NEW ENERGY RQRMTS TIED TO UTILITY MERGER OKS
Utilities in Power Squeeze as States Tie Mergers to Clean Energy
Julie Johnsson and Bradley Olson, December 16, 2011 (Bloomberg News)
"The surging pace of power-industry consolidation, with more than $31 billion in transactions pending in the U.S., is giving state officials… leverage to wrest more clean-energy investments from merging companies.
"Exelon Corp. (EXC)…will invest $1 billion in Maryland, almost doubling its previous offer [ and has agreed to develop some 180 megawatts of New Energy, more than seven times its initial 25 megawatt pledge], to gain [Governor] O’Malley’s support for the company’s $8.05 billion takeover of Baltimore- based Constellation Energy Group Inc. (CEG)…Similar discussions are under way in Massachusetts, where Governor Deval Patrick’s administration is in talks with Boston- based Nstar (NST) and Northeast Utilities over how their combined companies would help meet the state’s renewable energy goals…"
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"Tying state approval for mergers to investments in wind and solar may raise costs for utilities and drive more spending on renewable energy at a time when projects are faltering because of falling fuel prices…State officials and regulators have traditionally used their approval authority for utility mergers to protect the interests of consumers, often demanding concessions such as lower electrical rates or customer rebates.
"As natural gas prices have fallen amid a U.S. production glut, renewable energy has become a more expensive option. Many projects aren’t commercially feasible without government incentives, so companies may need to be forced to invest…When considering whether a utility merger is in consumers’ best interests, [advocates believe] it’s appropriate for states to add renewable energy to the mix of considerations that include electric rates and reliability…"