Wednesday, February 15, 2012

State OKs NStar/NU merger, if it buys Cape Wind power

By Rodney Brown

As part of a deal to help ease the process of the planned merger between NStar and Northeast Utilities, the administration of Gov. Deval Patrick has reached a deal that would see the merged entity purchase more than a quarter of the power expected to be generated by Cape Wind.

The Bay State’s Department of Energy Resources filed with the Department of Public Utilities a proposed settlement agreement that has provisions to “freeze rates, provide an immediate credit to customers, increase financial transparency and purchase more clean energy” as conditions of the planned merger between Massachusetts utility NStar and Connecticut-based Northeast Utilities, the state noted in a release Wednesday.

The negotiated deal still needs to win approval from the DPU. If it does get the OK, it will freeze the base distribution rates for four years, and provide a one-time customer rate credit of $21 million for residential customers of the three companies NStar Electric, NStar Gas and Western Massachusetts Electric Co, which is an NU subsidiary. That $21 million is broken down as: $15 million for NStar Electric customers, $3 million for NStar Gas customers, and $3 million for customers of WMECO.

NStar Electric is also being called up to fund and provide to the DPU, the DOER and the Massachusetts Attorney General, a study by an independent accounting firm that includes an audit of the company’s annual returns for the four-year period covering 2012 through 2015, as well as a “comprehensive listing of assets.”

The settlement proposal would also require the combined NStar/NU to purchase an additional 129 megawatts of clean energy, and NStar has agreed to enter into a 15-year contract to purchase 27.5 percent of the electricity output from Cape Wind, the offshore wind energy project planned for Nantucket Sound.

If Cape Wind has not broken ground by 2016, NStar has committed to purchasing an equal amount of clean energy from another source, the state reported in the release. However, if Cape Wind doesn’t start “physical construction” (i.e., installation of equipment or materials into the seabed) before Dec. 31, 2015, NStar can opt to terminate its power purchase contract with the wind farm.

Competing New England utility National Grid struck a deal to buy 50 percent of Cape Wind’s power capacity in May 2010, and the agreement was approved by the DPU in November 2010. The deal has been criticized as too expensive — adding an estimated $1.50 per month in electricity costs for the average residential customer. The Massachusetts Supreme Judicial Court upheld the power purchase agreement in a decision late last year.