Pennsylvania regulators last Tuesday approved a settlement agreement that allows Pittsburgh-based Duquesne Light Holdings to be purchased by a consortium led by Macquarie Infrastructure Partners (MIP) and Diversified Utility and Energy Trusts (DUET) for an estimated $1.6 billion.

The Federal Energy Regulatory Commission approved the marriage in late December. Approval by the Pennsylvania Public Utility Commission (PUC) was the only remaining agency clearance required.

The settlement bars Duquesne Light, the principal subsidiary of Duquesne Light Holdings, from increasing its base rate before 2010 and from including the costs associated with the acquisition in future rate filings; requires the utility company to continue community commitments at current levels ($2.9 million for 2006); creates a service quality index for residential and small business customers that will establish performance standards to ensure that service quality will not decline as a result of the acquisition; creates a universal service collaborative group that will work with the company in shaping its future plans for low-income and energy conservation programs; and continues a shareholder match of customer contributions to the Dollar Energy Fund up to $375,000.

The agreement also calls for Duquesne Light’s corporate headquarters to remain in Pittsburgh, and for the company to report annually to the PUC on the status of all of the commitments under the settlement. In addition, it requires the company to establish a competitively neutral economic development plan to attract new Pennsylvania industrial employers and support expanding ones.

The settlement agreement was reached between the merger partners and the parties who filed formal complaints against the proposed merger, including the Pennsylvania Office of Consumer Advocate, the state’s Office of Small Business Advocate, the PUC’s Office of Trial Staff, the International Brotherhood of Electrical Workers, the Community Action Association of Pennsylvania, Dominion Retail Inc., Duquesne Industrial Intervenors, the Retail Energy Supply Association, Strategic Energy LLC and the Pennsylvania Large Energy Users Coalition.

In September 2006, Duquesne Light and Macquarie fielded a joint petition for the acquisition with the Pennsylvania commission. Duquesne Light serves more than 580,000 electricity customers in Allegheny and Beaver counties in Pennsylvania.

MIP, headquartered in New York, is managed by a member of the Macquarie group, which is one of the world’s largest owners and managers of infrastructure assets, managing more than $25 billion in infrastructure equity around the world. MIP is a diversified unlisted fund focusing on infrastructure investments in the U.S. and Canada.

DUET, listed on the Australian Stock Exchange, is managed under a 50/50 joint venture between Sydney, Australia-based Macquarie Bank Ltd. and AMP Ltd. DUET has majority ownership in some of Australia’s key regulated energy utility businesses. These include regional electricity and gas distribution businesses in the state of Victoria as well as Western Australia’s Dampier-to-Bunbury natural gas transmission pipeline, that state’s key gas infrastructure asset. DUET also has a minority stake in Western Australia’s largest gas distributor, AlintaGas Networks.

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