Conn. Draft Would Adopt NU/Nstar Merger Settlement Without Modification

A draft Connecticut PURA decision would approve, without modification, a settlement agreement among Northeast Utilities, Nstar, the Office of Consumer Counsel, and the Attorney General, and would approve the merger of NU and Nstar.

Notable terms of the settlement can be found in our prior story

The draft dismissed as "unsupported by any record evidence" allegations from generators that the merged entity will have the ability to influence market power

Regarding four specific conditions sought by NRG Energy to mitigate market power, the draft cites the current competitive solicitation process for Last Resort Service and Standard Service supplies.

Specifically, the draft notes:

"The EDCs purchase of wholesale electricity and other products and services to supply electricity and other products and services to supply Standard Service and Supplier of Last Resort Service for electricity customers in CT is governed by CT General Statutes of Connecticut § 16-244c and Authority precedent in accordance with an approved procurement process designed to be fair and impartial and produce results that accurately reflect the wholesale market at the time of the procurement. Purchases are made through a competitive auction procurement processes periodically conducted by the EDCs and overseen PURA and the Office of Consumer Counsel with the assistance of expert consultants. The competitive auction process and the recommended bid portfolio are reviewed to ensure that the process was competitive, fair and impartial and that the results accurately reflected the wholesale market at the time of the procurement."

However, the continuing use of the current competitive auction process is not guaranteed given Public Act 11-80's provisions related to portfolio management (see 6/7 story).

"If on a going forward basis, NRG has any specific buyer market power concerns with the process for procuring Standard Service or Supplier of Last Resort Service or any other buyer market power concerns relating to the conduct of CL&P or Yankee, it has recourse to petition the legislature requesting remedial legislation, including revisions to statutes governing Standard Service and Supplier of Last Resort Service procurement. NRG can also petition the Authority for relief, including requesting changes to the Standard Service and Supplier of Last Resort Service procurement process. Additionally, NRG can request that FERC approve changes to wholesale market rules governing procedures for selling and pricing electricity products and services to address any market power concerns," the draft states.

Furthermore, regarding NRG's concerns with respect ratebased generation, the draft noted that, "[t]he issue of how much and what form of rate-based generation, renewable or otherwise that should be procured by EDC's is in the purview of the Legislature to decide."

"[T]he threshold decision of whether or not an EDC can legally build or propose to build renewable generation and under what conditions is a policy decision for the legislature. There are statutory provisions in Connecticut that currently only permit EDCs to build generation under certain specific and limited circumstances. NRG needs to petition to the legislature with respect to repealing or revising such legislation, if NRG opposes this policy as it exists, or as it may be taken under consideration by the legislature in the future," the draft adds.

The draft also notes that FERC has held that the NU/Nstar merger will not increase the post-merger company's ability to exercise buyer market power in the ISO New England wholesale energy market.

The draft would also decline to condition merger approval on the issuance of a competitive solicitation for 50 MW of biomass power, ostensibly designed to support NRG's 40 MW Montville biomass generating station.

"[T]here is no evidence in the record that allows the Authority to determine the costs or benefits of such a proposal. None of the information entered the record in this proceeding as sworn testimony and it was not included in the Settlement Agreement put forward by the Parties to this proceeding. Therefore, PURA will not condition this Decision on the issuance of a competitive solicitation for 50 MW or more of instate renewable biomass generation," the draft finds.