If a deal between the state of Connecticut and Northeast Utilities is approved by the Public Utilities Regulatory Authority, the state will get a $25 million rate credit soon after the merger with Boston-based NStar is completed. That means 1.2 million Connecticut Light & Power customers would receive an estimated $16 credit.
The $25 million rate credit is bigger than the $21 million Massachusetts ratepayers will receive from the $4.7 billion merger of the two utility companies, but Connecticut has more customers. The deal also freezes electric distribution rates for Connecticut customers until Dec. 2014. Massachusetts’ distribution rates will be frozen through Dec. 2016.
Gov. Dannel P. Malloy, Attorney General George Jepsen, and Consumer Counsel Elin Katz announced the deal at a Capitol press conference Tuesday afternoon.
In addition to the $25 million rate credit, Connecticut will receive $15 million for energy efficiency initiatives. Also, $21 million in executive compensation will be excluded from rates, Northeast Utilities will maintain a headquarters in Hartford for seven years, it will not reduce the number of line workers, and the first $40 million in damages related to the October snow storm and Tropical Storm Irene will be excluded from any rate case. The deal is unique also in that it creates an apprenticeship program for line workers and agrees to transfer $20 million in open space to a preservation trust.
The deal must be approved by Connecticut regulators, who have until April 2 to make a decision about the merger. Department of Energy and Environmental Protection Commissioner Daniel C. Esty said he expects this deal will speed up the process.
Asked if the failure of Connecticut Light & Power to restore power quickly after the two storms made it easier to deal with the company in negotiations, Malloy said he thinks the state would have had a strong hand to play regardless.
“This experience of the last year has been difficult for everybody,” Malloy said referring to the lengthy power outages that plagued the state.
He said he thinks they reached a fair deal with the company in getting them to underwrite $40 million in damages related to the two storms.
Northeast Utilities has not yet sought a rate increase from regulators to help them recover the costs of the storms. However, representatives of CL&P have said they spent $250 million repairing its infrastructure over the course of the two storms and an executive from Northeast Utilities told shareholders last November that it wouldn’t ask them to pay the $100 million in costs related to just Tropical Storm Irene. But no rate case has been filed yet.
Jepsen warned against comparing Massachusetts’ deal to Connecticut’s deal. He said the two deals are “apples and oranges.”
He said the real question is, what would have happened if Connecticut decided not to review the merger in the first place?
“If PURA did not act and other forces intervened and this deal collapsed we would not have a settlement. We would not have a merger and we would not have any of the rate reductions — so that is the appropriate comparison,” he said.
Jepsen and Katz begged PURA to reverse its initial decision not to review the merger. They succeeded in January to get the regulators to weigh in on the merger.
The deal announced Tuesday was applauded by both Northeast Utilities and NStar.
Click here to read the entire settlement agreement.