As FERC examines the proposed acquisition of NorthWestern Corp. by Australian-based Babcock & Brown Infrastructure Ltd. (BBI), Montana and South Dakota state representatives last Monday intervened with different agendas. Montana wants assurances that its retail utility customers will not end up paying for the purchase premium. North Dakota is seeking a 30-day extension to provide time for settlement negotiations with the companies.
Saying the proposed deal poses “significant challenges” for both future rates and regulation, the Montana Consumer Counsel filed Monday with the Federal Energy Regulatory Commission (FERC) contending the deal is “significantly leveraged and involves a substantial acquisition premium.” The state counsel, which is an extension of the Montana state legislature, urged FERC to find the application “incomplete” until the companies unequivocally state that the Montana Public Service Commission (PSC) holds the authority to act on the proposed sale.
Montana warned FERC that the proposed deal likely will be “one of the first major, post-PUHCA (Public Utility Holding Company Act) challenges to the ability of state regulatory commissions to control holding company structures and intra-holding company transactions effectively.”
At an open meeting earlier in the month of the South Dakota Public Utilities Commission (PUC), state regulators directed PUC staff to conduct settlement discussions with the applicants. “It appears that a successful outcome is possible and can be achieved in less than one month,” said the Washington, DC-based attorney for the PUC, asking for an extension of the time limit on comments until Sept. 13 in case the settlement talks stall.
The companies also joined in the South Dakota PUC’s request, noting that they “reserve the right to oppose any PUC pleading filed by Sept. 13, on grounds other than timeliness and on all grounds (including timeliness) if the substantive pleading is filed after Sept. 13.”
Montana’s filing raised the issue of NorthWestern’s recent history of having to pay financial premiums in acquisitions — first in February 2002 when it acquired Montana Power Co., and in September 2004 when it emerged from Chapter 11 bankruptcy.
“The proposed acquisition of NorthWestern by BBIL adds to these already recorded premiums-to-book value,” said the state consumer counsel’s filing. “[We] question whether just and reasonable retail and wholesale rates, based on original-cost asset values, can support the price for this proposed acquisition.”
Montana urged FERC to act in three areas:
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