New Century Energies Inc. (NCE) of Denver and Minneapolis-basedNorthern States Power Co. (NSP), two mid-sized combinationutilities, got the go-ahead from FERC yesterday for their marriagethat will cover a wide swath of the natural gas and electricitymarkets in the Midwest and Southwest. The $4.8 billion merger willcreate the 8th largest utility in the nation, serving more than 4.5million natural gas and power customers in 12 states from Canada toMexico.

The merged utility colossus, to be named Xcel Energy Inc., willhave a “broad geographic footprint,” said Commissioner LindaBreathitt. In addition to the utility subsidiaries in a dozenstates, the companies own and operate independent power projects,natural gas pipelines (such as NSP’s Viking Gas Transmission) andengage in the marketing of electricity and natural gas, she noted.

Despite the size of the pending merger, the Commission found itposed no adverse threat to competition. “The companies do notcompete with each other in any electricity markets, so there are nosignificant horizontal competitive issues. And while [SouthwesternPublic Service, an NCE subsidiary] and NSP each have gasaffiliates, the order finds that the merging companies do notcompete in common upstream and downstream geographic markets, andthus there are no vertical competitive concerns either,” saidCommissioner William Massey. Also in its favor, the Commissionpointed out, was the merged company’s willingness to join theMidwest ISO.

The two utility companies hope to close the merger in the secondquarter, an NSP spokesman said. But before they can do that, henoted the deal still must win the approval of regulators in sevenstates — Minnesota, Colorado, New Mexico, Texas, Wyoming, Arizonaand North Dakota. Only two states, Kansas and Oklahoma, haveapproved the transaction in whole or part so far. The Securitiesand Exchange Commission also has to sign off on it.

The combined company is expected to save $1.1 billion in costsover 10 years, which will benefit customers and investors. “Wethink our merger will be considered a model for the utilityindustry,” said Wayne Brunetti, president and CEO of NCE.

NCE serves gas and electric customers through three operatingsubsidiaries – Southwestern Public Service Co. (SPS), PublicService Co. of Colorado (PSCo) and Cheyenne Light, Fuel & Power- in Colorado, Kansas, New Mexico, Oklahoma, Texas and Wyoming. NSPcaters to gas/electric users in Arizona, Michigan, Minnesota, Northand South Dakota and Wisconsin.

NCE was formed through the merger of PSCo and SPS in 1997, butits appetite for growth continues. Northern States Power was thetarget of a takeover attempt by Wisconsin Energy Corp. that failedin 1997 after running into problems with Wisconsin regulators. Butthe Wisconsin Public Service Commission has no jurisdiction overthe NSP-NCE merger, even though NSP serves customers in that state.”We have no clear authority,” said a commission spokesman, whoadded that no one has even asked the state to review thetransaction.

In addition to its domestic operations, the merged company willserve about two million power customers and 400,000 gas customersin the United Kingdom, and will have operations in Central Europe,Australia and South America. Based on 1998 results, it would haverevenues of $6.4 billion, earnings of $618.8 million and assetstotaling $15.1 billion.

John Howard, who currently is chairman and CEO of NSP, will bethe chairman of the merged company, which will be based inMinneapolis, MN. NCE’s Brunett will become CEO of Xcel Energy.

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