By the OGJ Online Staff
HOUSTON, Mar. 6Consolidated Edison Inc. Tuesday said it is filed suit seeking a declaratory judgment Northeast Utilities has violated the merger agreement signed by the companies in October 1999.
The New York utility said Northeast Utilities violations “include, among other things, uncovered supply obligations� incurred by the company’s unregulated subsidiary Select Energy. The suit was filed in U.S. District Court in the Southern District of New York.
Consolidated Edison filed the suit in response to Monday’s statement by Northeast Utilities, which said it would file suit charging Consolidated Edison with breaching the merger agreement. Northeast Monday accused the New York utility of reneging on existing terms.
Monday, Consolidated Edison maintained it was compliance with the agreement. But the company noted “certain aspects” of Northeast Utilities’ operations raised questions with respect to its ability to satisfy its obligations under the merger agreement.
Consolidated Edison said the problems included, among other things, supply obligations at Northeast Utilities unregulated power marketing subsidiary Select Energy that pose “a significant risk” to prospects for Northeast Utilities’ unregulated businesses.
According to a Feb. 20 filing with the U.S. Securities and Exchange Commission, Select Energy’s rights to power generated at the Millstone nuclear power plant in Connecticut ends this year. Servicing 2,000 MW of load at Connecticut Light & Power Co. (CL&P) after the end of 2001, when Select’s entitlement to a large portion of the output from the Millstone ends, “poses a significant risk to Select,” Northeast Utilities said.
Northeast Utilities said Select’s risk is mitigated through its entitlement to 1,289 MW of hydroelectric and pumped storage generation acquired by Northeast Generation Co. (NGC), one of its subsidiaries, and continuing acquisition of new supply in the competitive market.
But Northeast Utilities conceded if Select is unable to source its remaining requirement for the CL&P load at prices below the standard offer contract price, as a result of continuing high energy prices, “earnings would be adversely impacted.”
Monday, Northeast Utilities said it is in a stronger financial position than it was when the merger was signed in October 1999. Including gas distribution operations of both companies, the combination would have created the nation’s largest utility holding company serving 6 million customers.
Consolidated Edison agreed to acquire New England’s largest electric utility last year in exchange for $3.29 billion in cash and stock. Under the deal, Consolidated Edison agreed to pay $25 per share for all of Northeast’s common stock.
The deal has been approved by the shareholders of both companies and by three federal and seven state regulatory agencies. It was awaiting final approval by the U.S. Securities and Exchange Commission.
On Feb. 28, Consolidated Edison said it was reviewing the prospects for the merger agreement reached with Northeast Utilities in light of changes in the New England utility’s businesses. At the time, it did not specify the nature of the changes it had in mind.
Northeast Utilities subsequently requested Consolidated Edison provide assurance in writing of its intent to close the merger on the agreed upon terms by Mar. 2. The two companies agreed to extend the deadline to 5 p.m. Monday.
Northeast Utilities CEO Michael G. Morris Monday said the company has instructed its attorneys to take appropriate steps to protect shareholders’ interests.