The Connecticut Public Utilities Regulatory Authority today ordered Northeast Utilities to delay finalizing its merger with NSTAR, concluding it has the regulatory jurisdiction to review and approve the proposed $4.7 billion merger involving the state’s largest utility.
“NU shall not consummate the proposed merger unless and until the Authority has issued a final decision approving the merger,” the authority said in an order.
The order is likely to result in PURA setting conditions on the merger, not stopping it.
“The issue was never to stop the merger,” said Rep. Vickie O. Nardello, D-Prospect, the co-chairwoman of the legislature’s Energy and Technology Committee. “The issue was if they merge and develop certain efficiencies, who gets the benefit from those economies? Where does the ratepayer fall?”
Nardello said the merger also raises issue of control.
“We want to have company personnel here in Connecticut and make sure Connecticut is a priority for them,” she said.
Attorney General George Jepsen, who urged PURA to assert jurisdiction, said the review will give the state access to information needed to know how much money the merger will save the new entity.
“It’s only at that point we can turn and see what conditions can appropriately be imposed,” Jepsen said. “If indeed there are significant synergies and savings that can be passed onto consumers, we want to make sure consumers see their fair share.”
Under the merger agreement, NU shareholders would own about 56 percent of the combined company, yet the chief executive officer of NSTAR would be the CEO.
NU had argued that state regulators had no authority to review what it described as an acquistion of an out-of-state company, and its regulated subsidiaries, Connecticut Light & Power and Yankee Gas, would continue to be owned by NU.
In a final decision that upholds a draft decision issued Jan. 3, the regulatory authority said it is “legally obliged to review the proposed merger to ensure that after any resulting merger, Connecticut Light & Power and Yankee Gas will have the qualifications and ability to provide safe, adequate, reliable and reasonably-priced services for Connecticut customers.”
The authority also concluded that “the personnel changes contemplated in Merger Agreement amount to a change of control of NU and are not merely internal board and management changes within a corporate entity not subject to Authority review.”
CL&P is the largest electric utility in Connecticut. NSTAR provides electricity to more than 1 million customers in the Boston area and gas to 300,000 customers in 51 communities.
The decision was released this morning and will be posted today on the agency’s website.
The authority initially declined in June to hold hearings on the merger, a decision it was urged to reverse by Jepsen, the Office of Consumer Counsel, legislators and NRG Energy, the owner of power plants in Connecticut. NU is responsible for the transmission of electricity, not its generation.
NU objected in December to calls for the review, saying it would be unfair to reverse a decision made six months earlier.
“We’re disappointed with PURA’s reversal of a final decision. We believe that their initial ruling was the correct one,” Al Lara, an NU spokesman, said. “However, now 15 months after our initial announcement, we are prepared to comply and will submit a merger application.”
PURA said today that it now sees the merger as material to how the utility may operate in Connecticut.
“The Authority finds that all of these changes in management and ownership composition are changes that affect and impact the holding company corporate parent’s control and authority, including who makes the decisions concerning the policies and operations of CL&P and Yankee,” it said. “Based on the foregoing, the Authority’s jurisdictional duty to review the proposed merger is triggered.”
Time is an issue. The merger agreement expires April 16.
PURA promised a quick review: “The Authority is mindful of certain milestones relating to the completion of the proposed merger and will dedicate all necessary staff resources to achieve a complete and thorough regulatory review consistent with that time schedule.”
The deal already was facing scrutiny by regulators in Massachusetts, meaning that PURA’s review is not the only holdup.
Lara said he thinks both states will act in a timely manner.
“They are aware there are benefits that come from this,” Lara said. “There are merger savings that no one wants to see jeopardized.”