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NStar warns delay could end deal

Utility says regulatory review could also lead to rate increases

By Erin Ailworth
Globe Staff / July 22, 2011

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NStar said yesterday that if state utility regulators delay their review of the company's proposed merger with Connecticut-based Northeast Utilities, it could not only kill the deal, but also result in rate increases for customers totaling tens of millions of dollars.

The Boston utility was responding to a move by the Patrick administration to postpone proceedings on the merger until NStar completes a lengthy review of its customer charges, known as a rate case, which the company had separately scheduled for 2012.

The Massachusetts Department of Energy Resources filed that request with state Department of Public Utilities last week.

If that delay happens, NStar said in its own filing with regulators, the company "will have no alternative" but to ask for rate increases "on the order of $50 million for NStar Electric and $15 million for NStar Gas." That money would help cover expenses incurred in recent years on capital projects, rising operating costs, and union wages - costs that would be more than offset by the merger's anticipated $784 million in savings, NStar said.

"We are hopeful that the DPU will rule favorably [for NStar] in this latest delay tactic," Caroline Allen, the utility's spokeswoman, said in a statement.

The Energy Resources Department, citing concerns about the merger's impact on NStar's 1.1 million electric customers and 300,000 gas customers, said a review of NStar's rates is warranted because the utility has not undergone a full-blown rate case in 25 years. Instead, it has reached rate settlements with the state attorney general's office, which represents customers, and won approval of the settlements from the DPU.

The company contends its rates were thoroughly analyzed during a 2005 settlement. NStar submitted a comprehensive cost review for its electricity charges, according to the company, and utility regulators approved a $30 million rate increase. NStar originally requested $80 million.

NStar and Northeast Utilities first proposed a merger in October. If completed, the new $17.5 billion energy company would serve nearly 3.5 million electric and gas customers from Connecticut to New Hampshire.

State energy officials declined to comment on NStar's filing yesterday, saying they had not read through the document.

This is not the first time the Energy Resources Department has sought to delay merger proceedings.

Earlier this year, the agency asked utility regulators to hold off on their review because it felt NStar had not provided enough information about the company's greenhouse gas emissions, which contribute to global warming and climate change.

NStar responded by submitting more information to the Department of Public Utilities, which has yet to rule on that first delay request from energy resources officials.

The DPU has neither set a deadline for rendering a decision on the latest request from energy officials, nor the overall merger.

In its filing, the company questioned what benefit a further delay could have.

"The relief sought by DOER can be addressed by the Department [of Public Utilities] through a rate proceeding conducted after the merger closing," NStar said. "Holding the proposed merger 'hostage' to an extended review of existing rates adds zero value."

Yesterday, two environmental groups and a utility union filed statements in support of the request from energy resources officials, saying they wanted more information on the merger and its impacts on the environment and potential cost savings.

Erin Ailworth can be reached at eailworth@globe.com or on Twitter @ailworth.

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Mergers, acquisitions

Mergers, acquisitions
Recent notable deals involving Massachusetts companies.

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