Massachusetts regulators approved Hartford-based Northeast Utilities’ proposed $5 billion purchase of a Boston energy company on Wednesday, clearing the way for the formation of one of the biggest U.S. utility companies with 3.5 million electric and gas customers in three states.
The Massachusetts Department of Public Utilities OK’d the purchase of NStar two days after approval by Connecticut regulators.
The two states had already negotiated agreements with the companies that set the stage for regulatory approval. In Massachusetts, Northeast Utilities and NStar agreed to buy more than a quarter of the power that would be produced by the proposed Cape Wind offshore wind farm as a condition of the deal.
In Connecticut, Northeast Utilities agreed to a rate credit for customers, a rate freeze for distribution costs, $300 million for system improvements and other demands by the state.
As part of the approval, Massachusetts regulators said Wednesday they are strengthening transparency requirements by setting an April 15, 2015, deadline for additional financial data such as assets and operating expenses.
The regulators said they could investigate the utilities’ rates in 2016 based on the results of that report.
Thomas J. May, NStar’s chairman, president and chief executive, did not address the increased transparency rules. In a statement, he said Northeast Utilities’ investments in transmission and NSTAR’s balance sheet will lead to “an impressive growth opportunity for the combined company” that will support economic growth in New England and meet rising energy needs.
The deal is set to close April 10.
NStar is required to open its books to public review and make renewable energy and energy efficiency investments, said Ann Berwick, chairman of the Massachusetts Department of Public Utilities.
“The agreements unquestionably create benefits both in terms of the financial implications for ratepayers and job creation in the state’s growing clean energy sector,” she said.
When the deal was announced on Oct. 18, 2010, the utilities said the acquisition should help Northeast Utilities pay for large transmission projects designed to bring low-carbon power from Northern New England and Canada to higher population areas in southern New Hampshire, Massachusetts and Connecticut.
The deal, particularly its size and scope, quickly drew dozens of organizations of consumers, unions, industry rivals and others who demanded a say in the regulatory review. Massachusetts and Connecticut stepped in with proposals to increase the use of alternative energy and rate relief for customers.
Perhaps more than any other factor, however, a rare and destructive autumn snowstorm in southern New England last October affected how regulators in Connecticut reviewed the deal.
Hundreds of thousands of customers of Connecticut Light & Power, a subsidiary of Northeast Utilities, were without power for up to 10 days as the utility struggled to reconnect power lines brought down by fallen trees and limbs. CL&P’s president was forced to resign, and the utility came under strong criticism from elected officials.
Connecticut Gov. Dannel P. Malloy cited the winter storm and the remnants of Hurricane Irene, which hit the state in late August, as opportunities to negotiate an agreement that stipulated better terms for customers.
Besides the concessions that Northeast Utilities agreed to, it will pay more to buy NStar. The purchase price, which is based on the price of NStar shares, is up more than $800 million since the Oct. 18, 2010, announcement, reflecting share prices that have climbed with Wall Street’s improved performance.
The Federal Energy Regulatory Commission approved the deal last July, saying it reviewed its impact on competition, rates and regulation. The agency said the deal will have no adverse effect on competition and will have a minimal impact on market concentration in New England.
The two companies already have been working in tandem. Their project, Northern Pass Transmission LLC, would build, own and operate 180-mile transmission lines through New Hampshire while leasing them to Hydro-Quebec to transmit electricity into the New England power pool.
Opponents fear the utilities will use eminent domain to take private land for the Northern Pass project.
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