Regulators in Connecticut appear poised to deny the proposed merger of Iberdrola USA and UIL Holdings, citing in a draft order concerns about how the utility will be managed locally. Federal regulators have already approved the deal, paving the way to create one of the largest utilities in the United State with 6.7 GW of installed capacity. But Connecticut and Massachusetts must both also approve it if the deal is to move forward. The state's attorney general has asked regulators to condition the deal on the cleanup of a coal facility that is almost 100 years old, but the Connecticut Public Utilities Regulatory Authority (PURA) has said the matter is better addressed in other forums. Dive Insight: A final decision is not expected for two weeks, but Connecticut regulators say they are concerned with how the utility would operate if Iberdrola is allowed to purchase UIL.
SNL reports on the draft order, which praises the current utility and appears wary ratepayers would see significant benefits from the merger.
"Connecticut has a competent, responsible and well-managed utility with established track records," the draft order reads. "It is unknown what the replacement entity would be; its structure, operations or management. Iberdrola's record of mergers and divestitures in the region is mixed and does not offer a consistent picture of sustained commitment to strong, resilient and dedicated local distribution of gas and electricity."
Regulators said they balked at what amounted to a "leap of faith" over how the utility would be managed. The state's consumer advocate applauded the decision.
"We welcome PURA's decision as a strong statement that our regulated utilities should put customers first, and stay true to their mission of serving Connecticut residents and businesses," Consumer Counsel Elin Swanson Katz said in a statement. "This proposed takeover, which would have provided almost $600 million to shareholders but no meaningful benefits to UI's consumers, was properly rejected by PURA as not in the public interest, and we respectfully urge PURA to reject the acquisition in its final decision."
Connecticut Attorney General George Jepsen has advocated the companies place $30 million in an escrow fund to clean up the English power plant, which UIL shut down in the early 1990s and subsequently sold. The Authority, however, has indicated it would prefer to address the issue in a separate proceeding.
If ultimately approved, the deal calls for an exchange of Iberdrola USA shares for UIL stock, along with cash payments to UIL shareholders of $597 million.
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