April 9, 2012 | last updated June 1, 2012 1:42 pm

NU, NStar spent $33M to win merger approval

Northeast Utilities and NStar spent more than $33 million to complete their $4.7 billion merger, but the last two regulatory approvals proved the most costly.

The Hartford and Boston utility parent companies promised more than $2 billion in rate rebates, rate freezes, infrastructure upgrades and power purchases to secure the approval of Massachusetts and Connecticut regulators. The brunt of that cost will be borne by Massachusetts ratepayers, but Connecticut ratepayers aren't off the hook either.

In the end, the money spent turned out to be enough as the companies officially received approval from Connecticut regulators on April 2 and from Massachusetts regulators on April 4.

With all the necessary approvals in place, the companies set a closing date of April 10. Over the next 10 years, the companies estimate their merger will save ratepayers $780 million.

The Massachusetts Department of Public Utilities approved the merger after the two companies agreed to a number of conditions with Gov. Deval Patrick and Attorney General Martha Coakley. Those conditions included a $21 million rate credit to customers of NStar Electric, NStar Gas and NU's Western Massachusetts Electric Co. All distribution rates will be frozen in Massachusetts until 2016.

The two companies also agreed to enter into a $1.6 billion contract to buy electricity from offshore renewable project Cape Wind, which is about $940 million over the costs of regularly priced electricity in Massachusetts. However, NU and NStar would have had to pay a premium price anyway for renewable energy to meet their requirements under Massachusetts' renewable energy law, regardless of the source of that electricity.

None of the Massachusetts costs will be passed to Connecticut ratepayers.

NU and NStar received approval from Connecticut regulators after obtaining consent from Gov. Dannel Malloy, Attorney General George Jepsen and Consumer Counsel Elin Swanson Katz by giving Connecticut electric ratepayers a $25 million rate credit; freezing distribution rates until Dec. 1, 2014; investing $15 million in energy programs; donating 1,000 acres of land for preservation; and making $300 million in infrastructure upgrades.

Since announcing their proposed merger on Oct. 16, 2010, NU and NStar spent $33.1 million in 2010 and 2011 on merger-related costs, according to the filings with the U.S. Securities and Exchange Commission.

NU spent $9.4 million in 2010 and $11.3 million in 2011. NStar spent $6 million in 2010 and $6.4 million in 2011. Those costs don't include their 2012 expenses, which don't have to be reported to the SEC until July.

The merged company — called Northeast Utilities with dual headquarters in Hartford and Boston — will be New England's largest utility company with 3.5 million customers spread over six electric and natural gas subsidiaries in Connecticut, Massachusetts and New Hampshire, including Berlin-based Connecticut Light & Power and Yankee Gas.

"A year and half ago, we set out to combine Northeast Utilities and NStar and create a great New England-based company, knowing that together we would be even stronger advocates for our customers and the region as a whole," said Charles Shivery, NU's chairman, president and chief executive, in a statement following the Massachusetts approval. "Each day of the merger process has only reinforced the value that joining our companies will deliver, tomorrow and for many years to come."

Shivery will be non-executive chairman of the merger company for 18 months, and then he will retire. Tom May — NStar's chairman, president and CEO — will be NU's president and CEO. After Shivery retires, May will be chairman as well.

In previous interviews with the Hartford Business Journal, May said he sees the new NU as a powerful force in the region, capable of acquiring smaller companies and help shape energy policy in New England and nationally.

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