Iberdrola Deal Approved By New York State Public Service Commission

The New York State Public Service Commission on Wednesday authorized the acquisition of Energy East Corp. and its affiliates by Spanish power giant Iberdrola SA.

One of the world’s leading energy providers, the company is now positioned to play a major role in Upstate New York; its aquisition includes Energy East affiliates New York State Electric & Gas Corp. and Rochester Gas and Electric.

The approval included stipulations requiring Iberdrola to enhance ratepayer financial benefits, protect the utilities’ assets and financial condition, improve transmission and reliability and strengthen the quality of services provided, among others. Iberdrola must file written notice that it accepts the commission’s order before the deal can be finalized.

“Determining whether a company should have the privilege to operate a utility franchise in New York is a paramount responsibility of the Commission, and it’s a responsibility we exercise with great caution,” said Commission Chairman Garry Brown. “Millions of people who depend on safe and reliable utility service at just and reasonable rates should expect nothing less; and the acquisition approved today, with necessary conditions, will do just that.”

Energy East’s two New York subsidiaries have a total of 1.7 million customers in New York, or about 16 percent of the state’s electric customers and 12 percent of the state’s natural gas customers. The combined service territory encompasses a substantial portion of

Upstate, including portions of Western New York, the Finger Lakes, the Southern Tier, the Adirondacks, the Capital Region and the Hudson Valley. The subsidiaries deliver electricity and natural gas across nearly 40 percent of the state.

Under the commission’s authorization, NYSEG and RG&E electric and gas customers will receive at least $275 million in benefits. Over time, commission officials said such benefits will be used either to reduce rates or to moderate requested rate increases. Conditions also were established to ensure customers receive a portion of any added benefits associated with efficiency gains produced by the transaction. The authorization also places restrictions on Iberdrola’s ability to expose the companies to business and financial risks from its international and competitive holdings.

NYSEG and RG&E will be required to maintain its planned levels of capital investment in the transmission and distribution systems.

Also on Wednesday, the commission reaffirmed its policy regarding vertical market power, noting that it is unacceptable for a company owning transmission and distribution facilities to also own generation. The commission also noted, however, that such restrictions can be overcome by demonstrating substantial ratepayer benefits and mitigation measures. The commission, therefore, voted to allow Iberdrola to develop and own wind generation, while imposing several conditions on the transaction. Commissioners said ratepayer benefits would result, in the form of positive adjustments reflected in the previously mentioned $275 million, and justify allowing the transaction to proceed.

“Great attention has been given to a single aspect of this case: the potential ownership of wind facilities by a transmission and distribution company,” Brown said. “Developing renewable energy sources is critically important for New York. Our decision today allows Iberdrola to fulfill its commitment to invest in renewable energy projects in New York State.”

In addition to the $100 million the company previously committed to wind development, the commission ordered an additional $100 million to be set aside for the same purpose. If the company fails to invest that $100 million, it must use up to $25 million in shareholder funds to invest in economic development projects in its service areas.

The commission accepted Iberdrola’s offer to divest fossil fuel generating plants and ordered the utilities to file a divestiture plan within 90 days of the merger. Iberdrola also can continue to own and operate existing Energy East hydroelectric facilities.

Through six public hearings Upstate, the commission heard from more than 40 organizations and individuals in the proceedings as well as hundreds of members of the public. Many of the comments advocated provisions to enhance ratepayer benefits, ensure greater financial strength and create greater transparency, according to a release from the commission.

The full text of the written decision, when issued, will be available online at www.dps.state.ny.us, through the Commission’s File Room section, referencing Case 07-M-0906.

Originally published by Daily Record Staff.

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