Northeast Utilities made an offering at the altar of the regulatory gods. The New England utility parted ways with the executive who headed its biggest division, Connecticut Light & Power, over its poor handling of two storms that left millions of customers without power for weeks. Investors seemed to think that will help it gain approval for a $4.7 billion takeover of rival NSTAR. Their optimism looks misplaced.
In an interview with Reuters Breakingviews, Connecticut’s Commissioner of the Department of Energy and Environmental Protection, Dan Esty said Governor Dan Malloy’s administration is determined to insert itself into the merger approval process, even if that means introducing and fast-tracking special legislation.
“There are important questions that need to be vetted for the people of Connecticut” before this deal is approved, Esty told Reuters Breakingviews. “The state needs to know how the merger will impact ratepayers and what lines of accountability will be drawn.”
That’s a stark change from the state’s earlier line. Connecticut’s Public Utilities Regulatory Authority had previously decided it had no jurisdiction over the deal, which was announced a little over a year ago, leaving final approval to utilities regulators in Massachusetts. That was before Hurricane Irene and a snowstorm on Halloween weekend left millions of customers of Connecticut Light & Power, NU’s primary subsidiary, without power for more than a week.
CL&P’s planning, response and communications are now the subject of numerous investigations by the state and local authorities. The company failed to meet a handful of deadlines for restoring power. On Thursday NU accepted the resignation of CL&P’s Butler, who had become the public face of the company’s failings during the outages.
It’s easy to see why that news warmed investors’ hearts and gave NU shares a 1.8 percent lift Friday. By removing the man in charge of the bungled performance of CL&P, the monopoly can argue that it is accountable to its customers and local regulators.
But two weeks in the cold and dark have done the seemingly impossible in today’s difficult political climate: united the right and left on a single issue. Connecticut sounds resolute in reopening its right to weigh in on the NU/NSTAR merger. It would be foolish for investors to ignore the heightened risk to their deal.