limited reopener is warranted to meet the financial needs of the Company while balancing the interests of ratepayers by avoiding the larger customer impacts associated with a general rate case. Placing the $36.4 million Rockville treatment plant upgrades in service constitutes sufficient “cause” as that term is used in section 16-9 of the General Statutes. In support of this request for limited reopening of Docket No. 09-12-11, CWC submits the following information in accordance with Section 16-1-46 of the Regulations of Connecticut State Agencies.

Statement of Application

As is more fully described in the attached pre-filed testimony by David C. Benoit, Interim President and Chief Executive Officer of CWC, Craig J. Patla Vice President of Service Delivery and Maureen P. Westbrook, Vice President of Customer and Regulatory Affairs, significant and necessary capital expenditures relating to the Rockville Water Treatment Facility require that the Company seek immediate recovery of those costs in rates. The Company completed major upgrades and put the new Treatment Facility in service in May 2017 to avoid water quality challenges to CWC’s system. Capital cost recovery for the upgrades needs to begin promptly. On the other hand, the Consumer Counsel and the Company are sensitive to the impact of rate increases on customers. To balance these factors, CWC and OCC have worked closely to craft a rate agreement that optimizes these elements for all stakeholders. As explained in the attached testimony, the Settlement Agreement strikes a middle ground between the Company and the OCC’s interests by delaying recovery in customers’ rates of the additional $151 million of capital investments made by the Company since the last general rate case.

The Rockville upgrades constitute about 5.2% of the Company’s total plant in service. At that level, timely cost recovery is essential in order for the Company to have a reasonable opportunity to earn a fair return. If the Company were to file a full rate case (including the Rockville upgrades, other rate base additions, cyber-security costs and increased operation and maintenance expenses), the amount of that rate increase request would be triple the amount called for by the Settlement Agreement.

The settlement agreement also appropriately delivers to customers the benefits of lower federal statutory tax rates. As demonstrated more fully in the accompanying prefiled testimony, CWC’s customers have benefited from the Company’s adoption of repair tax accounting with the credit applied to customers’ bills per the settlement agreement in Docket No. 09-12-11RE01 and lower WICA charges than would otherwise have been approved since that time with repair tax accounting considered in the taxes reflected for eligible WICA projects. Further, the statutory tax rates applied to capital investments in the agreement have been adjusted to account for the change in the tax law. Specifically (1) upon adoption of the repair tax accounting in 2014, Connecticut Water Company voluntarily passed through a $12.4M refund received from the IRS to customers as a credit on their bills, (2) WICA projects eligible for the repair tax deduction since 2014 were not grossed-up for income taxes, (3) the agreement reflects the new lower tax rate in the revenue requirement for the Rockville project and (4) the previously approved WICA charge that will be rolled into base rates in this agreement is reduced to reflect the new federal statutory tax rate.  It is evident that the continued benefits of repair tax accounting will result in lower rates for customers than would otherwise have been requested in our next general rate case.  For these reasons, one essential element of the settlement agreement is that recently reopened Docket No. 09‑12-11RE03 be closed with no action taken.

To provide further protection to customers and assurance that the Company will not unduly benefit from this Agreement, the Company has agreed that upon implementation of new rates under this agreement, until such time as new rates are adopted in a general rate case, through a temporary modification of the earnings sharing mechanism, customers will receive one hundred percent of any earnings in excess of levels allowed by law rather than limiting such customer credits to 50% as contemplated by Section 16-262y of the General Statutes.

The Company will not adjust the deferred income tax balances it initially recorded at the previous higher federal tax rates for the new lower 2018 federal income tax rates. Unless otherwise required by generally accepted accounting principles or by federal law, the Company will continue to defer the deferred tax balances that were incurred at the higher tax rates until its next full rate decision. This will ensure that the impact of any deferred tax balance write down resulting from the change in the tax rate will not immediately go to the Company’s shareholders.

In addition, by agreeing to the stay-out provisions in the Settlement Agreement, the Company is forgoing the opportunity to file a full rate case for an additional seventeen- month period. Thus the customer impacts of the Settlement Agreement are far smaller than would result from a full rate case. The Settlement Agreement will permit the Company to recover only the revenue requirements associated with its investments in the Rockville Water Treatment Facility and permit the Company to continue its WICA program by resetting the Company’s current WICA surcharge. In summary, the Settlement Agreement will deliver a reduced rate impact to customers, prolong the period between general rate proceedings, and enable the Company to continue to promote water conservation and prudently replace the Company’s aging infrastructure, while still providing a chance for the Company to earn a reasonable return.

1.    Legal Name of the Company

The exact legal name of the Company is The Connecticut Water Company. CWC is a Connecticut corporation with its principal place of business located at 93 West Main Street, Clinton, CT 06413.

2.    Contact Information

The names, titles and addresses of persons to whom all correspondence or communication in regard to this request are to be addressed are as follows:

David C. Benoit, Interim President & CEO    Paul R. McCary

The Connecticut Water Company            Murtha Cullina LLP

93 West Main Street                185 Asylum Street

Clinton, CT 06413                    Hartford, CT 06103

Phone: (860) 669-8630                Phone: (860) 240-6037

E-Mail: dbenoit@ctwater.com             E-Mail: pmccary@murthalaw.com

Peter J. Bancroft, Director of Rates and Forecasting

The Connecticut Water Company

93 West Main Street

Clinton, CT 06413

Phone: (860) 669-8630

E-mail: pbancroft@ctwater.com

3.    Statement of Facts and Annexed Materials

The evidentiary support for the factual information needed to grant this Petition and to implement the rate adjustments required by the Settlement Agreement is contained in the accompanying pre-filed testimony of David C. Benoit, Craig C. Patla and Maureen P. Westbrook. In further support of this Petition, the Company hereby submits and incorporates herein the following Exhibits attached hereto:

Exhibit A    Settlement Agreement by and among CWC, Consumer Counsel and the Attorney General.

