Locally owned energy utilities became an endangered species in Rhode Island in 1999. As the landmark merger of the state’s three major electric utilities and a second deal that would roll the combined system into a British company crawled toward final approval last year, a Texas natural gas company jumped into Rhode Island with both feet.
Southern Union Co. of Austin, Texas, announced three local natural gas utility acquisitions in rapid succession beginning in October. The company is seeking to buy Fall River Gas Co. for roughly $75 million, Providence Energy Corp. for approximately $400 million and Valley Resources Inc. of Cumberland for about $160 million.
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Providence Energy Corp. owns North Attleboro Gas Co. and Providence Gas Co. Valley Resources owns Bristol & Warren Gas Co. and Valley Gas Co.
The proposed natural gas mergers, which must be approved by regulators in Rhode Island, Massachusetts and other states where Southern Union operates, also include eight unregulated energy businesses here. Each of the eight businesses are subsidiaries of one of Southern Union’s local acquisition targets.
Southern Union officials have said the company plans to run its local acquisitions as separate divisions under their current management for the foreseeable future. The company also has said that it won’t ask customers here to pay for part of the merger costs.
But New England Electric System’s plan to do just that in its merger with Boston-based Eastern Utilities Associates sparked stiff opposition last year from heavy energy users, advocates for the poor and the state Attorney General.
New England Electric of Westborough, Mass., owns Narragansett Electric Co., and Eastern Utilities owns Blackstone Valley Electric Co. and Newport Electric Corp. A second proposed merger would combine New England Electric with National Grid Group PLC of Coventry, England.
New England Electric is asking that $110 million in merger costs, mainly a so-called “acquisition premium,” be paid by Rhode Island customers rather than by Narragansett Electric’s shareholders.
Opponents such as The Energy Council of Rhode Island and Attorney General Sheldon Whitehouse say the bill should go to shareholders instead.
New England Electric argues that customers should be willing to kick in for the merger since the combined company will be more efficient and, thus, save ratepayers money. The company floated a revised set of proposed electric rates, which could reduce many ratepayers’ bills late last year to help sell the acquisition premium to the state Public Utilities Commission.
But the proposed changes in the company’s initial rate plan came just days before PUC hearings on the matter were scheduled to begin. The commission rescheduled the hearings for later this month at the request of state utility regulators.
As the debate over the landmark electric merger began to take shape in October, longtime PUC Chairman James Malachowski stepped down in to take a job at the Providence advertising and public relations firm RDW Group Inc. That leaves commissioners Kate Racine and Brenda Gaynor to weigh the far-reaching changes in electric rates proposed by New England Electric.
Racine’s term ended last March, but she is staying on until Gov. Lincoln Almond names a replacement. Almond has said he expects to announce replacements for Racine and Malachowski early this year.
Also expected this year is the completion of the new Tiverton electric generating plant. Construction began in late 1998 and is expected to be complete sometime this spring.
A string of scorching days last summer pushed electricity usage to the brink of causing a major power failure in New England, but the region’s system operators got a break as state governments shut down to reduce the load and several of the summer’s hottest days came over weekends when many energy-guzzling businesses were closed. And a cold spell in early October produced some problems for Providence Gas as residents rushed to get their furnaces up and running.
But one thing that was still absent from the energy scene in Rhode Island last year was residential competition. Despite the state’s first-in-the-nation electric restructuring law, utilities still have the residential market to themselves.
The only company competing to sell electricity to homes here, Sunshine Energy, announced plans to pull out of Rhode Island after determining it couldn’t offer competitive prices in the Ocean State. And residential natural gas customers must still buy from the local utility.
