In a draft decision released Wednesday, the Public Utilities Regulatory Authority reversed its position that it did not have the authority to review a proposed merger between Northeast Utilities and Massachusetts-based NSTAR.
In June the regulatory board concluded it didn’t have the jurisdiction to review the merger, which would create one of the biggest utilities in New England. Under the deal NSTAR shareholders would acquire 44 percent of NU, the parent company of Connecticut Light & Power, and be allowed to appoint seven of its 14 board members.
In the first draft decision, regulators reasoned that even after the merger, NU would remain the corporate parent of CL&P and “subject to the continuing jurisdiction of the department without any reduction of the department’s existing regulatory oversight.”
But pressure to weigh in on the decision after the companies handling of two large storm events was mounting. Just last week Attorney General George Jepsen asked that they reconsider in light of NU’s power restoration performance this year.
Jepsen cited the results of the independent review conducted by Witt Associates which examined NU’s response to the widespread power outages after Tropical Storm Irene and the October snowstorm. The report raised “significant additional issues about the utility’s management and its executive leadership,” he said.
Over the summer, the Office of Consumer Counsel also asked for PURA to review the merger. According to a Department of Energy and Environmental press release, Jepsen and the consumer counsel provided convincing information.
PURA found itself “legally obliged to review the proposed merger to ensure that after any resulting merger CL&P and Yankee [Gas] will have the qualifications and ability to provide safe, adequate, reliable and reasonably-priced services for Connecticut customers.”
The consumer counsel provided evidence that the merger may constitute attempts to exercise control over CL&P or Yankee Gas, PURA found. That control, either direct or indirect, could fall under areas regulated by PURA and DEEP, including storm response and best practices, according to the draft decision.
“This determination alone triggers the Authority’s jurisdiction and duty to review the proposed merger. Any terms and conditions relating to these and other issues potentially affecting Connecticut public service companies, CL&P and Yankee Gas, will be examined and assessed in a merger review,” the decision said.
If the merger goes through the new merged utility will include six regulated entities and serve 3.5 million customers.
Parties to the case have until Monday to file written exceptions to the decision and will have the opportunity to make oral arguments before the PURA directors on Jan. 9 and Jan. 12. NU spokesman Al Lara said the utility is considering its options and any exceptions to the decision will be provided to PURA in writing. He said he couldn’t comment further since the regulatory process has begun.
PURA will vote on whether to make its draft decision final by Jan. 18. If the decision is upheld NU will have to file an application seeking PURA’s approval of the merger.
In a statement, Jepsen urged regulators to finalize the draft decision and issue an order that the merger not take place before a full review is completed.
“Connecticut’s consumers deserve a meaningful, thorough review process. It is important that the review look not only at how the new company will be structured and how it will operate, but also determine what conditions need to be in place to ensure NU’s Connecticut customers share in any benefits,” he said.
The Massachusetts Department of Public Utilities, which had previously claimed authority to review the merger, will hear arguments over the case on Friday. Lara said he is confident regulators in both states are moving quickly to review the merger agreement, which will expire in April 16.