An NStar-NU merger could create a voice with massive clout in the energy debate
By Erin Ailworth
Globe Staff / June 5, 2011
The proposed merger between Boston’s NStar and Connecticut-based Northeast Utilities is as much about politics as it is about business.
Executives at the two companies say they are pushing the partnership to not only gain economic advantages, such as lower overhead and greater market power, but also to increase political clout to influence energy and environmental policies that can cost utilities billions.
"Like anything else, if you run a flower store and you have three employees, you don’t have quite the same impact as Joe Tucci who runs [the Hopkinton-based technology company] EMC and has 33,000 employees," NStar chief executive Thomas J. May said in an interview. "We believe bigger is better here."
As Massachusetts regulators prepare to launch hearings on the merger next month, energy and climate change policies are again gaining attention, pushed to the forefront by another surge in oil prices and violent storms that have devastated the Midwest and Western Massachusetts. National energy and climate policies are being debated in Washington, while several states are adopting their own energy and climate initiatives.
The stakes are high. In Massachusetts alone, green energy mandates aimed at stabilizing prices and cutting greenhouse gas emissions are estimated to cost utilities — and ultimately customers — nearly $10 billion over the next decade, according to the Beacon Hill Institute, a conservative think tank at Suffolk University.
"The utility sector is in the early stages of a relatively significant and long-term capital spend — a huge part of that will be environmental compliance," said Jim Owen, spokesman for the Edison Electric Institute, a utility trade group in Washington. "Obviously, a larger, more well-capitalized company that is [doing business] in several states is just going to have a bigger voice in the conversation."
The prospect that an already formidable corporate lobby — and frequent adversary — could become even more influential in state houses and Congress worries environmental advocates.
"A merged NU and NStar would be a political powerhouse in New England, and that power could be used to further environmental progress or delay it," said Derek K. Murrow, energy and climate policy director with the advocacy group Environment Northeast. "They have yet to publicly commit to being proactive on environmental policy."
From the moment they announced their intent to combine in October, executives at NStar and Northeast Utilities have made it clear that the merger, which must be approved by Massachusetts regulators, is motivated in part by their desire to increase political clout.
"I think we can play a larger role in energy policy on a national scale than either one of us could have before," Charles W. Shivery, chief executive of Northeast Utilities, told analysts. "That ultimately translates, I think, into more economic growth, which ultimately translates into benefit to our shareholders."
May, the NStar chief executive, said the combined company — which would serve 3.5 million customers from Connecticut to New Hampshire — would not only have more money to expand energy-efficiency and solar power, but also a larger voice in creating a unified national energy policy.
"Energy policy should really be done for the nation rather than for 50 separate states," May said. "Size does help in the sense of entering into the dialogue — people invite you to participate."
Utilities are already big players on Beacon Hill and in Washington. From 2006 to 2010, NStar and Northeast Utilities spent roughly $2.9 million to push their agendas at the State House on legislation such as the Global Warming Solutions Act, wind energy siting reform, and transmission costs, according to state lobbying records. Competitor National Grid spent nearly $1 million in the same period.
The three companies combined have contributed hundreds of thousands of dollars to federal campaigns and political action committees over the past decade, according to the Center for Responsive Politics.
Consumer and environmental advocates worry that a bigger utility, generating bigger profits, will have more money to spend to influence the political process.
In the last legislative session, for instance, records show that NStar, Northeast Utilities, and National Grid all spent money on lobbying to block legislation that would allow cities and towns to form municipal lighting plants, which would take away their customers. The legislation went nowhere, though similar bills are again up for consideration. [note by MAMEC: details here]
"If a primary reason for two companies to join forces is just so their lobbying shop has bigger sway over state and energy policy making, that is not grounds to approve the merger," said Tyson Slocum, director of the energy program at Public Citizen, a national consumer advocacy organization. "That is grounds to question the merit of this merger and begs a bigger, more important question of, ‘What has our system of government become?’"
State environmental officials and utility regulators had no comment because the merger review is pending.
Sue Reid, a director with the nonprofit Conservation Law Foundation, said her advocacy group is nervous about NStar becoming part of a more powerful company. NStar, Reid said, has dragged its feet on initiatives aimed at encouraging energy conservation and efficiency by consumers, and has done "the bare bones" to meet state goals to increase the use of wind power.
"We are deeply skeptical and concerned about the prospect of increased political clout by this proposed mega-utility," Reid said.
May defended his company’s environmental record, pointing to contracts to buy power from three wind farms. "We have a lot of things in our filing that will support the region’s clean energy goals," he said.
Some say an NStar-Northeast Utilities merger could benefit customers, as well as energy policy. A larger company would have more bargaining power in buying electricity, and more resources to finance clean energy projects, said Robert Rio, a spokesman for Associated Industries of Massachusetts, the state’s largest employer group.
But just how much the combined company could influence policy, he added, remains to be seen.
"I don’t look at the merger and say, ‘Oh my god, if the merger goes through, something is going to happen [to the state’s energy goals],’" Rio said. "We’re happy to sit down with the newly merged company and say, ‘What is the best direction for Massachusetts in terms of energy policy?’"
Erin Ailworth can be reached at firstname.lastname@example.org.