Energy East Corp. announced on Friday that its shareholders “overwhelmingly approved” its proposed merger with RGS Energy Group. Energy East plans to buy the parent company of Rochester Gas & Electric for approximately $1.4 billion.

“RGS Energy’s operations in nine counties centering around Rochester will provide a solid base for growth,” said Wes von Schack, Energy East’s CEO, during the company’s annual meeting. “The Greater Rochester Region is one of the largest exporters in the nation, with over $15 billion of exports in 2000. Large and reputable companies located in the area, combined with an increasing number of new businesses, particularly in the biotech and precision manufacturing industries, help make it an extremely attractive part of the upstate economy.”

The merger, first announced in late February (see Daily GPI, Feb. 21), would make Energy East one of the most diversified energy suppliers in the Northeast, serving almost three million gas and electric customers across upstate New York and New England. Energy East said the combined company would have more than $5 billion in annual revenue and almost $10 billion in assets. The merger is expected to be completed in early 2002.

Von Schack said RG&E’s generation portfolio will help Energy East manage some of the business risks that are naturally inherent in a transmission and distribution business. “RG&E’s power generation facilities substantially satisfy its customers’ needs, and will help support some of NYSEG’s (New York State Electric and Gas Corp.) supply requirements and improve our ability to continue to deliver electricity at stable prices,” von Schack said. “The addition of this generation, our existing long-term power purchase contracts and selective generation expansion by Energy East will give us an even broader range of options to meet the energy needs of upstate New York consumers.”

Von Schack said that electricity shortages and price spikes that are being felt all around the country are also being experienced in New York State. “Fortunately, NYSEG customers have been spared these price shocks because their electricity supply and delivery prices have been frozen since 1995,” von Schack said.

The NYSEG, a subsidiary of Energy East, proposed a six-point energy policy, NYSEGPlan, to help address the crisis in New York. NYSEGPlan calls for:

“Certainly, we understand that it will take some time and cooperation between state and federal regulators before these initiatives can be completed. In fact, we estimate that it will take in the vicinity of seven years to build the necessary generating plants and energy infrastructure to ensure a sound energy and economic future for New York State,” von Schack said. “During that time, we want our consumers and the upstate economy insulated from price volatility.”

NYSEG said it has voluntarily filed with the New York Public Service Commission a Price Protection Plan that would continue to freeze electricity delivery and supply prices until 2008, while still enabling customers to choose their electricity supplier.

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