NSTAR and Northeast Utilities Required to Freeze Distribution Rates for Four Years, Provide Millions in Rate Credit to Customers as Condition of Proposed Merger
AG Coakley’s Office Negotiates More Than $217 Million in Savings, Other Requirements as Condition for Supporting Proposed Merger
BOSTON – Ratepayers across the Commonwealth will receive approximately $217 million in savings through a settlement agreement negotiated by Attorney General Martha Coakley’s Office with NSTAR and Northeast Utilities, AG Coakley’s Office announced today.
The agreement was reached as a condition for the AG’s Office’s approval of a merger between NSTAR and Northeast Utilities. The proposed agreement will now go before the Department of Public Utilities (DPU) for consideration and final approval. Through the negotiations with AG Coakley’s Office, the proposed conditions will provide savings to customers of NSTAR Gas, NSTAR Electric, and Western Massachusetts Electric Company (“WMECo”).
“The merger of these public utility companies has the potential to lower costs for customers through increased operating efficiency, but we believed ratepayers needed to see the results of those savings in their bills,” AG Coakley said. “Through this agreement, customers across the Commonwealth are ensured much needed savings through the distribution rate freeze and customer credits.”
As the official advocate for Commonwealth ratepayers, the AG’s Office recommended in September that the DPU require NSTAR and Northeast Utilities agree to a series of merger conditions. In addition to the four-year distribution rate freeze, the settlement agreement requires that the two utilities:
- Provide an immediate $21 million merger savings credit to customers;
- Protect customers from inappropriate merger costs, such as “golden parachutes” and executive retention payments;
- Apply specific accounting treatment to certain assets and merger related expenses, as well as submit post-merger cost reporting;
- Restructure existing rates in WMECo’s service territory that currently result in commercial and industrial customers paying significantly more than the actual cost to serve them.
In a brief filed in September, the AG’s Office argued that as a condition of the merger, the DPU should either impose distribution rate freezes for NSTAR Electric, NSTAR Gas, and WMECo, or require the utilities to direct $314 million in estimated ten-year savings back to customers in the form of credits if the utilities sought significant rate increases that were expected to be filed with the DPU over the next few years.
The Department of Energy Resources (DOER) is also a signatory to the AG’s settlement agreement. The DOER filed a separate agreement with the utilities requiring NSTAR to execute a 15-year power contract with the Cape Wind Project as a condition of the merger.
NSTAR is the parent holding company of NSTAR Electric Company, which serves 1.1 million customers in Massachusetts, and NSTAR Gas Company, which serves 300,000 customers. Northeast Utilities is the parent holding company of WMECo which serves 210,000 customers.
The AG’s Office of Ratepayer Advocacy serves as the utility ratepayer advocate and is authorized to intervene in administrative and judicial proceedings on behalf of consumers in connection with any matter involving the rates, charges, prices or tariffs of any gas or electric company doing business in the Commonwealth.