Nstar may rush a “merger savings credit” worth some $150 million to customers in an effort to push its proposed combination with Northeast Utilities through the regulatory pipeline.
The potential compromise came during yesterday’s high-stakes hearing at the Department of Public Utilities, a final showdown to debate the $4.7 billion deal’s benefits to ratepayers and the environment.
The Patrick administration abruptly dropped its demand that Nstar undergo a full rate review as part of the merger case, but the company was apparently prepared to avoid such a time-consuming process by offering up guaranteed savings to ratepayers.
“I think the company would certainly consider and agree to a situation where there was an up-front credit equal to, say, 50 percent of what the anticipated savings will be,” said Robert Keegan, Nstar’s attorney.
The other half of the estimated $315 million in savings – covering the period between a merger approval this spring and a rate review next spring – would go to shareholders. That didn’t impress DPU commissioners.
“A 50/50 sharing … doesn’t to us sound like a fair distribution of benefits between shareholders and ratepayers because we understand that there are likely to be such substantial benefits outside of the $315 million going to shareholders,” said DPU Chairwoman Ann Berwick.
Rachel Evans, an attorney for the state Department of Energy Resources, stuck with the agency’s motion to delay the merger proceedings until Nstar provides more details about the companies’ greenhouse gas emissions.
“If these companies are asking the DPU to approve this merger, then what concrete steps will they do – different than business as usual – to reduce their carbon emissions? Not to slow down their historic increases in carbon emissions, but to actually reduce it,” she said.
Nstar is under pressure behind the scenes, and between the lines, to buy power from Cape Wind, the offshore energy project supported by the Patrick administration.
In September, the Department of Energy Resources asked that approval of the merger require wind energy purchases, stopping short of naming Cape Wind. The developer of Cape Wind wants the DPU to include a condition that the companies buy the unsold half of its power.
Keegan insisted Nstar has demonstrated the deal’s environmental benefits.
The proposed merger, which was announced in October 2010 and faces an early-April consummation deadline, is in jeopardy because there is no time limit for the DPU to decide on the state’s motion to stay the proceedings or on the overall merger petition.
And earlier this week, Connecticut regulators decided to pursue their own review.
Nstar spokeswoman Caroline Allen said the companies need a ruling from regulators in Massachusetts and Connecticut – who decided this week to conduct their own review – by April 2 to meet an April 16 merger closing deadline. If not, the merger could be scrapped.
“Connecticut regulators have committed to making a decision prior to the April deadline, so we would hope for the same in Massachusetts,” Allen said. “They are aware of the deadlines, so we would hope that they would render a decision prior to that.”
Susan Reid of the Conservation Law Foundation ripped the utilities for offering up what she called a “paltry evidence of record” on the environmental impacts of their long-term energy delivery plans, and making no move toward “offshore renewables,” a reference to Cape Wind.
“What we’ve seen is a failure, in this merger proceeding, to adapt to a substantial change in the law with respect to clean energy and climate policy,” she said.
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