March 22, 2012

Nstar’s rate freeze seen ending in spike

By Jerry Kronenberg, 22 March 2012

Hub utility giant Nstar will likely raise power prices the minute a four-year rate freeze that it’s offered in exchange for approval of its planned merger with Northeast Utilities ends.

“Given the difficulty (the companies) are going to have getting through that rate-freeze period, I would anticipate (a price hike) would take effect immediately after the rate freeze expires,” utility attorney Robert Keegan told a state Department of Public Utilities hearing yesterday.

The DPU and Connecticut regulators plan to decide within two weeks whether to approve Nstar’s proposed $4.7 billion merger with Hartford-based Northeast Utilities, whose holdings include Western Massachusetts Electric Co.

The utilities have agreed to freeze 1.6 million Massachusetts customers’ gas and electric rates for 44 months, saving consumers some $200 million, if regulators OK the deal.

However, Keegan told the DPU he expects the merged entity to file a petition in 2015 to raise rates, aiming for hikes to take effect right on Jan. 1, 2016.

The lawyer said Nstar and Northeast Utilities will already face hardships absorbing wage hikes and some $200 million in annual infrastructure costs during the rate freeze.

“I know through some of the internal discussions with the companies that it’s going to be a significant challenge,” Keegan said.

Nstar and Northeast Utilities OK’d the freeze to win backing for their deal from Massachusetts Attorney General Martha Coakley, who represents consumers in DPU cases.

The companies also secured the state Department of Energy Resources’ endorsement by agreeing to buy 27.5 percent of the power output from Cape Wind, the controversial planned Nantucket Sound wind farm. Based on National Grid’s contract with Cape Wind, that could cost Nstar ratepayers as much as $382 million.

URL to article: