NU: N.H. ratepayers should benefit from NStar merger

Public Service of New Hampshire consumers won’t get the rate freezes and one-time credits negotiated by Connecticut and Massachusetts regulators in approving the $17.5 billion merger of PSNH’s parent company, Connecticut-based Northeast Utilities, and Boston-based NStar.But that’s a good thing, said Tom May, the NStar executive who will now head the expanded NU, in announcing the closing of the deal on Tuesday.That’s because PSNH customers could be the first to benefit from nearly $800 million in savings the merger is expected to produce over the next decade, May said.”Those that are unfrozen will benefit from those savings better than those that are frozen,” he said, implying that consumers in the Granite State may have made out better than their counterparts in the neighboring states where rate freezes were negotiated with regulators.In Massachusetts, NU promised to freeze rates for four years, saving about $200 million, as well as make a one-time $21 million payment, though that might be offset by an agreement to buy power from the offshore Cape Wind Project.Connecticut consumers’ rates will be frozen until Dec. 1, 2014. They will get a $25 million credit and $15 million to fund an energy-efficiency program.New Hampshire had no role in approving the merger, so its regulators were not able to get any such concessions. But the state should be able to benefit from the estimated savings the next time it set rates, May said.”Only time will tell what the actual savings are,” May said. But, he added, the “estimate is on the lower end of the range of possibilities and I’m very confident that we will achieve that.”The estimated $780 million in savings is based on an earlier study that predicted various efficiencies because of the merger, including the gradual elimination of about 350 jobs through attrition.Otherwise, New Hampshire won’t be much affected by the merger down in the flatlands, except for the fact – for better or worse – that PSNH will now be part of a much larger company, with much larger resources.The merger – which involves the $5 billion purchase of NStar – closed some 18 months after the two companies announced the merger. It created a $17.5 billion utility overseeing six utilities – four electric and two gas — with 3.5 million customers and 9,000 workers. It is the largest in New England.NStar shareholders received 1.3 common shares of NU stock for each common share of NStar previously held. NU is expected to increase its current quarterly dividend from $0.29375 to approximately $0.3425 per common share.NStar is now a subsidiary of NU in Massachusetts. The 14-member board is headed by Charles W. Shivery, who had been NU’s CEO, as chairman of the board of directors.While the two companies plan to cut “redundancies,” May said, NU will work out of NStar’s former Boston headquarters as well as out of Hartford, Conn., but many corporate functions will be combined.However, there are no plans to alter PSNH staffing or structure, May said.There will also be no change in the utility’s push to build the Northern Pass transmission line, May said. Both NU and NStar had already been financially united on the project, which would transmit power from Hydro Quebec to be shared by the utilities.”NU now owns 100 percent of the project,” May said. NU may find it easier to finance the project, because the combined companies would boost the company’s credit ratings, May said.May gave no indication that he planned to shift the route of the controversial because the company owns about 80 percent of the right of way.”Starting from scratch to find a new route would be a lot more difficult,” he said.May declined to give a target date to start construction on the project.PSNH might also benefit from the larger company having more resources to deploy crews in the case of emergencies, May said.While the new NU does plan to ditch an outdated coal plant in Salem, Mass., it plans to stick with PSNH’s coal plant in Bow, now that its $400 million scrubber has been completed, May said. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW