Federal officials say Northeast Utilities' proposed $4.66 billion purchase of NStar will not hinder competition, increase rates or weaken regulation.
By STEPHEN SINGER | AP Business Writer
HARTFORD, Conn. — Federal officials have approved Northeast Utilities' proposed $4.66 billion purchase of a Massachusetts electric and gas utility, saying the massive deal will not hinder competition, increase rates or weaken regulation.
The deal, which was approved by the Federal Energy Regulatory Commission on Wednesday, must still be approved by Massachusetts regulators who are reviewing the proposal.
The federal approval is a boost to the deal, representatives of the two companies said Thursday.
"It's an important step along the way," said Michael Durand, a spokesman for NStar, based in Boston.
The deal is among the largest in the utility industry in New England and would form the region's biggest utility company. It has become an easy target for industry rivals, environmentalists and others taking part in regulatory proceedings in Massachusetts.
Connecticut regulators have refused to take up the matter, prompting the state's chief consumer advocate to go to court to try to force the Department of Public Utility Control to review the deal.
FERC said in its 35-page decision that it reviewed the proposed deal's impact on competition, rates and regulation. The agency said the deal will have no adverse effect on competition and that it will have a minimal impact on market concentration in New England.
Northeast Utilities owns or controls about 1,300 megawatts, which FERC said is less than 4 percent of total generation in the region. NStar has divested all of its generation, the federal agency said.
Federal regulators also said the utilities' application does not indicate that customer rates will increase as a result of costs related to the deal.
And FERC said it sees no evidence that state or federal regulation will be impaired by the utility deal. The merger "will not create a regulatory gap" at the federal level because the commission will keep its regulatory authority over the companies after the deal goes through, if it is approved by Massachusetts, federal regulators said.
Jonathan Peress, director of the Clean Energy and Climate Change program at the Conservation Law Foundation in Boston, said the group has questions about how the merger will be comply with standards for review imposed by Massachusetts. State standards for review of the deal will consider its impact on renewable energy, energy efficiency and other matters, he said.
"The Massachusetts review will be a more rigorous standard," Peress said.
Reducing greenhouse gases falls heavily on the electricity generating industry and regulators' review "must recognize this new reality," the Massachusetts Department of Energy Resources has said.
Power generators have told Massachusetts regulators they worry about the possibility of a huge new competitor if the new and larger utility returns to generating, which it ended years ago with the industry's restructuring. Energy retailers are concerned that the new Northeast Utilities will use ratepayer money to invest in new projects, gaining an unfair competitive advantage by shielding shareholders from risk.
David D. Grumhaus Jr., portfolio manager at Copia Capital in Chicago, said Thursday the deal has not drawn controversy at the federal level because Northeast Utilities and NStar do not generate electricity and as a result do not pose any risk of establishing a monopoly.
"Where we've seen FERC be a little involved is in generation or monopolies or transmission," he said. "Here, where you're slamming two transmission and distribution companies together they still need to approve it but I don't think there's much to do."