Iberdrola sweetens push for Energy East sale 

A Spanish company said Tuesday that it hopes to invest $2 billion in wind energy in New York over the next five years if regulators approve its purchase of Energy East Corp., which serves four Northeastern states.

Global energy company Iberdrola SA needs approval from New York’s Public Service Commission to buy Energy East for $4.6 billion. The deal would affect 3 million customers from upstate New York to Maine and would put Rochester Electric and Gas Corp. and New York State Electric & Gas Corp. under foreign ownership.

The company has regulatory approval from the other states and the federal government for its proposal, which includes a Rochester headquarters for the Northeast operation. New York’s Department of Environmental Conservation and economic development offices have also endorsed the proposal.

“Iberdrola has helped many countries meet their renewable energy goals and benefit from our high-tech investments and `green collar’ jobs that result from this kind of investment,” said Iberdrola’s Xabier Viteri.

Although New York officials support significant expansion into renewable energy to reduce costs and create jobs, the deal is questioned by state PSC regulators who are concerned about whether it will best serve the public in cost and competitiveness.

The PSC staff questioned whether the deal adequately shields New York customers from paying for Iberdrola’s other business ventures. And they are concerned that the Spanish company’s financial records might not be fully available to state regulators, making it difficult to enforce measures to ensure the system is reliable and responsive to customers.

The PSC is awaiting an administrative law judge’s preliminary recommendation, which the PSC can accept, reject or amend after a 35-day comment period and further staff comment, said James Denn, spokesman for the commission.

“We are pleased and encouraged by Iberdrola’s announcement that it wants to make future investments in New York,” Denn said. He said Tuesday’s proposal comes too late for consideration by the judge, “but Iberdrola could choose to bring this proposal to the commission before it makes its final and ultimate decision.”

The process is now in its 10th month and on schedule, he said. Another recent utility sale took 13 months.

U.S. Sen. Charles Schumer has said he worries customers in New York might face higher bills and service problems, as in the 2002 acquisition of Syracuse-based Niagara Mohawk Corp. by the British firm National Grid.

After Tuesday’s announcement, Schumer said he’s still concerned about rate hikes, but he supports Iberdrola’s effort to provide green power to New York.

The Independent Power Producers of New York says the proposal runs counter to the state’s trend toward keeping power providers from also being the generators of power, which supporters say is best for consumers because competition will keep prices lower and force better service. IPPNY argues that Iberdrola would have a competitive advantage by erecting wind power facilities paid for by an existing power plant it would acquire in Rochester. Other wind power developers wouldn’t have the same resource.

Iberdrola owns Oregon-based PPM Energy, which operates several wind farms in the U.S. and has operations in gas and electricity in 28 countries.

Energy East owns utilities in New York, Connecticut, Massachusetts and Maine.

There was no opposition to the deal in Maine, where 80 percent of electric customers are served by Energy East’s Central Maine Power subsidiary.

Associated Press

forbes.com

3 June 2008