Associated Press, September 4, 2008
Albany — New York utility regulators have given the global energy company Iberdrola the go-ahead to buy Energy East.
The 4-0 vote by New York’s Public Service Commission yesterday clears the way for the $4.6 billion deal, which includes Energy East subsidiaries Rochester Gas and Electric Corp. and New York State Electric and Gas.
Energy East also owns power companies in Maine, Connecticut, and Massachusetts, where regulators have already approved the takeover. But New York’s approval comes with a series of conditions that Iberdrola hasn’t yet accepted.
The commissioners, who have had Iberdrola’s proposal before them for more than a year, characterized their decision as a compromise that protects Energy East’s customers while not imposing conditions so onerous they’d cause Iberdrola — which is based in Spain — to nix the buyout.
“This isn’t a perfect deal, and it might not be a great deal,” commissioner Maureen Harris said before casting her vote. “In my opinion, it’s a good deal, and I’m not willing to risk having the company walk away from it.”
Iberdrola had no immediate comment except to say that it looks forward to reviewing the order to determine what steps it will take next.
Staff analysts at the PSC had argued for months against the deal because of concerns about whether it would best serve the public in terms of cost and competitiveness. They laid out a series of conditions they said the agency’s decision-making panel should impose before the deal could go through.
Yesterday’s approval addressed most of the issues staff analysts raised, though the conditions were significantly scaled back from their original recommendations.
For example, the commissioners required Iberdrola to put aside $275 million to offset future rate increases. That’s compares with the $646 million PSC staff analysts initially proposed as a condition of the sale.
PSC staff analysts also initially said Iberdrola should be required to sell its interest in wind and hydropower generating plants as a condition of the deal. That was in keeping with a state policy that power companies shouldn’t own both transmission lines and generating plants, which might give them too much control over setting prices.
Iberdrola — which has wind projects from the Pacific Northwest to Europe — strongly objected to that demand and sought help from state and federal officials, including Senator Schumer, who said he lobbied the PSC chairman, Garry Brown, to find a compromise.
The commission said yesterday that Iberdrola must sell the fossil fuel generating plants but may keep the wind energy plants as long as it commits to spending up to $200 million on wind energy development in the state. The company has publicly said it will spend $2 billion on wind energy in New York, but it hasn’t made a firm commitment.
Under the terms the PSC laid out, Iberdrola would also be required to make any future investments in wind energy using money from a non-Energy East subsidiary.
“We have argued long and hard for Iberdrola’s ability to develop wind power, and we very much urge them to accept this ruling,” Mr. Schumer said in a prepared statement after the PSC’s decision.
It’s not clear, however, if the company will go along with the conditions. A spokesman for the PSC said the agency expects to issue a written order spelling them out within a few days, and it’s up to Iberdrola to accept or reject the offer.