PSC approves takeover of NiMo

Albany-- Talks produce an $8.9B merger deal with National Grid that lowers consumer power rates by 4.6%

By JAMES M. ODATO, Capitol bureau First published: Thursday, November 29, 2001

The Public Service Commission signed off Wednesday on a consumer-friendly deal that would allow British-based National Grid to swallow up Niagara Mohawk Power Corp. and create the nation's ninth-largest power company. The merger plan, negotiated over months, calls for National Grid to lower electricity prices and freeze natural gas delivery rates for 10 years.

Consumers are expected to see bills drop 4.6 percent. It will also provide discounts to low-income people and invest $12.5 million annually in economic development.

PSC Chairwoman Maureen O. Helmer called the deal a plus for upstate's economy. "The economic development dollars were an important element in maintaining the economy upstate. More important is the stable rates,'' she said. "That affects everybody.''

The deal also requires National Grid, with a U.S. base in Westborough, Mass., to keep a regional headquarters at NiMo's longtime Syracuse home. With service quality requirements making it difficult for National Grid to cut large numbers of workers, the company expects to cut less than 10 percent of the jobs in New York and New England through attrition.

Among NiMo's 1.5 million customers are 300,000 electric and 200,000 gas users in Albany, Schenectady, Rensselaer, Columbia and southern Saratoga counties.

The $8.9 billion merger, which includes $5.9 billion in debt, still requires clearance from the U.S. Securities and Exchange Commission. It is expected to be completed early next year.

"We have reached a stable settlement that hopefully makes all the parties we have to deal with over the next several years happy,'' said Thomas Robinson, National Grid's deputy general counsel, who added that service quality will improve.

The merger plan was approved after discussions among a host of special interest groups, regulators and company officials, who all signed off on the settlement, said Leonard Weiss, a PSC commissioner.

Public Utility Law Project lawyer Ben Wiles said his group, which represents low-income people, endorsed the plan because it results in discounts for tens of thousands of people.

"We supported the settlement because it includes, for the first time in NiMo territory, a low-income discount for qualified low-income customers of $5 per month,'' he said. About 15,000 customers will be able to get the discount in the first year of the merger. An equal number will join in the discounts each year until 60,000 are receiving the breaks.

Many groups, including Assembly Democrats, complained about the initial merger plan in hearings last year. Among the concerns were whether consumers would gain as much as NiMo stockholders, and the impact on upstate's economy, utility jobs and rates.

Most of those issues were eventually addressed as some 35 parties helped shape the final settlement. Wiles said the rate plan was better than originally proposed, while environmental groups generally supported the deal because it will help foster renewable power resources and encourage customers to use them, something the deregulation process has not yet been able to accomplish.

Helmer said use of private systems, including renewable power sources, will be easier because a deal with NiMo will be replaced, eliminating some expensive fees for leaving the utility and allowing customers to afford trying new technologies.

However, advocates for alternative energy sources were not all happy. American Wind Energy Association lawyer David Wooley said the final deal left out a key provision his group pushed: that customers be able to opt for renewable energy sources to supply their electricity needs. He said the group will petition for another hearing.

Assembly Energy Committee Chairman Paul Tonko, D-Amsterdam, said there appear to be "significant improvements'' in the deal. But, despite the lower delivery rates, the commodity rate, or cost of electricity itself, has risen, and the overall savings aren't as great as he would like.

Helmer pointed out that the PSC gave an unusually long settlement term of 10 years to let National Grid figure out how to turn NiMo into a profitable company again. But the terms can be revisited and changed during the decade if necessary.

"This gives the ability, if the need arises, to make adjustments in the public interest,'' Helmer said.

Electric delivery rates will fall about 8 percent, or $152 million a year, and natural gas delivery rates will be frozen. Consumers will see their bills, which also include cost of power, drop by 4.6 percent as a result, the PSC said.

The reductions come from the company writing off $980 million in costs of nuclear plants. NiMo had once proposed using those costs to raise rates.

Yet the company could still pass on to consumers hundreds of millions of dollars in other costs associated with the unsuccessful nuclear plants, Tonko said.