Exhibit 10.1

APPLICATION OF THE CONNECTICUT : DOCKET NO. 09-11-12
WATER COMPANY TO AMEND RATE     :
SCHEDULES                 : June 28, 2013

SETTLEMENT AGREEMENT

INTRODUCTION

The Connecticut Water Company (“CWC” or the “Company”) has identified an
opportunity to utilize a recent change in the United States Internal Revenue
Services (“IRS”) Code (Repair Regulations – Rev. Proc. 2012-19) allowing for the
immediate deduction of qualifying capital spending that otherwise would have
been deducted over the book life of the asset. This has provided an opportunity
for a regulated utility like CWC that has been addressing its aging
infrastructure needs by systematically replacing components of its pipeline, to
derive a material financial benefit. In this Settlement Agreement The
Connecticut Water Company (“CWC” or the “Company”), Consumer Counsel Elin
Swanson Katz (“Consumer Counsel”), and George Jepsen, Attorney General for the
State of Connecticut (“Attorney General”) propose a mechanism to provide the
benefit from those savings to customers in the form of a rate reduction or
credit on their water bills. 

“Revenue Procedure 2012-19” allows CWC to adopt an alternative method for
determining how capital expenditures can be treated for federal tax purposes,
allowing certain expenditures that were historically considered as capital for
tax purposes to now be eligible to be deducted on federal taxes.  The IRS
procedure allows the Company to reflect a ‘catch up adjustment’ to be adopted on
its 2012 Federal Tax Return and reach back for refunds of taxes paid on or after
January 1, 2010.  The Company has proposed to reflect the method change in its
2012 tax filing, which is due on or before September 16, 2013, and anticipates a
significant refund as a result. The Company expects that the refund will be
approximately $10 million.

The Company has proposed an accounting treatment to allow for the deferral of 
the tax refund received from the 2012 IRS filing and a credit of the catch up
tax benefit to customers over a period of time through a credit on water bills
issued starting April 1, 2014.  

In conjunction with the rate reduction from the tax change, the Settlement
Agreement provides that CWC shall remove the Water Infrastructure and
Conservation Adjustment (“WICA”) authorized as of October 1, 2013 as a surcharge
on customers’ bills and include that amount in base rates effective April 1,
2014, concurrent with the rate reduction for the tax refund. 

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Further, the Settlement Agreement provides that CWC record on its accounting and
financial reporting records revenues to establish and implement the Revenue
Adjustment Mechanism (“RAM”) authorized by PA 13-78, with any associated change
in rates to also be reflected on customers’ bills as of April 1, 2014. 

With these changes, the Company would delay the filing of the next application
for WICA for one year after the WICA filing that it plans to file in July 2013.
Thus there would be no new WICA surcharge on customers’ bills after the rate
changes on April 1, 2014 authorized by this agreement until October 1, 2014. 
Further the Company agrees herein that it would not file for a general rate
increase that would become effective prior to October 1, 2015.

The combined effect of these changes will result in a net reduction on
customers’ bills as of April 1, 2014 and delay otherwise planned increases from
WICA and a general rate case, creating greater certainty for customers.  The
Company, the Consumer Counsel, and the Attorney General submit that the proposed
settlement provides clear benefits to customers and request the Public Utilities
Regulatory Authority’s (“PURA” or the “Authority”) approval thereof.

This Settlement Agreement (the “Agreement”) is made as of the 28th day of June,
2013 by and between CWC, the Consumer Counsel, and the Attorney General. CWC,
the Consumer Counsel and the Attorney General are sometimes referred to
individually as a “Party” and collectively as the “Parties.”

I.
BACKGROUND

A.
The Parties have engaged in rate settlement discussions in order to reduce the
impact of CWC’s water rates on Connecticut consumers, to stabilize those water
rates in the coming years and to provide for the recovery of the Company’s costs
of providing high quality water service to its customers.

B.
Those settlement discussions resulted in the rate settlement that is the subject
of this Agreement and the accompanying Petition to Reopen the Company’s prior
general rate case for the limited purpose of securing the approval of the
Authority with respect to implementing the rate adjustments described herein.

C.
This Agreement represents an integrated set of trade-offs and compromises in
order to achieve the goal of a fair resolution of the issues described above. It
provides a rate reduction to consumers and enables CWC to accept a “stay out”
period within which it agrees it will not file for a general increase of base
rates. As more fully set forth in Section C below, neither of the Parties
necessarily finds any particular element of the Settlement Agreement reasonable
standing apart from the rest of the Agreement.

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D.
The elements of the rate adjustments required by the Agreement are described
below. The attached exhibits showing rate and revenue requirement calculations
are provided for illustration purposes only. Actual calculations will be
provided as and when described below, when actual final tax and sales figures
are known.

