It is done in our system a lot. We always require that they backfill up to the spring line of the water main with what we call flowable fill, others use other names, but it is basically very low strength concrete (40-60 psi). You also need to ensure that the contractor provides support for the existing AC line while they have it exposed. We have had good success with this method. Any other method of backfill under the water main that has been used in our system has usually resulted in the main beam breaking.