Coakley proposes conditions of utility merger

Jessica M. Karmasek Sep. 29, 2011, 12:46pm


BOSTON (Legal Newsline) - Massachusetts Attorney General Martha Coakley has recommended that the approval of a proposed merger between NStar and Northeast Utilities be subject to certain conditions to ensure that customers reap the benefits.

In a 50-page brief filed with the Department of Public Utilities on Wednesday, the Attorney General's Office argued that as a condition of the merger, the DPU should either impose a five-year distribution rate freeze for NStar Electric, NStar Gas and Western Massachusetts Electric Co., or require the companies to flow $314 million in estimated savings back to customers in the form of a credit.

"The merger of these two public utility companies has the potential to lower costs for customers through increased operating efficiency, but ratepayers need to see the results of those savings in their bills," Coakley said in a statement.

"In order to support this merger, we believe customers should be guaranteed a rate freeze or receive significant savings. These merger conditions are necessary to ensure that the companies' shareholders don't simply pocket the increased profits and guarantee that any benefits of the merger flow back to consumers."

Coakley's office also proposed several safeguards to protect ratepayers against certain potential harms that could arise from the merger. They include specific accounting requirements on certain assets and merger-related expenses, as well as limiting the effect on rates caused by the higher cost of debt that NStar would face in the combined business.

The attorney general also called on the DPU to require Western to refund $14 million in insurance fund distributions that the company failed to return to customers from a previous pending case.

According to Coakley's office, Western also would be required to file a proposal within six months of the merger that will address issues with its rate structures that result in commercial and industrial customers paying significantly more than the actual cost to serve them.

NStar is the parent holding company of NStar Electric Co., which serves 1.1 million customers in Massachusetts, and NStar Gas Co., which serves 300,000 customers.

Northeast Utilities is the parent holding company of Western Massachusetts Electric Co., which serves 210,000 customers.

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