New England Electric System of Westborough, Mass., has reached a preliminary settlement agreement with three of the parties that have opposed parts of its plan for acquiring Eastern Utilities Associates of West Bridgewater, Mass. But one opponent of the merger plan, The Energy Council of Rhode Island, hadn’t signed onto the settlement agreement by press time.
Valued at $635 million, the landmark merger would combine Narragansett Electric Co., owned by New England Electric, with Blackstone Valley Electric Co. and Newport Electric Corp., both owned by Eastern Utilities.
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The state attorney general’s office, the state Division of Public Utilities and Carriers and the U.S. Navy have agreed in principle to a settlement, said Steven Scialabba, DPUC’s chief accountant.
The parties filed with the state Public Utilities Commission a three-page summary of the proposed agreement. A formal draft of the settlement is due at the PUC by the end of the day on Feb. 1.
Scialabba said the The Energy Council of Rhode Island, which represents heavy energy users here, had been involved in the negotiations but had not joined the settlement as of press time.
All of the parties intervening in the merger opposed the utility’s plan to recover $110 million in merger costs from customers. Narragansett had defended the proposed recovery on the grounds that customers would save on their bills once the three electric utilities were rolled into one.
Under the proposed settlement, Narragansett Electric is denied the right to recover the merger costs through rates as it had hoped. However, the utility is allowed as an incentive to pocket half of any merger-related savings it can prove to regulators.
“Rather than getting a guaranteed recovery of merger costs, they have an opportunity to share a portion of those savings,” Scialabba said.
Ronald Gerwatowski, Narragansett Electric’s general counsel, said the company realized it had to swallow the sharing plan to move the deal forward.
“It puts the heat on us to keep the rates low,” he said. “It puts lots of risk on us, but the merger is an important thing, and it does give us the chance to reap some reward if we perform.”
The settlement agreement, which wasn’t available for review at press time, also includes $13 million a year in lower rates for some customers, a five-year rate freeze and doubles the number of low-income customers eligible for discounted rates, according to a statement released by New England Electric.
New England Electric now expects to complete the merger in March, more than a year after the deal was announced. A second merger with National Grid Group PLC of Coventry, England, is awaiting regulatory approval from the Securities and Exchange Commission in Washington, D.C.