Exhibit B    Proposed Customer Notice

4.    Customer Notice.

Pursuant to Connecticut General Statutes Section 16-19(f), the Company proposes to issue the draft customer notice attached hereto as Exhibit B. Upon approval by the Authority, the Company will issue the proposed customer notice to comply with the timeframes required by Section 16-19.

I certify that a copy hereof has been furnished on this date via first class mail, postage prepaid, to all parties, intervenors and participants of record as evidenced on the Authority's service list as of this date. A copy has also been filed with the Authority as an electronic web filing and is complete.

Respectfully submitted,

THE CONNECTICUT WATER COMPANY

By: /s/ Paul R. McCary

Paul R. McCary

Murtha Cullina LLP

185 Asylum Avenue

Hartford CT 06103

(860) 240-6000

Its Attorney

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EX-99.1

Exhibit 99.1

Connecticut Water Service, Inc.          NEWS

93 West Main Street, Clinton, CT 06413

Connecticut Water Files for Rate Reopener with Settlement Agreement with the Office of Consumer Counsel

Increase amounts to 11 cents per day for average residential customer

CLINTON, Conn.– Feb. 7– Connecticut Water Company today announced that it has reached an agreement with the Connecticut Office of Consumer Counsel (OCC) that it says will result in a rate increase of 11 cents per day for an average residential customer and “is good for the families and communities served by the company and maintains our ability to continue investing in drinking water infrastructure.”

“We are keenly aware of the current economic climate and the impacts that it has had on our customers and particularly Connecticut’s municipalities. That’s why we focused on holding down cost increases for our consumers, and we’re pleased to have been able to achieve that goal. We had planned to file a general rate case in 2018 that would include recovery of $187 million in capital investments made since our last general rate case filing in 2009 that are not yet covered in rates,” stated David C. Benoit, Connecticut Water’s interim president and chief executive officer.

Benoit further stated, “Working with Consumer Counsel, Elin Katz, we were able to reach a settlement agreement that delays a full rate case filing; covers only a portion of our capital investments since the last case; minimizes financial impacts on customers, including municipalities; and maintains our ability to invest in infrastructure to serve customers and benefit the environment.”

Under the settlement agreement, the amount of the Water Infrastructure and Conservation Adjustment (WICA) charge currently on customers’ bills will be folded into base rates, and the WICA charge will reset to zero. This will allow continued investment in replacement of aging pipe, which improves system reliability, reduces the amount of treated drinking water lost to leaks, and conserves water and energy. The company could seek approval to adjust WICA charges in the future through separate filings with the Public Utilities Regulatory Authority (PURA) as additional WICA work is completed and serving customers.

Connecticut Water would begin to recover on the $36.3 million related to the company’s generational investment in clean drinking water at the newly upgraded Rockville Drinking Water Treatment Facility, which went online in 2017.

The net effect for a typical residential customer using the average of 15,000 gallons per quarter would be an increase of about 11 cents per day, or less than $3.50 per month, on their bill. Customers will still receive safe, clean drinking water for less than one penny per gallon.

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The settlement agreement between Connecticut Water and OCC was submitted to PURA on Feb. 6 as part of a petition for a limited reopener of the company’s last general rate case. It calls for the reset of the WICA and the rate increase related to the Rockville Drinking Water Treatment Facility to be effective on April 1. The petition requests that PURA consider the agreement negotiated between the two parties. PURA approval is required before the agreement can take effect.

Other key provisions of the settlement agreement include:

• Connecticut Water will not file for changes to base rates that would take effect before January 2020. Bills would continue to be subject to PURA-approved surcharges such as WICA and the Water Revenue Adjustment as authorized.

• Municipal fire protection charges are exempted from the April 1 rate adjustment but would be subject to any PURA-approved surcharges in effect before the next general rate case.

• If Connecticut Water should earn more than is authorized by PURA, 100 percent of the over-earnings would be returned to customers.

• Customer benefits from recent federal tax law changes have been incorporated into this agreement and have reduced the impact on customers by nearly half a million dollars, so the pending PURA docket regarding the effect of the federal tax law changes will be closed for Connecticut Water.

Under the settlement agreement, Connecticut Water preserves the right to recover in a future general rate case the remaining $151 million in capital investments it has made since the 2009 rate case filing that is being deferred under this agreement.

Mr. Benoit concluded, “Arriving at this agreement is consistent with our strategy to serve customers and communities with high-quality water and service while maintaining the financial strength to invest in our systems.”

This settlement agreement pertains only to customers of the Connecticut Water Company. Customers of the Heritage Village Water and Avon Water companies will not see their rates change as a result of this agreement.

The petition and settlement agreement will be included in a Form 8-K filing with the Securities and Exchange Commission.

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Connecticut Water Company is a regulated public water utility serving more than 93,000 customers in 56 Connecticut communities, and it is the largest operating subsidiary of the Connecticut Water Service, Inc. (Nasdaq:CTWS). Through its regulated utility subsidiaries, CTWS serves more than 134,000 water customers, or about 450,000 people in 80 communities across Connecticut and Maine, and more than 3,000 wastewater customers in Southbury, Connecticut.

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This news release may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the company’s results of operation, financial position and long-term strategy. These forward-looking statements are based on current information and expectations and are subject to risks and uncertainties discussed in our filings with the Securities and Exchange Commission, which could cause the company’s actual results to differ materially from expected results. We undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

News media contact:

Daniel J. Meaney, APR

Director of Corporate Communications

Connecticut Water Company.

93 West Main Street, Clinton, CT 06413-1600

860-664-6016

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