After you've followed the instructions to install the Water Utility Editing Toolbar found here : Water Utility Network Editing and Analysis | ArcGIS for Water , click the tool on the far right of the Attribute Assistant Toolbar called "Show Config Information" (the symbol is a document sheet with a cog in front of it). This will open the Config and Log File Dialog Window. Click on Config File Path > Open Location, which will open the folder where your config file has been saved locally. Open the "loaded.water.config" file with a text editor. Notepad++ works well (and is a free download). I recommend you make a copy of the original before altering the file. After you've made changes and saved (using the same naming convention as the original), you may have to re-launch ArcMap. The Reload button on the Config and Log File Dialog may only reload the Attribute Assistant config file.
Specifically regarding the above lateral creation configuration, here is the section of the config file to look at:
<!-- Begin Configuration Section for the Add Laterals Tool and Construction Tools, This is an XML array, so you can define any number of AddLateralDetails Entities-->
<AddLateralsLayers>
<!-- Start of the Entry, the name is just for reference, not used or presented-->
<AddLateralDetails Name="Meters to Mains">
<!-- The Point layer to connect to the main through a lateral-->
<Point_LayerName>Water Service Connections</Point_LayerName>
<!-- the layer to look to connect to, the lateral will connect
to this from the point-->
<MainLine_LayerName>Water Mains</MainLine_LayerName>
<!-- The line used to connect the point to the main-->
<LateralLine_LayerName>Water Lateral Lines</LateralLine_LayerName>
<!-- The Template to use to populate the attributes of the lateral line,
this can be removed or left blank and the user will be prompt for a template-->
<LateralLine_EditTemplate>1" Copper Domestic</LateralLine_EditTemplate>
Another possibility for why Devin was getting the behavior in the original post could be because of the way his organization was treating abandoned or removed Main Lines. If they were perhaps changing an attribute in the feature class which then drew the lines with blank symbology, it could have been that the lateral construction tool was treating un-symbolized abandoned lines as the nearest main line.
I had to get around this in our District by setting a definition query on the wMainLines feature class of "LifecycleStatus <> Abandoned" before running the tool. If you are strictly following the LGIM, your abandoned lines will be in a separate feature class and not be an issue. However, we couldn't get the abandon features tool to work properly, and I didn't like that I was losing a lot of attributes when these lines were abandoned. So we added a LifecycleStatus field and AbandonedDate field to each feature class instead.