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ALBANY -- Staff at the state Public Service Commission have serious concerns about National Grid's proposed $7.3 billion merger with KeySpan Corp.
The deal, announced one year ago, must get approval from the PSC's board of commissioners.
National Grid, which acquired Niagara Mohawk in 2002, is based in Britain and is the dominant utility in the Capital Region. It has a total of 4 million customers in New York and New England.
Based in Brooklyn, KeySpan is the largest natural gas distributor in the northeastern United States with 2.6 million customers. It is also the largest electric generator in the state, supplying 1.1 million customers on Long Island and 25 percent of New York City's power needs.
Internal staff at the PSC are expected to issue a formal recommendation in June, although the commission board members do not have to agree with that report when they cast their vote, tentatively scheduled for August.
The PSC board includes up to five members. There are currently four, although Gov. Eliot Spitzer has nominated Angela Sparks-Beddoe as the new chairwoman. Sparks-Beddoe, a longtime energy executive in the state, still awaits approval from the state Senate.
In testimony last month, senior PSC staff told the commission the merger "is not in the public interest, and as such, should not be approved by the commission as it is currently configured."
The testimony, on file with the PSC and available on its Web site, is redacted, and it is difficult to tell who is giving the testimony at any one time. Those who spoke included John Stewart, Warren Myers and Thomas Coonan, all on PSC staff. Myers is chief of regulatory economics at the PSC.
When the panel was asked why they opposed the merger, they said that it "creates an unreasonably high number of future risks and uncertainties for New York rate-payers and utility investors."
They also said that the merger "is totally reliant on debt financing and has already had a negative credit impact on both (National) Grid and KeySpan."
PSC spokeswoman Anne Dalton said neither staff nor commission board members would comment on the case at this time. A KeySpan spokeswoman referred inquiries about the merger to National Grid.
National Grid spokesman Alberto Bianchetti said Friday that the PSC staff's testimony is just part of the negotiations and debate that take place with mergers of this type. National Grid is going to file a formal reply with the PSC later this month. He said face-to-face negotiations with staff are also expected to take place.
"We believe the differences can be addressed and resolved," Bianchetti said. "Now we start the process of back and forth exchanges."
National Grid has said that the merger would benefit customers, especially in upstate New York, with lower prices because the merged companies could cut operational costs and share assets.
The merger, which was initially expected to be completed by early 2007 when it was announced in February 2006, has already received shareholder and federal regulatory approval.
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