Proposed utility deal a big target in New England

HARTFORD, Conn. (AP) -- One of the largest proposed power company deals in New England that would form the region's biggest utility company has become an easy target for industry rivals, environmentalists and others taking part in the regulatory proceedings.

Northeast Utilities' proposed purchase of Nstar would give the company 3.5 million electric and gas customers in three states. The Massachusetts Department of Public Utilities is permitting more than a dozen power companies and consumer, labor and environmental groups to intervene in the review.

Northeast Utilities plans to buy Nstar in an all-stock deal for $4.36 billion based on the most recent price of NSTAR shares.

The price was $4.17 billion when the deal was announced in October, but investors have welcomed the news of the merger and bid up shares in Northeast and Nstar. The companies and industry analysts said customers should benefit from improvements to the power grid and cost savings the new Northeast Utilities may pass along.

However, critics are lining up to give their opinions to Massachusetts regulators. Hearings are scheduled to begin April 6. No date has been set for a decision.

Power generators worry about the possibility of a huge new competitor if the new and larger utility returns to generating, which it ended years ago with the industry's restructuring.

Energy retailers are concerned that the new Northeast Utilities will use ratepayer money to invest in new projects, gaining an unfair competitive advantage by shielding shareholders from risk.

Conservationists say the new utility will do little to advance renewable energy. A workers group worries that service and safety will deteriorate.

In addition, the Massachusetts Department of Energy Resources said reducing greenhouse gases falls heavily on the electricity generating industry and regulators' review "must recognize this new reality."

David D. Grumhaus Jr., portfolio manager at Copia Capital in Chicago, said utility mergers are "notorious for not getting done," but the Northeast Utilities-Nstar deal will likely be the exception. Nstar has a good relationship with regulators and the merger proposal is not controversial, he said.

"It makes a lot of sense from a consumer perspective to take utilities right next to each other and combine them," Grumhaus said. "It's about as straightforward of a merger deal as you're going to get."

The Connecticut Department of Public Utility Control will not weigh in on the merger plan. In a preliminary decision, it said Wednesday that Northeast Utilities will remain the corporate parent of subsidiaries still subject to the state's jurisdiction.

Many critics say the proposed deal is thin on details.

The Conservation Law Foundation in Boston said the paperwork handed in to regulators is a "sparse filing, centered on an argument amounting to little more than a claim that bigger is better."

Roger Borghesani, chairman of the Energy Consortium, which represents universities and other nonprofit organizations, said his group wants more details on how customers would benefit.

"That's really what we're after," he said. "The ratepayers are being left out of this."

Caroline Allen, a spokeswoman for NStar in Boston, and Northeast Utilities spokesman Al Lara in Hartford say details will emerge during the review.

"That is the application process in Massachusetts and we expect we'll be answering hundreds of questions," Allen said.

Angela M. O'Connor, president of the New England Power Generators Association, said electric generating companies in the region worry that the larger, merged utility will get back into the generating business. Massachusetts law permits utilities to generate power from solar plants, an exception to a prohibition against generating power that was part of deregulation more than a decade ago.

Nstar's Allen said the utility has no intention of violating power generating rules.

"Whether or not we merge has nothing to do with whether the state changes the role of utilities," she said.

Sue Reid, director of the Conservation Law Foundation Massachusetts, said the proposed merger is silent on how it would advance goals of reducing greenhouse gas emissions and using renewable energy.

"I think the filing raises more questions than it answers," she said.

Mark McDonald, president and chairman of the New England Gas Workers Association, questions the commitment to service by the larger, merged utility.

"Our concern is that in the history of mergers we've seen not just in New England, but in the rest of the country a reduction of service," he said.

And Joe Soares, senior power supply planner at Cape Light Compact, a power retailer for Cape Cod and Martha's Vineyard, wants assurances that energy efficiency programs it administers are not interrupted by the merger.

Lara said the volume of questions and criticism is understandable and that Northeast Utility officials expect the attention the deal is receiving.

"A large merger should warrant a lot of review," he said.