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Applicants describe shared services and laboratory arrangements; cost-allocation rules still unresolved
Summary
Company witnesses said RWA provides laboratory services to Aquarion and that noncore commercial businesses produce revenue that flows to construction or growth funds; parties asked for written cost-allocation policies and contracts.
Witnesses described existing and planned arrangements for shared services, commercial laboratory operations and noncore businesses. Those arrangements were raised repeatedly to understand how costs, revenues and potential cross-subsidies would be allocated after the transaction.
Why it matters: Shared services and commercial activities (laboratory testing, PipeSafe/Homeowner Safety Valve, other noncore offerings) generate net revenues and create cross-entity interactions that regulators must evaluate for fairness and ratepayer protection.
What was said: - Laboratory services: Counsel and witness testimony confirmed that RWA currently provides laboratory testing to Aquarion under a competitively bid RFP; Aquarion will continue to use RWA laboratory services under the new arrangements and will pay RWA for services provided. - Noncore and subsidiary revenues: RWA described multiple noncore offerings and subsidiaries that produce net revenue; those net revenues are transferred into a construction or growth fund and have historically reduced the rate burden. The transcript indicates a $16.1 million gross revenue figure for 2024 and an estimate of $22 million for 2025 (subject to read-in verification). - Cost-allocation and shared-services policy: Company witnesses said they do not yet have a finalized shared-services policy covering cost allocation between RWA and AWA; they described likely methods (time-driven allocations, number-of-customers proxies, direct-charge at cost to subsidiaries) and agreed to produce a formal policy as a late filing or read-in.
Requests on the record: Late-file exhibits requested for (a) the detailed noncore revenue/net revenue history by entity, (b) the laboratory services contract(s), (c) the shared-services accounting policy and (d) the itemized capital and operating revenue impacts of third-party lab operations.
Ending: Regulators and intervenors sought written contracts and a formal, board-reviewed shared-services policy before concluding how revenues and costs will flow post-closing.
