KELLY HARRINGTON, SNL Interactive, June 18, 2008
Spanish utility Iberdrola SA will reconsider its proposed acquisition of Energy East Corp. should New York regulators “impose unacceptable” conditions on the deal, the company said.
The company’s statement comes a day after Administrative Law Judge Rafael Epstein recommended that the Public Service Commission not approve the deal. The proposal, he wrote, “does not satisfy the ‘public interest’ requirement of Public Service Law.” However, if the PSC decides to approve the deal, Epstein said it should do so with several conditions, including one for Iberdrola and its affiliates to exit the generation business in New York.
An Iberdrola spokesman June 17 said the administrative law judge has issued a recommendation and not a ruling and that the company hopes there will be a positive outcome when the full commission makes its decision.
“We hope that will be next month at the July session,” he said.
Iberdrola’s main areas of concern with the recommended decision are the provisions pertaining to the recommended level of “positive benefit adjustments,” and one that would preclude Iberdrola from owning, operating or developing renewable energy that would be interconnected with Energy East’s New York subsidies New York State Electric & Gas Corp. and Rochester Gas and Electric Corp.
Iberdrola has outlined a business plan to invest $2 billion in wind energy development in New York, some of which would be connected to those utilities’ systems, he said.
“As Iberdrola Chairman Ignacio Sánchez Galán has said, Iberdrola will reconsider this transaction and seek other options in the United States if the final PSC ruling imposes unacceptable conditions on the transaction in these two key areas,” he said.
In his recommendation, Epstein said that NYSEG and RG&E customers should be credited with positive benefit adjustments of $646.4 million, including $201.6 million initially upon completion of the merger transaction. This would result in NYSEG and RG&E delivery rate reductions of $54.8 million, or 4.4%, initially, according to the recommendation.
Iberdrola in June 2007 said it would acquire Energy East, including its operations in New York, Maine, Connecticut, New Hampshire and Massachusetts, for about $4.5 billion. Including the assumption of debt, the transaction is valued at about $8.5 billion.
FERC and regulators from Connecticut, Maine and New Hampshire have already approved the deal. New York regulators have yet to rule on the proposal. During the review process Department of Public Service staff have outlined concerns about the deal.
New York Gov. David Paterson also weighed in on the recommendation. In a June 17 statement, Paterson said the PSC is not bound to the recommended decision. The governor said he trusts that the commission will keep in mind “significant statewide and ratepayer benefits” from the deal, including Iberdrola’s plan to invest $2 billion in wind energy and its pledge to offer $200 million in ratepayer benefits.
“Although this amount is less than suggested by the administrative law judge, I hope the commission will not let the perfect be the enemy of the good when it comes to ratepayer benefits,” Paterson said. “I look forward to a discussion of benefits in a broader context to capture the full range of future opportunities this acquisition can bring about. Creative solutions to address the issues surrounding utility ownership of limited wind resources can be found and defining ratepayer benefits more broadly to encompass capital investments in clean energy are among the things the commission should look at in deciding to let this important acquisition move ahead.”