Con Ed says NU merger conditions raise 'serious' doubts
Consolidated Edison Inc. says it is reviewing its options in light of restrictions imposed by Connecticut state regulators in their approval of the company's proposed acquisition of Northeast Utilities. In a brief statement Monday, Con Ed said conditions imposed by the Connecticut Department of Public Utility Control call into 'serious question whether the transaction will be completed.' Tuesday, a company spokesman said it will have no further comment for the time being.
Consolidated Edison Inc. says it is reviewing its options in light of restrictions imposed by Connecticut state regulators in their approval of the company's proposed acquisition of Northeast Utilities.
In a brief statement Monday, Con Ed said conditions imposed by the Connecticut Department of Public Utility Control (DPUC) call into "serious question whether the transaction will be completed." Tuesday, a company spokesman said it will have no further comment for the time being.
Con Ed agreed to acquire New England's largest electric utility last year in exchange for $3.29 billion in cash and stock. Including gas distribution operations of both companies, it will create the nation's largest utility holding company serving 6 million customers.
Con Ed said it will ask the DPUC to reconsider its decision. Noting the decision, did make ``some changes'' from an earlier draft decision, Con Ed said the "order is not materially different from the draft and is substantially different from anything that we had any reason to expect."
Unless the order is substantially modified, Con Ed said it so significantly changes the economic effects and risks of the merger that it calls into question whether the merger will be completed. The merger must still clear federal regulatory approvals.
Connecticut regulators said a series of conditions imposed on the proposed acquisition are required "to protect the public interest." Under the order, within 60 days of the completed merger, distribution rates at Connecticut Light & Power Co. (CL&P), presently a regulated unit of Northeast, must be reduced by 3%, or about $45 million over 3 years.
Regulators also set as a condition of approval writing off $60 million in stranded costs, sharing of merger-related cost savings, and restrictions on the dividend the merged utility's Connecticut operations can pay the parent company.
Other conditions include:
� Headquarters for CL&P and Yankee must remain in Connecticut, as shall the service company�s headquarters for New England operations.
� Pending the sale of the Millstone nuclear plants, Con Ed can make no budgetary changes for their operation or impose any layoffs not already contemplated in NU�s sale plan. There will also be no involuntary layoffs at the balance of the regulated subsidiaries in Connecticut for 2 years after the merger.
� CL&P must file a plan to improve customer service within 60 days of the completed merger which the DPUC will review in a separate proceeding, while customer service improvements service at Yankee will be addressed in 2001.
� The company must fund a study by an independent market power expert to evaluate market structure and behavior and the effectiveness of competition in the electric and gas wholesale and retail markets
� New CEI, the holding company to be formed after the acquisition, must bid its generation into the regional market in a manner consistent with promoting open market competition. If ISO-New England, which operates the electric grid throughout New England, finds it necessary to investigate the company�s bidding or requires monthly reports, the DPUC will closely monitor the reports.