Leverage

Here’s one to watch.  Today’s Globe:


The Patrick administration is seeking to delay approval of the merger between Boston’s NStar and Connecticut-based Northeast Utilities until at least next year – a move that, if successful, could unravel the deal to create one of the nation’s largest utility companies.

The administration, through the Massachusetts Department of Energy Resources, last week filed a request with state utility regulators to put off action on the merger until NStar completes a formal review of its rates, which could begin as early as May but could take several months. That means regulators may not be able to take up the case again until late next year, well beyond the April 2012 date the utilities originally set to reassess the deal if regulatory approvals were not in place by then.

Caroline Allen, an NStar spokeswoman, said yesterday that such a “substantial delay” could ultimately jeopardize the deal.

“It’s unfortunate because this seems inconsistent with the Patrick administration’s desire to improve the business climate in the Commonwealth,” Allen said in a statement. “Here are two Massachusetts companies, coming together to form a Fortune 250 company, keep jobs local, and result in $784 million in customer savings over 10 years.”

Mark Sylvia, commissioner of the state Department of Energy Resources, said, “We’re not attempting to kill any deal. What we’re trying to do is our job and our due diligence.”

The state, he said, simply needs more information about NStar’s rate structure so it can best protect consumers as the merger goes forward.

So the Patrick Administration wants to push off a huge business deal for as much as a year, so that it can take a closer look at the proposed merger.  Sounds reasonable.  More:


This latest move was prompted, in part, by concerns over the impact of the merger on NStar’s business and residential customers, Sylvia said. NStar’s electricity rates are among the highest in the state. and its residential customers pay on average of $7 to $19 a month more than customers of National Grid, according to data from the Department of Public Utilities.


Sylvia asked if there are going to be additional costs to ratepayers if the merger goes through. That’s difficult to assess, he said, because it has been 25 years since NStar last went through a full-blown rate case, in which utilities open their books to a full financial review by regulators, and then offer testimony and other evidence to justify rate requests and address concerns of customers and other interested parties.

 Now it sounds really reasonable!  The Patrick Administration is just looking out for consumers, don’cha know.  But hang on a second.  Has anyone else looked at this proposed deal?  According to the Globe, yes, “[t]he partnership received approval from the Federal Energy Regulatory Commission this month…”  That’d be the FERC, otherwise known as the federal agency with jurisdiction over, among other things, electricity rates. Oh, and Attorney General Martha Coakley, who negotiates utility rates on behalf of Massachusetts consumers on a regular basis, is supportive of the merger too – specifically on the cost issue.  According to her spokesman, “This merger could lead to substantial savings… and we continue to advocate that these savings need to be passed on to consumers.”

Ordinarily it is unusual to find the state’s utility regulator at odds with the feds, or so significantly behind in their approval timeline.  And it is strange to see such polar opposite stances from the Governor and the AG on an issue like this one. There must be something extraordinary about this deal…

“Ready for your full-blown rate case?”

Skip back to that last block quote.  The Patrick Administration proposes to put NSTAR through a “full-blown rate case,” during which “utilities open their books to a full financial review by regulators,  and then offer testimony and other evidence to justify rate requests and  address concerns of customers and other interested parties.”  If you think that sounds a bit like the regulatory equivalent of a two-fisted enema, you aren’t wrong.

I wonder if there is an unspoken “unless” clause in the Patrick Administration’s position… something NSTAR could do to convince the MDER to set aside its rubber gloves.  I’d bet big bucks there is… READ THE REST at CriticalMASS

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