New York Commission Approves Deal Doubling Wind Power

October 06, 2008

The New York Public Service Commission has approved Iberdrola’s acquisition of Energy East, an energy services and delivery company serving five northeastern states. The result of the agreement will be to double wind power capacity in the state within a few years.

Iberdrola S.A. is a Spanish energy conglomerate and one of the world’s leading producers of wind power. The company will purchase Energy East for $4.6 billion and is expected to invest another $2 billion in the construction of hundreds of wind turbines across upstate New York. Those new wind turbines will add 1,000 megawatts (MW) to the state’s wind capacity over the next several years. That will essentially double the 1,000 MW capacity that New York is expected to have by the end of this year.

The approval by the commission on September 3 culminated a 15-month-long process during which the deal was heavily scrutinized. In fact, the commission originally recommended blocking the transaction because of concerns that Iberdrola would violate a policy to prevent the generation, transmission, and distribution of power by a single company. Such a scenario could leave customers and suppliers susceptible to price manipulation. Therefore, the terms of the deal require Iberdrola to obey restrictions that reduce the risk of price manipulation.

Iberdrola must also set aside $275 million for customer rebates to offset future rate increases and sell off all of Energy East’s fossil fuel generating plants; the company will be allowed to keep Energy East’s hydroelectric plants. In addition, Iberdrola is required to protect its operations in the state from financial risks assumed outside New York’s borders.

In a statement issued September 10, New York Governor David Paterson said Iberdrola’s acceptance of the commission’s ruling “is a huge win for the state of New York. Not only will Iberdrola prosper in New York, but the company’s presence will promote job creation and revenue for New Yorkers at a time when we face significant fiscal challenges.” He added that the state looked forward to helping Iberdrola grow “while ensuring that New York ratepayers receive safe and reliable utility services at just and reasonable rates.”

The majority of Energy East’s assets (98 percent) are in regulated utilities, including New York State Electric and Gas, Rochester Gas and Electric, Central Maine Power, Southern Connecticut Gas, Connecticut Natural Gas, and Berkshire Gas.

For more information on the ruling, see the commission’s September 3 press release (PDF 19 KB). Download Adobe Reader.

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