The Patrick administration has reached a deal with NStar that has wide-ranging impact for Massachusetts ratepayers.
The agreement gives the power company the go-ahead to merge with Connecticut-based Northeast Utilities. But as part of the deal, NStar also commits to buying power from Cape Wind, the planned offshore wind farm.
Northeast asked to buy NStar, which is based in Boston, over a year ago. It also wanted to satisfy renewable energy requirements in Massachusetts by purchasing hydro-power from around New England — not the more expensive electricity from Cape Wind.
But now the companies have agreed to buy 27.5 percent of the offshore wind farm’s power. Even so, Gov. Deval Patrick says Cape Wind was not the sticking point in the negotiations.
"The sticking point was the rates!" Patrick said. "It is very concerning to me that NStar’s rates are, by some measures, as much as 40 percent higher than other utilities."
As part of this deal, the new company will agree to a cap on electricity rates for four years. Operating under the name Northeast Utilities, it'll also pass on half of its projected savings from the merger, or $21 million, back to its customers. The average household would get between $12 and $15.
Cape Wind gets a lot more than that.
"This was a very important milestone, and it really catalyzes the project and moves it forward," said Jim Gordon, the Cape Wind developer.
Gordon had already sold half the wind farm’s power to National Grid. Now he’s expected to get similar terms from Northeast Utilities for most of the rest of the wind farm’s capacity. That means he can start asking investors for the cash to start building.
"We now have another major chunk of our electricity sold," he said. "Now we’re going to move forward into the financing phase of the project."
Audra Parker, with the Alliance to Protect Nantucket Sound, calls the deal anti-consumer, saying other green energy sources are far cheaper. She says the Patrick administration gave NStar little choice.
"The state has been twisting NStar’s arm for quite some time," she said.
Parker wants Connecticut regulators, who still have to rule on the merger, to say no to the wind power provision.
If the Cape Wind does not go forward, Northeast has agreed to purchase a comparable amount of renewable energy from another project in Massachusetts.
Headquartered in Hartford, Northeast serves roughly 2.1 million customers in Connecticut, New Hampshire and Massachusetts, while NStar has 1.4 million customers in Massachusetts.
Under the agreement, the new company has committed to retain the current level of service, which Secretary of Energy and Environmental Affairs Richard Sullivan Jr. said held particular importance in western Massachusetts with Western Massachusetts Electric being part of the deal as a subsidiary of Northeast Utilities.
The joint company, based on its initial merger plans, would operate six electric and gas utilities in three states, with nearly 4,500 miles of electric transmission lines, 72,000 miles of electric distribution lines and 6,000 miles of gas distribution lines.
Northeast president and CEO Charles Shivery will become chair of Northeast Utilities and Thomas May, president and CEO of NStar, will become president and CEO of Northeast Utilities under the proposed merger.
With additional reporting by State House News Service
This article was originally published on February 15, 2012.
This program aired on February 15, 2012.