Saying a takeover of Northeast Utilities (NU) by ConEdison wouldhurt the state’s consumers and economy, Connecticut AttorneyGeneral Richard Blumenthal recently filed statements at theConnecticut Department of Public Utility Control (DPUC) opposingthe merger. The DPUC is expected to issue its final decision on themerger in May.
Blumenthal’s comments centered around the effects the mergerwould have on Connecticut Power & Light (CP&L), an NUsubsidiary and the largest electric utility in the state servingmore than 1.1 million customers in 149 counties.
“This deal involves too many critical unanswered questions andtoo few details to permit it to go forward,” Blumenthal said in apress statement earlier this month. “The significant risks aresimply unacceptable, and the DPUC should demand answers thatguarantee real benefits for our state’s consumers and economy.”
In the filed statements, an Attorney General’s witness pointedto ConEdison’s historically higher rates than CP&L, ill-definedregulatory plans, employment downsizing, and control by anout-of-state corporate management team as reasons to prevent themerger.
As one might expect, ConEdison disagrees adamantly with theAttorney General’s assessment. “We are trying to stress that achange in management does not change the reality that all theutilities involved in this merger will still be regulated by thestates they operate in,” said Robert Leonard, a ConEdisonspokesman. “We don’t make the rates. The regulatory commissions inthe states do.”
As for the fears about downsizing, Leonard pointed to ConEd’snow complete merger with Orange & Rockland as an example of theplan for this merger. “Most of the employee movement concerning theO&R merger was done through attrition or retraining. We’vefound that many O&R employees have even received opportunitiesfor promotions at ConEdison.”
Under the terms of the $7.5 billion merger agreement formed lastyear (see Daily GPI, Oct. 14), thecombined company would have annual revenues of $11 billion and a totalenterprise value of $19 billion. NU would become a wholly-ownedsubsidiary of ConEd. Eugene McGrath will remain ConEd’s CEO and NU CEOMichael Morris will become the New York company’s president. The newConEdison would be based in New York, but all the utility subsidiarieswill keep their headquarters in place.
Yet according to the state’s Attorney General, the deal alsoincludes an inflated acquisition premium of $1.5 billion. “Someundefined portion” of this premium would be paid by Connecticututility customers, Blumenthal argued, in the form of higher rates.
“This proposed merger is a no-win combination for Connecticutconsumers, our state’s economy and NU employees. It raises thespecter of higher rates, lower quality service and job losses. Themerger may well mean that Connecticut consumers will see ConEd’slesser efficiency and inferior customer service become the newcompany’s norm,” Blumenthal said. “Unless this deal can be shown tobenefit and fairly balance ratepayer and shareholder interests, itshould be resoundingly rejected.”
ConEdison and NU still hope to complete the merger by the thirdquarter of this year. The companies have made all their filings andawait permission merge from the shareholders, regulatorycommissions in Connecticut, New Hampshire and New York, the SEC,NRC and FERC.
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