Electric utility mergers represented the top energy industry story of the last six months. New England Electric System, which is the region’s second largest electric utility with about 1.3 million customers, this year has been involved in two significant merger deals. In December, the company announced plans to merge with the National Grid Group and two months later NEES executives said they also wanted to merge with Eastern Utilities Associates.
If the NEES-EUA deal wins approval, it will mean one utility owns the wires delivering electricity to most Rhode Island customers. NEES owns Narragansett Electric Co., the largest investor-owned electric utility in Rhode Island, and EUA is the parent company of both Blackstone Valley Electric Co. and Newport Electric Corp., the state’s only other investor-owned electric utilities.
On June 16, the Federal Energy Regulatory Commission approved the proposed NEES-National Grid deal.
That deal was announced on Dec. 14, 1998, and is valued at $3.2 billion, according to NEES. National Grid has its headquarters in Coventry, England, and is the world’s largest, independent transmission company.
FERC commissioners indicated the decision was made quickly because this particular merger does not raise competitive, rate or regulatory issues.
“We are pleased that the FERC approved the merger so quickly, which will help us bring its benefits to customers faster,” said NEES President and Chief Executive Officer Rick Sergel. “Clearly they recognize the value of bringing National Grid’s U.K. transmission expertise to the U.S. market.”
That particular deal still needs approval from the Securities and Exchange Commission, the Nuclear Regulatory Commission, and regulators in Connecticut, New Hampshire and Vermont.
Executives from NEES and EUA signed a $634 million merger agreement on Feb. 1. NEES spokespeople have said a rate consolidation plan proposed by the companies would save Rhode Island and Massachusetts customers a total of $25 million.
The merger would also involve offering early retirement incentives to about 250 EUA employees, according to NEES officials. NEES already eliminated some jobs last year, after the state’s restructuring law took effect, through a combination of early retirement incentives and attrition.
The NEES-EUA deal still needs approvals from a number of state and federal agencies, including the Rhode Island Public Utilities Commission. Todd McLeish, a spokesman for EUA-owned Blackstone Valley Electric, said company officials don’t expect the merger deal to be complete until the first quarter of 2000.
The PUC is also still reviewing the rate consolidation plan filed by NEES, which would lower rates for Blackstone and Newport customers. At the same time, the PUC is still dealing with a request by the Division of Public Utilities and Carriers that it review EUA’s rate structure. For the past three years, EUA has had to issue refunds to customers, because its companies made too much money. The PUC could order the company to lower its rates or other action.
So it’s still a wait-and-see situation for a lot of people, who are watching the proposed deals closely.
“We are in favor of the merger, we think it will prove cost effective. We just want to be sure,” said Roger Buck, executive director of The Energy Council of R.I., in a May interview about the proposed NEES-EUA deal.
There will be benefits to groups such as TEC-RI with one company owning the electric wires throughout the state, Buck explained. There are two other small electric companies in the state: Pascoag Fire District, which serves about 4,000 electric customers, and Block Island Power. TEC-RI collects data about its members’ energy use and negotiates utility deals by combining members in an aggregation pool.
“It (the sale) will make my electricity pool a lot easier, it will be one state, one rate,” he explained.
And in other electricity related news this year, EUA finished selling off all its power generation assets with the sale in January of a 102-year-old hydro plant in Pawtucket. The plant generates 1.2 megawatts of energy, or enough to power 1,300 local households, according to a spokesman from Blackstone Valley Electric.
EUA and NEES both had to divest all ownership in power plants, because of a stipulation in Massachusetts restructuring law. Restructuring deregulates the power production segment of the electricity industry in the hope that it will breed new competition, which would ultimately reduce rates.
Incumbent utility companies retain control of the wires that deliver electricity, even though they have to sell off the power plants. The merger trend is expected to continue among the so-called wire companies, which can improve their earnings by combining services.
