CLINTON, Conn., Oct. 26, 2006 (PRIMEZONE) -- Connecticut Water Service, Inc. (Nasdaq:CTWS) announced today that its regulated public water utility subsidiary, The Connecticut Water Company, has received approval from the Connecticut Department of Public Utility Control (DPUC) to purchase up to one million gallons of treated drinking water per day from the South Central Connecticut Regional Water Authority (RWA) in New Haven. Under the terms of the 50-year agreement, Connecticut Water is not required to purchase a minimum amount of water and will pay RWA's prevailing wholesale rate for any water purchased, and the agreement may be renewed for 20-year periods after the initial 50-year term. The agreement is subject to additional permit approvals from the Department of Environmental Protection (DEP) and the Department of Public Health (DPH).
The water purchased from RWA will be supplied through an existing interconnection and will be used to supplement Connecticut Water's own sources in its Guilford Water System, which serves 14,400 customers or about 50,400 people in Guilford, Madison, Clinton, Westbrook and Old Saybrook. This area along the coast of Long Island Sound experiences a substantial increase in demand during the summer because of the influx of vacationers.
According to Thomas R. Marston, Connecticut Water's Vice President, Planning and Treatment, the agreement is good for customers. Mr. Marston states, "Our customers will benefit because the cost of securing the supply from RWA, about $1.5 million, compares favorably to what it would cost the Company to develop a new source or expand an existing source for the same quantity of water. The Company recently added the availability of an additional 800,000 gallons a day to its Guilford System by increasing the storage capacity of its Killingworth Dam at a cost of more than $5 million. The purchased water from RWA and the increased storage at the Killingworth Reservoir will allow us to meet the water supply needs of the Guilford System for decades to come."
The cost of securing the RWA supply includes a series of fourteen annual payments to RWA totaling $1,050,000 for its capital investment in the infrastructure required to secure and produce the water called for in the agreement, about $400,000 for the construction of a pump station that will be required to take the full supply amount, and up to $50,000 in securing necessary permits from the DEP and DPH. The DPUC is allowing Connecticut Water to include the $1,050,000 in its rate base.
The water supply agreement is expected to become effective in 2008 to allow time for RWA and Connecticut Water to secure necessary permits from other state agencies. In the meantime, Connecticut Water has an existing agreement with RWA to purchase up to 49,000 gallons a day with a three million gallon minimum per year for the Guilford System.
Connecticut Water Service, Inc. is the largest, domestic-based, investor-owned water utility in New England. It provides water to over 82,000 customers in 41 towns in Connecticut, as well as providing water-related services under contract to municipalities and companies.
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This press release may contain certain forward-looking statements regarding the Company's results of operations and financial position. These forward-looking statements are based on current information and expectations, and are subject to risks and uncertainties, which could cause the Company's actual results to differ materially from expected results.
Our water companies are subject to various federal and state regulatory agencies concerning water quality and environmental standards. Generally, the water industry is materially dependent on the adequacy of approved rates to allow for a fair rate of return on the investment in utility plant. The ability to maintain our operating costs at the lowest possible level while providing good quality water service is beneficial to customers and stockholders. Profitability is also dependent on the timeliness and amount of rate relief, including the rate relief sought in the company's rate case application to the DPUC filed on July 18, 2006, and numerous factors over which we have little or no control, such as the quantity of rainfall and temperature, industrial demand, financing costs, energy rates, tax rates, and stock market trends which may affect the return earned on pension assets, and compliance with environmental and water quality regulations. The profitability of our other revenue sources is subject to the amount of land we have available for sale and/or donation, the demand for the land, the continuation of the current state tax benefits relating to the donation of land for open space purposes, regulatory approval of land dispositions, the demand for telecommunications antenna site leases and the successful extensions and expansion of our service contracts. We undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.