Based upon the Company’s current estimates of the Repair Tax Deduction Credit
(“RTDC”) and assuming that it is applied over a two-year period, the approximate
amount of the reduction for CWC that will be shared with customers from the RTDC
is expected to be approximately $10 million or 6.4%. The benefit of the RTDC can
be applied such that, even with the implementation of the Revenue Adjustment
Mechanism (“RAM”) authorized by PA 13-78, the Parties expect there will be a net
reduction in customers’ bills starting in April of 2014.

II.
RATE ADJUSTMENTS

A.
The tax impact of the change in the repair tax deduction taken on CWC’s 2012
federal tax return will be credited to customers over a two-year period starting
on April 1, 2014. This rate reduction will be reflected as a line item on the
customer bills with the surcredit as a percentage of base rates in effect as of
April 1, 2014.

1.
CWC’s 2012 Federal Tax Return will be filed as required on or before
September 16, 2013. Through that filing, the Company will be allowed to capture
eligible repair tax deductions for prior years, creating the RTDC that is to be
credited to customers pursuant to this Agreement.

2.
PURA shall authorize CWC to defer, as soon as practicable, but not later than
December 31, 2013, the amount to be credited to customers on its Balance Sheet.

3.
Amount to be credited to customers:

a.
Cash refund equal to total amount paid on 2010 federal income tax return plus;

b.
Cash refund equal to total amount paid on 2011 federal income tax return plus;
and

c.
Amount the RTDC allowance reduces federal income taxes paid for 2012 tax year.

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4.
On or before October 30, 2013, CWC will submit the following to PURA as a
compliance filing:

a.
Total actual amount of the tax refund relating to 3(a) and 3(b) above and the
amount of the RTDC for the 2012 tax year;

b.
A copy of the Company’s Consolidated 2012 federal income tax return; and

c.
The calculation of the rate reduction that will be applied to all customers’
bills starting on April 1, 2014. (See Exhibit A for example of rate reduction
calculation; see paragraph C below for rate design).

B.
The approved WICA authorized as of October 1, 2013 will be included in the
Company’s base rates and removed as a surcharge effective April 1, 2014. There
will be no increase to customers’ bills due to the change in location of the
WICA on the bill.

1.
Effective on April 1, 2014 the approved WICA in effect as of October 1, 2013
will be folded into base rates on a pro rata percentage basis across the board
to all of the Company’s rates, including miscellaneous charges.

2.
On or before March 1, 2014, CWC will submit the following to PURA:

d.
The new base rate revenue requirements calculation reflecting the WICA fold in
(See Exhibit B for example); and

e.
A schedule showing all of the Company’s current base rates and what each base
rate will become on April 1, 2014, reflecting the WICA adjustment described
herein and the RAM described in Section C below.

C.
To establish and implement the RAM authorized in Section 3 of Public Act
No. 13-78, PURA shall authorize the Company to record on its accounting and
financial reporting records its allowed revenue as its operating revenue
annually beginning in calendar year 2013, and to defer on its balance sheet as a
regulatory asset or liability the positive or negative difference between its
actual revenues and allowed revenues.

1.
Recovery or refund of the deferral for under or over collecting authorized
revenues in 2013 on customers’ bills will start on April 20, 2014, through
adjustments to the Company’s base rates designed to true up actual revenues to
allowed revenues over a twelve-month period.

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2.
The PURA rate order authorizing the rate adjustments required by this Agreement
shall provide that CWC customers shall benefit from the establishment of an over
earnings sharing mechanism as stipulated in Section 3(f) of Public Act No. 13-78
that will become effective for earnings accruing on or after the implementation
of the RAM.

3.
Exhibit C shows the timeline and calculations for the RAM using sales and
revenues from the Company’s 2012 calendar year as an example. As noted in
Section B, on or before March 1, 2014, CWC will submit to PURA a schedule
showing all of the Company’s new base rates that reflect the transfer of the
existing WICA charges to base rates and the adjustment allowed under the RAM.

D.
Except as otherwise provided in part IV of this Agreement, the Company will not
make a general rate filing for new rates unless those rates are to be effective
on or after October 1, 2015. The Company will continue to make investments in
infrastructure replacement consistent with its approved WICA plan, but after the
rate changes on April 1, 2014 authorized by this agreement will not seek a WICA
to be effective before October 1, 2014. The WICA filing in July 2014 will
include all eligible WICA investments completed by the Company but not reflected
in the last approved WICA adjustment in effect in October 2013.

E.
Protection for the Company in case the IRS subsequently disallows all or part of
the RTDC that CWC has or was expecting to credit to customers:

1.
If the amount that has been credited to customers is greater than allowed by the
IRS:

a.
Within ten days of the receipt by the Company of a formal notice from the IRS
disallowing some or all of the RTDC, the Company shall make an immediate
compliance filing with PURA eliminating the amount of the credit to customers’
bills equivalent to the amount of any such IRS disallowance on a going forward
basis. The RTDC surcredit shall be adjusted or, in the case of complete
disallowance by the IRS, eliminated as proposed by the compliance filing unless
PURA issues a notice within twenty days of the compliance filing requiring a
different schedule.

b.
The Company shall be authorized to defer on its accounting and financial records
and include for recovery in its next general rate application the amount that
has been credited to customers over and above the amount allowed by the IRS.

