The deal includes freezing rates for 4 years, including rates for 200,000 customers of Western Massachusetts Electric Co.
BOSTON – State leaders on Wednesday unveiled a landmark agreement with NStar and Northeast Utilities that would permit the two electric utilities to merge in return for purchasing a certain amount of power from the Cape Wind project and for freezing rates for four years including for 200,000 customers in Western Massachusetts.
Under the agreement, which still needs approval of the state Department of Public Utilities, the combined company would keep its electric distribution base rates the same through 2015.
In addition, the merged utility would also have to award customers with a one-time rebate of $21 million, or about $12 to $15 for the average ratepayer.
Massachusetts Gov. Deval L. Patrick talks to Belchertown residents during a meeting last November about the Oct. 29 snow storm. At right is Richard K. Sullivan Jr. Secretary, Executive Office of Energy and Environmental Affairs. Patrick and Sullivan on Wednesday announced that a merger of two electric utilities would be conditioned on a freeze of rates for four years for ratepayers including about 200,000 in Western Massachusetts.At a press conference, Gov. Deval L. Patrick said the merger will be good for ratepayers, the environment and the economy.
"What we have today is a landmark agreement for customers," Patrick said. "It will protect ratepayers from rate increases now and into the future and it passes the savings from the merger directly back to the customer."
According to Richard K. Sullivan Jr. of Westfield, the state's secretary of energy and environmental affairs, state officials made sure that customers in Western Massachusetts would benefit from the merger.
Sullivan said the merged utility will also need to improve reliability and response to power outages in Western Massachusetts.
"This is a fair agreement, a good agreement," Sullivan said.
Under the settlement, the merged entity will enter into a 15-year contract to purchase 27.5 percent of the electricity from the 133-turbine Cape Wind, the fully permitted offshore wind energy project planned for Nantucket Sound off the south shore of Cape Cod, the Patrick administration said. If that project does not break ground by 2016, the utility will buy an equal amount of clean energy from another source, likely land-based wind or solar, the Patrick administration said.
In 2010, another key utility, National Grid, agreed to buy about 50 percent of the power output of Cape Wind.
Northeast Utilities, based in Hartford, owns the Western Massachusetts Electric Co., which serves 200,000 residential and other customers in Western Massachusetts including Amherst, Agawam, Greenfield, Ludlow, Springfield and West Springfield.
NSTAR, based in Boston, has electric customers in 81 communities and gas customers in 51 communities.
Connecticut regulators also still need to approve the merger of the two utilities.
With its provisions to boost clean energy and help ratepayers, state officials hailed the agreement as a major victory for the state and customers.
Attorney General Martha Coakley said the agreement is a condition for her approval of the merger. Coakley said her office negotiated the agreement with the two utilities.
"The merger of these public utility companies has the potential to lower costs for customers through increased operating efficiency, but we believed ratepayers needed to see the results of those savings in their bills," Coakley said in a statement. "Through this agreement, customers across the commonwealth are ensured much needed savings through the distribution rate freeze and customer credits."
The agreement also calls for restructuring existing rates that currently result in commercial and industrial customers for Western Massachusetts Electric paying significantly more than the actual cost to serve them, Coakley said.
House Minority Leader Bradley H. Jones Jr., a North Reading Republican, criticized the agreement. Cape Wind has a higher cost for power when compared to some other sources of energy.
"Strong-arming NSTAR to purchase Cape Wind as a condition of the company’s merger with Northeast Utilities will ultimately increase electricity costs and hurt Massachusetts’ ratepayers, businesses and municipalities," Jones said.
The merger, which would create a company valued at $17.5 billion, was announced in October 2010. The new company would be called Northeast Utilities and would result in one of the country's largest utilities.
Sullivan said the state utilities department still needs to rule on a separate investigation into the response of electric companies to the freak Oct. 29 snowstorm, which knocked out power for a week for some customers. The state investigations, announced on Nov. 8, focus on the companies' efforts to restore electric power, including their communications with cities and towns.