Note: bold added by MAMEC
NStar’s merger with Northeast Utilities now finalized
By Erin Ailworth | GLOBE STAFF APRIL 11, 2012
The merger finalized Tuesday between Boston’s NStar and Connecticut’s Northeast Utilities has created one of the nation’s largest energy delivery companies, with more money to invest in system improvements, more crews to fix power outages, and better bargaining power to negotiate lower rates for customers, chief executive Thomas J. May said.
NStar is now a subsidiary of the combined utility, which will be the region’s largest, serving nearly 3.5 million electric and gas customers in Massachusetts, Connecticut, and New Hampshire. The company will retain the Northeast Utilities name, but be run by May, NStar’s longtime chief executive. It has dual headquarters in Boston and Hartford and 9,000 employees.
“We will have a stronger balance sheet, we will have more resources - whether that’s more people during a storm or better technology,’’ May said during an hourlong conference call with reporters. “We will have literally hundreds and hundreds of crews throughout New England that we can move around to the impacted areas’’ during a storm.
May will also be able to cash in $5.1 million worth of stock as a result of the merger, according to a filing made Tuesday with the Securities and Exchange Commission [note by MAMEC: see below table from page 16 of Form 10-K/A for 2011 filed by NStar with the SEC on 4/10/12]. That’s in addition to his regular compensation, which totaled roughly $9.2 million in 2011, up 16 percent from a $7.9 million pay package the year before.
The closing of the nearly $20 billion deal capped more than a year of scrutiny by state regulators, energy officials, and consumer advocates, who secured several concessions from the utility, including a four-year distribution rate freeze for NStar and Western Massachusetts Electric Co. customers, and a promise from NStar to purchase power from the offshore Cape Wind project.
NStar signed a 15-year contract last month to buy Cape Wind’s power at a starting price of 18.7 cents per kilowatt-hour, significantly above the cost of electricity from traditional power plants. That’s expected to add about a dollar to customers’ monthly bills.
NStar had long balked at the high cost of Cape Wind’s power, but May defended the utility’s decision to buy electricity from the project. By negotiating the terms with the state, rather than having them imposed by regulators, the company had more control over the concessions it made to get the merger approved.
“What we tried to do was take the uncertainty off the table,’’ May said.
The Cape Wind contract still needs the approval of state regulators and is conditioned on Cape Wind starting construction by the end of 2015. Cape Wind officials announced Tuesday that they had chosen a joint venture of Boston-based Cashman Equipment Corp., the Flatiron Construction Corp. of Colorado, and Cal Dive International Inc. of Houston as the construction contractor.
But May promoted the $780 million in savings his company expects to see over the next 10 years, in part by eliminating duplicate administrative functions and some jobs. The utility has agreed to pass some of those savings to customers, including through a one-time $21 million rebate negotiated by Massachusetts Attorney General Martha Coakley.
“There are certainly the potential for further benefits for customers,’’ said Christopher Loh, a spokesman for Coakley. “We will continue to closely watch the utilities’ performance including their service quality standards and their ability to respond to major storm events.’’
Richard K. Sullivan Jr., the state energy and environmental affairs secretary, said he would also monitor the utility to ensure it keeps its promises to help advance the state’s renewable energy goals and better serve customers.
“We will hold Tom May and the now merged company to their word on that,’’ Sullivan said Tuesday.
Erin Ailworth can be reached at email@example.com. Follow her on Twitter @ailworth.