Friday, February 29, 2008

Schumer wants conditions on Energy East buyout by Claudia Vargas

(February 29, 2008) — While Iberdrola SA continues to negotiate with the state Public Service Commission on the purchase of Energy East Corp., Sen. Charles Schumer is recommending a specific plan for Iberdrola to adopt if the deal goes through.

The New York Democrat said Thursday that takeovers of utilities can often benefit shareholders but hurt ratepayers.

His concern echoed what was said at a PSC public hearing in Rochester last week, when many speakers said they already were pinched by high costs of electricity and natural gas.

Energy East is the parent of Rochester Gas and Electric and New York State Electric and Gas. Iberdrola, based in Bilbao, Spain, has an agreement to acquire Energy East for $4.5 billion but still needs PSC approval.

Schumer said he doesn't want the Iberdrola takeover to have a negative effect on rates and service, which is what he said happened after National Grid of Britain acquired Niagara Mohawk in 2001.

"Their fear comes with good reason," Schumer said about ratepayers' concerns. "National Grid is history we do not want to repeat ... soaring bills and lousy service."

Schumer proposed that Iberdrola set up a trust fund of at least $1 billion that could be tapped to offset rate increases and keep monthly utility bills as low as possible.

He also said he wants Iberdrola to set up a performance assurance plan, which would provide for fines for any service failures.

Additionally, he said he wants the PSC to require that Iberdrola be aggressive with alternative energy development in upstate, especially wind energy, which is a forte of the Spanish company.

Finally, Schumer said he wants Iberdrola to repower RG&E's Russell power plant in Greece as a natural gas facility, rather than coal, a commitment RG&E already has made.

"The PSC must make them, literally, put their money where their mouth is," Schumer said of Iberdrola, adding that he intends to put "a lot of pressure" on the PSC to adopt his recommendations in its current negotiations with the company. Schumer said he sent a formal letter to the PSC outlining his recommendations.

James Denn, a PSC spokesman, said Schumer's letter will be "closely reviewed and considered as proceedings continue. In any public proceeding, any letters that are received are given careful consideration."

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