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III.
RATE DESIGN

A.
All of the adjustments to base rates contemplated by this Agreement shall be
reflected by across the board pro rata adjustments to rates and charges as
follows:

3.
The RTDC shall be applied to all rates (including fire protection charges)
except miscellaneous/special charges.

4.
The changes in base rates, to include the WICA charge and the application of the
RAM, shall be applied to all rates and charges, including sales for resale and
approved miscellaneous/special charges.

IV.
OTHER ISSUES

A.
Upon Authority approval of the Settlement Agreement in its entirety, CWC agrees
that it shall not file a new application for a general increase in rates
pursuant to section 16-19 of the Connecticut General Statutes that would become
effective prior to October 1, 2015, provided that CWC reserves the right to
request rate relief that would become effective prior to October 1, 2015 if CWC
incurs or will incur unanticipated substantial and material cost increases as a
result of changes in law, administrative requirements or accounting standards,
or due to force majeure events such as acts of God, strikes, lockouts, acts of
the public enemy, wars, riots, landslides, lightning, earthquakes, fires,
storms, floods, breakage or accident to machinery or lines of pipe, line freeze
ups, and other cause, whether the kind herein enumerated, or otherwise, which is
not in the control of CWC and which by the exercise of due diligence CWC is
unable to prevent or overcome, occurring after the date of this Settlement
Agreement.

B.
The record in this proceeding provides sufficient evidence on which the
Authority can rely to make a determination that the Settlement Agreement is
reasonable and in the public interest, and that the resulting rates comply with
applicable law.

C.
The Parties waive the right to submit briefs prior to the Authority issuing a
Draft Decision approving or rejecting the Settlement Agreement.

D.
The Parties agree that this Settlement Agreement is in the public interest.

E.
This Settlement Agreement is intended to be an integrated document. As such, the
terms contained herein are interdependent and not severable, and they shall not
be binding upon, or deemed to be an admission or

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concession by any Party, or to represent the positions of the Parties, if the
Settlement Agreement is not fully approved by the Authority. If the Authority
does not approve this Settlement Agreement in its entirety, it shall be deemed
withdrawn, it shall not constitute a part of the record in this or any other
administrative or judicial proceeding, shall not be admissible as evidence or be
used for any purpose whatsoever in this or any other administrative or judicial
proceeding, and each Party shall be free to advocate any position on any of the
issues addressed by the Settlement Agreement in this or any other administrative
or judicial proceeding, unless the Parties agree otherwise.
F.
The Parties shall support the Settlement Agreement before the Authority, any
other public forum and any court to which an appeal may be taken, shall do
nothing to undermine the integrity of the Settlement Agreement and shall take
all such action necessary on a cooperative basis to secure approval and
implementation of the provisions of the Settlement Agreement.

G.
The discussions which have produced this Settlement Agreement have been
conducted on the explicit understanding that all offers of settlement and
discussions relating thereto are and shall be privileged and confidential, shall
be without prejudice to the position of any Party presenting such offer or
participating in any such discussions, and are not to be used in any manner in
connection with this or any other administrative or judicial proceeding
involving any or all of the Parties or otherwise.

H.
This Settlement Agreement does not represent an admission or concession by the
Parties as to the proper disposition of any issue not related to this Settlement
Agreement or these Parties in any other proceeding before the Authority, any
court or any other administrative agency. It does not signify the Parties'
agreement with any claim or claims made by any Party in this case. This
Settlement Agreement or any of its terms shall not prejudice the positions that
the Parties may take on any issue in any proceeding not related to this
Settlement Agreement before the Authority, the courts or any other
administrative agency, and shall not be admissible as evidence therein or in any
proceeding not related to the matters and parties covered by this Settlement
Agreement before the Authority, the courts or any other administrative agency,
and shall not be deemed an admission or concession by any of the Parties in
regard to any claim or position taken by any other of the Parties in such
proceedings. The Settlement Agreement is not intended to establish precedent in
such proceedings. Nothing contained herein shall be construed as a waiver of, or
limitation upon any Party's right to raise any issues contained herein in any
docket not related to this Settlement Agreement during the term of this
Settlement Agreement.

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IN WITNESS WHEREOF, each of the Parties has duly executed this Settlement
Agreement as of the date set forth above.
 
THE CONNECTICUT WATER COMPANY

By /s/ David C. Benoit

         David C. Benoit
         Chief Financial Officer, Vice President-
Finance and Treasurer

ELIN SWANSON KATZ
CONSUMER COUNSEL

/s/ Elin Swanson Katz

GEORGE JEPSEN
ATTORNEY GENERAL FOR THE STATE OF
CONNECTICUT

/s/ George Jepsen (NRD)

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