State regulators: Public interest a must for NU-NStar deal

Hartford (AP) — Connecticut regulators have ratcheted up their demands for approval of a big utility deal, saying Northeast Utilities' proposed $4.6 billion purchase of NStar must be shown to be in the public interest.

Connecticut Attorney General George Jepsen and Consumer Counsel Elin Swanson Katz had asked for the ruling by the state Public Utilities Regulatory Authority.

Regulators reversed themselves last month and said they will review the proposed deal. Last year, regulators said they would not get involved, leaving regulatory approval to Massachusetts.

A spokeswoman for Northeast Utilities did not return a call seeking comment. In its application to regulators for permission last month, the Hartford-based utility said the deal is in the public interest and that it will continue to control its operating companies in Connecticut.

Northeast Utilities is the parent company of Connecticut Light & Power, Western Massachusetts Electric Co., Yankee Gas Services Co. and Public Service of New Hampshire.

The Massachusetts Department of Energy Resources is urging state regulators to delay or reject the deal if the companies can't better detail how the merger would benefit ratepayers and cut carbon emissions.

Katz said Connecticut regulators can require Northeast Utilities to show that the deal would have a positive impact on ratepayers by not imposing additional costs.

"The merger should not cost ratepayers money," she said.

However, a utility industry analyst said there's another way to look at energy cost savings. Electric rates are rising and combining two utilities help keep down expenses, saving hundreds of millions of dollars, said Paul Franzen, an analyst at Edward Jones,

"That's the bigger picture," he said.

Deciding how to distribute those savings between shareholders and ratepayers is part of negotiations in regulatory proceedings, he said.

"If regulators want to take too much out of the deal, the companies could potentially choose to walk away," Franzen said. "I would think this still has the opportunity to go through. I think it makes sense for the two utilities to get together."

NU and NStar announced the deal in October 2010. If approved, it would create New England's largest utility company serving 3.5 million electric and gas customers in Connecticut, Massachusetts and New Hampshire.