Print this Article
Email this Article
Buy This Photo
“;
aryZooms[imgCounter] = “javascript: NewWindow(870,675,window.document.location+’Template=photosimg=”+imgCounter+”‘)”;
var match = /Cod Times/.test(“”);
if (match==false || “”==””){
document.getElementById(‘purchasePhoto’).style.display = “none”;
}
bolImages=true;
State regulators have approved a multibillion-dollar merger between NStar and Northeast Utilities, clearing the way for the creation of New England’s largest utility company.
NStar delivers electricity to Cape Cod, Martha’s Vineyard and other communities in the southeastern part of the state, as well as in the Greater Boston area. Northeast Utilities delivers power to customers in Connecticut, New Hampshire and Western Massachusetts.
The Massachusetts Department of Public Utilities filed an order late Wednesday approving Northeast Utilities’ bid to buy NStar in an exchange of stock worth roughly $5 billion. The new company will be worth nearly $20 billion and serve 3.5 million electric and gas customers in the three states.
The merger between the two utility giants includes a $21 million one-time credit for NStar’s customers, a freeze on the utility’s base distribution rate until 2016 and a provision that NStar buy more than a quarter of the power produced by the proposed Nantucket Sound wind farm.
The merger agreement also requires the two companies to provide state officials with a list of assets, additional information on operating expenses, capital investments, rates of return and revenues for the next four years.
“The agreements unquestionably create benefits both in terms of the financial implications for ratepayers and job creation in the state’s growing clean energy sector,” Ann Berwick, DPU chairwoman, said in a statement released with the agency’s approval of the merger. “This merger features significant clean energy and transparency commitments, requiring that NStar Electric begin a new era of opening its books to public review and making renewable energy and energy efficiency investments.”
Connecticut regulators approved the merger Monday. Northeast Utilities agreed to a $25 million rate credit for about 1.2 million customers of its subsidiary Connecticut Light and Power. The company also agreed to a freeze on distribution rates until December 2014 and $300 million in system improvements.
Critics of the merger argue that the rate freeze will not cover all additional costs to customers because the companies would still be able to add certain expenses, such as pension costs, to customers’ bills.
Officials with the two utilities claim efficiencies realized through the merger will save customers more money in the long run. The companies also plan to invest $9 billion over the next five years in infrastructure, officials said.
The two companies have already worked together on a $1.1 billion investment in new transmission lines from Quebec to move energy from Canadian hydroelectric projects into New England.
NStar will continue to serve its territories in Massachusetts as a subsidiary of Northeast Utilities, according to NStar spokesman Michael Durand.
NStar President and CEO Thomas May will become president and CEO of Northeast Utilities after the merger is completed. In 18 months, May will become chairman.
May made $7.9 million in salary, bonus and other compensation with NStar in 2010, according to documents filed with the United States Security and Exchange Commission.
“Our plan as of now would be to close on the transaction next Tuesday,” Durand wrote in an email about when the merger deal would be final.
Cape Wind’s opponents have claimed that the merger, which was first announced in 2010, was held hostage by Massachusetts Gov. Deval Patrick’s administration unless NStar agreed to buy power from the project. NStar officials, however, say the agreement to buy Cape Wind’s power was a small part of the merger deal.
The DPU must still approve the power purchase agreement between NStar and Cape Wind.
If Cape Wind fails to finance and build the offshore wind farm or if the DPU rejects the contract, NStar must buy the same amount of power from other renewable energy resources.
The DPU has already approved a nearly identical deal between Cape Wind and National Grid for half of the power from the 130-turbine wind farm.
Although critics have argued that the additional cost of Cape Wind’s power is too high, supporters of the project argue that it will help reduce greenhouse gas emissions and provide instate clean energy jobs. In addition the project could reduce energy costs throughout New England because of its broader effect on the energy market, according to a study released by Cape Wind last week.
Both NStar and Northeast Utilities have also been criticized for their handling of the storm recovery during Tropical Storm Irene in August and a snowstorm in October.
State officials have said that a review of NStar’s storm response will proceed separately from the merger review.
NStar also has faced criticism for the company’s use of herbicides to control plant growth beneath its transmission lines. NStar officials agreed to hold off on using the herbicides for the past two years and have yet to file any plan that includes the chemicals for this year.