Commitments and Contingencies

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements [Abstract]

Commitments and Contingencies

NOTE 16:  COMMITMENTS AND CONTINGENCIES

Security – Investment in security-related improvements is a continuing process and management believes that the costs associated with any such improvements will be eligible for recovery in future rate proceedings.

Reverse Privatization – Connecticut Water derives its rights and franchises to operate from state laws that are subject to alteration, amendment or repeal, and do not grant permanent exclusive rights to our service areas.  Our franchises are free from burdensome restrictions, are unlimited as to time, and authorize us to sell potable water in all towns we now serve.  There is the possibility that states could revoke our franchises and allow a governmental entity to take over some or all of our systems.  From time to time such legislation is contemplated.

Environmental and Water Quality Regulation – The Company is subject to environmental and water quality regulations.  Costs to comply with environmental and water quality regulations are substantial.  We are presently in compliance with current regulations, but the regulations are subject to change at any time.  The costs to comply with future changes in state or federal regulations, which could require us to modify current filtration facilities and/or construct new ones, or to replace any reduction of the safe yield from any of our current sources of supply, could be substantial.

On January 6, 2012, Connecticut Water issued a “Do Not Drink Advisory” to 181 year round customers in the Amston Lake water system when elevated levels of copper were detected in samples from some customers’ homes.  While there was not a violation of any state or federal water quality standard, copper levels in samples from some customers’ homes were found above the Environmental Protection Agency (EPA) action level of 1.3 mg/L.  The "Do Not Drink Advisory" was lifted on January 18,2012.  The Company is following an action plan approved by the Department of Public Health.  The resulting copper levels have been below the EPA Action Level.

Rate Relief – Connecticut Water is a regulated public utility, which provides water services to its customers.  The rates that regulated companies charge their water customers are subject to the jurisdiction of the regulatory authority of the PURA.  Connecticut Water’s allowed rate of return on equity and return on rate base are currently 9.75% and 7.32%, respectively.

In 2007, the State of Connecticut adopted legislation which permits regulated water companies to recapture money spent on eligible infrastructure improvements without a full rate case proceeding.  The PURA may authorize regulated water companies to use a rate adjustment mechanism, such as a Water Infrastructure and Conservation Adjustment (WICA), for eligible projects completed and in service for the benefit of the customers.  Regulated water companies may only charge customers such an adjustment to the extent allowed by the PURA based on a water company’s infrastructure assessment report, as approved by the PURA and upon semiannual filings which reflect plant additions consistent with such report.

Land Dispositions – The Company and its subsidiaries own additional parcels of land in Connecticut, which may be suitable in the future for disposition, either by sale or by donation to municipalities, other local governments or private charitable entities.  These additional parcels would include certain Class I and II parcels previously identified for long term conservation by the Connecticut DEP, which have restrictions on development and resale based on provisions of the Connecticut General Statutes.

The Company is finalizing a land sale with the Town of Plymouth, Connecticut to sell approximately 175 acres of land for open space and recreational purposes, pending the approval of a Conservation Easement by the State of Connecticut Attorney General Office.  The Company and Town have agreed on a sale price of $1.45 million for the parcel that is valued at $1.615 million.  The Company expects the transaction to be completed in 2012.

Capital Expenditures – The Company has received approval from its Board of Directors to spend $25.1 million on capital expenditures in 2012, in part due to increased spending primarily for infrastructure improvements.