New York State regulators approved a deal that will allow Iberdrola
S.A. (IBE.MC) the world’s largest operator of renewable energy to build
hundreds of new wind turbines in the state.
The New York State Public Service Commission (PSC) voted unanimously to
authorize Iberdrola’s acquisition of Energy East Corporation and its
affiliates–New York State Electric & Gas Corporation along with
Rochester Gas and Electric Corporation.
The Commission reaffirmed its statement of policy regarding vertical market power, imposing several conditions on the
transaction. The conditions are designed to mitigate the risk that Iberdrola could exercise vertical
market power, and to provide substantial ratepayer benefits.
In addition to the $100 million the company previously committed to wind development,
the Commission ordered an additional $100 million be set aside for the same purpose. If the
company fails to invest the additional $100 million, it will use up to $25 million in shareholder
funds to invest in economic development projects in its service territories.
Iberdrola has said it wants to invest $2 billion over the next five years in wind energy projects in New York.
The Commission accepted Iberdrola’s offer to divest fossil fuel generating plants and
ordered the utilities to file a divestiture plan within 90 days of consummation of the merger; the
Commission will also allow Iberdrola to continue to own and operate existing Energy East
hydroelectric facilities.
The Commission also approved protective conditions designed to minimize the financial
and business risks of the transaction. These conditions assure that ratepayers are not burdened
with the acquisition costs and transaction cost of the merger and include requiring NYSEG and
RG&E to establish a special voting right so that a bankruptcy of Iberdrola or its affiliates would
not cause a bankruptcy of the New York companies.
Energy East’s two New York subsidiaries have a total of 1.7 million customers in New
York, or about 16% of the state’s electric customers and 12% of the state’s natural
gas customers. The combined service territory encompasses a substantial portion of upstate New
York, including portions of Western New York, the Finger Lakes, the Southern Tier, northern
New York, the Capital Region and the Hudson Valley.
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