One of the world’s largest energy companies proposed on Tuesday to build hundreds of wind turbines in New York, significantly raising the stakes in a nine-month battle with state regulators over its intended purchase of a power company.
Executives of the company, Iberdrola S.A., of Spain, said it would invest $2 billion in wind turbines upstate if the state’s Public Service Commission, which regulates utilities in New York, approves its purchase of Energy East, which has three million customers in five states, including New York. The new turbines would more than double state energy production from wind and make New York one of the larger producers of wind power in the country.
“Iberdrola has helped many countries meet their renewable energy goals and benefit from our high-tech investments and ‘green-collar’ jobs that result from this kind of investment,” said Xabier Viteri, the chief executive of Iberdrola’s renewable energy division.
The purchase of Energy East has been approved by federal regulators and officials in other states. But in New York, where Energy East owns two utilities, Rochester Gas & Electric and New York State Electric & Gas, Iberdrola has run afoul of state rules meant to discourage what is known as vertical market power, when a single company owns power-generating plants as well as transmission and distribution lines.
In negotiations over the last several months, the commission staff has extracted several concessions out of Iberdrola, including a promise of $201 million in rate subsidies to existing Energy East customers to ensure that they do not pay more for electricity as a result of the sale.
But the commission staff is also insisting that Iberdrola agree to sell off Energy East’s existing wind turbine facilities, arguing that owning them would violate the vertical power rules.
An administrative law judge is expected to issue a recommendation on the deal within weeks, though neither the judge’s recommendations nor those of the commission staff are binding on the five-member commission itself.
James Denn, a spokesman for the commission, said the added investment would not allay the commission’s concern, adding, “On this deal, they would be able to produce, transmit, and distribute power within their region.” . Mr. Denn also noted that Iberdrola had not formally submitted the new proposal to the commission; the current plan has the company making only a binding commitment of $100 million worth of investment in the state.
The commission staff also wants Iberdrola to increase the subsidies, known as ratepayer benefits, to $644 million, as well as to agree to provisions in the merger that would insulate any New York facilities from potential financial problems at Iberdrola.
Iberdrola is one of several foreign-owned energy companies that have entered the United States market, where rising gas prices and a spate of state laws requiring more energy from renewable sources have made wind, solar and hydroelectric power increasingly attractive.
The company’s acquisition of Energy East – and the promise of clean power in an era of high demand – has drawn support from leading business and environmental groups, as well as lawmakers of both parties, though the state power producers association has filed a brief supporting the commission staff.
In a statement on Tuesday, Senator Charles E. Schumer urged the commission to allow Iberdrola to acquire Energy East without divesting its wind power holdings, while keeping careful watch on whether rates increased as a result. Mr. Schumer and some other critics believe that the rules against simultaneous production, transmission and distribution, which date back to efforts in the 1990s to break up the state’s energy market, have failed to help lower energy costs.
“The Public Service Commission ought to get out of the way when it comes to investing in renewable power, and instead concentrate on making sure consumers don’t get burned by rate hikes as a result of this merger,” Mr. Schumer said in a statement.
By Nicholas Confessore
4 June 2008
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