A new proposal by Babcock & Brown Infrastructure (BBI) has prompted the staff at the Montana Public Service Commission (PSC) to recommend that the five regulators reopen the utility’s proposed acquisition of South Dakota-based NorthWestern Energy. In May the PSC voted 5-0 to reject the original BBI-NorthWestern marriage proposal (see Daily GPI, May 24).

In June, the Australian investment firm’s U.S.-based operation, BBI, refiled a new proposal with the state regulatory panel, the only one to reject the deal. Regulators in South Dakota and Nebraska, where NorthWestern also has utility operations, long ago approved the deal that was originally announced in April 2006 (see Daily GPI, April 26, 2006).

“This [merger] would have been a done deal, except for the Montana PSC,” said a South Dakota-based NorthWestern spokesperson. “There are several milestones coming up in the next few weeks.”

Montana regulators have not indicated if they would agree with the staff and set a rehearing schedule, rather than rejecting the proposed deal as they reportedly were about to do in June. Just before that meeting, BBI tried to improve the offering by proposing to create a stand-alone Montana utility subsidiary with restrictions on how much in dividends BBI would be able to take from its Montana operations that represent more than half of NorthWestern’s 640,000 electric and natural gas customers. Montana electric customers (346,000) represent more than 80% of the company’s power customers in Montana and South Dakota.

BBI and NorthWestern have the option of refiling an entirely new application if the PSC again denies what is currently on the table. If the PSC decides on rehearings, it should continue the existing case and build on its record, according to the PSC staff attorney on the case.

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