NStar agrees to buy Cape Wind power to win state blessing on merger
Massachusetts officials reached a breakthrough deal with NStar and Northeast Utilities today that would allow the two electric companies to merge in exchange for freezing rates for four years, and a commitment from NStar to buy a significant amount of power from the offshore Cape Wind project.
Under the agreement the new utility would keep it its electric distribution rates steady through 2015, and providing customers with a one-time rebate of $21 million, or about $12 to $15 for the average ratepayer. NStar still must work out the details of its power purchase with Cape Wind, but the deal means the offshore wind project would soon have enough power under contract to attract the financing it needs to start construction.
The terms are a huge concession by the utilities to Governor Deval Patrick, who had insisted the merger should promote cleaner sources of energy, and to Attorney General Martha Coakley, who said it should result in cost savings and efficiencies that would benefit ratepayers.
“What we have here today is a landmark agreement for customers. It will protect ratepayers from rate increases now and into the future, and it passes the savings from the merger directly back to the customer,” Patrick said this afternoon. “It also makes NStar a bigger participant in the green energy revolution underway in the Commonwealth.”
The parties have been at a stalemate since the Oct. 2010 announcement of the utilities’ proposed $17.5 billion merger, which would create the largest utility in the region, serving nearly 3.5 million electric and gas customers from Westport, Conn., to Pittsburg, N.H., near the Canadian border.
NStar spokeswoman Caroline Allen said the utility’s promise to purchase Cape Wind Power came after a year of “thoughtful consideration by the state agencies and our companies” on several issues, including rates and transparency, and the use of clean energy sources.
“As we’ve said all along, we want to be sure to do everything we can to keep prices down for our customers while also promoting renewable energy,” Allen said. “The merger discussion offered the opportunity to achieve a number of goals to improve the Massachusetts environment and the economy, and the Cape Wind contract was a factor in meeting those goals.”
NStar had originally resisted Patrick’s demand to buy power from Cape Wind because of its high cost -- 18.7 cents per kilowatt hour in its first year -- compared to more conventional energy sources.
The deal with Massachusetts now commits the NStar to buying 27.5 percent of Cape Wind’s electricity, which should be enough to allow the project to get underway, state officials said. The wind farm would provide about 2 percent of the new utility’s total power needs.
Cape Wind spokesman Mark Rodgers called the NStar’s promise to buy power from the project a “major milestone,” and the next step will be to finalize the details of that promise.
“Our hope is to begin construction by sometime next year,” Rodgers said. “Obvoiously that will depend on how quickly we can achieve project financing.”
The deal with Massachusetts regulators also requires the utilities to maintain service levels and ensures that any workforce reductions that result from combining the two companies would not fall disproportionately on the local workforce. Union officials immediately praised state officials for that aspect of the agreement, but worried about it standing up.
“We applaud the Governor, the Attorney General and their administrations for prioritizing the jobs of hardworking men and women, and for securing language in this agreement that aims to protect jobs. However, we do remain concerned about how enforceable this language is over the long-term,” said Dan Hurley, President of the Utility Workers Union of America Local 369.
Also it is unclear how the deal with Massachusetts will play to officials in Northeast Utilities’ home state of Connecticut. Regulators there initiated their own review of the merger out of concern that any conditions imposed by Massachusetts would adversely affect their ratepayers.
Connecticut officials have said they will try to reach a decision on the merger by April. Meanwhile, Massachusetts officials said they would hold off giving final blessing at their end until after Connecticut regulators issuing their ruling.
Erin Ailworth can be reached at eailworth@globe.com.
