Letter to Kimberley J. Santopietro, Executive Secretary of Public Utilities Regulatory Authority

Letter

Senator Richard Blumenthal (D-CT) today released a letter sent last week to the Public Utilities Regulatory Authority (PURA) as it reviews the proposed merger between Northeast Utilities and NSTAR. Blumenthal submitted the letter as part of the PURA period of public comment on the merger, citing concerns that the owner of Connecticut Light & Power Company (CL&P) in any approved merger "will have the financial resources and management capacity to efficiently and effectively prepare and respond to widespread power outages or other problems caused by natural disasters."

In the letter, Blumenthal states, "The unacceptably inadequate planning and responses concerning such severe weather events argue for heightened review and scrutiny to protect consumers. A company headquartered and controlled outside the state is potentially less likely to be responsive and to prepare… I urge the PURA to carefully consider its state law authority in light of new information regarding the resources and structure of Connecticut Light and Power during the two recent power outage emergencies and exercise its authority to review the proposed merger to ensure that consumer and ratepayer interests in affordable, reliable electricity are protected."

The full text of the letter is below:

Kimberley J. Santopietro, Executive Secretary

Public Utilities Regulatory Authority

10 Franklin Square

New Britain, CT 06051

Re: Petition of the NRG Companies for a Declaratory Ruling that the Pending Merger of Northeast Utilities and NSTAR Requires Approval by the Public Utilities Regulatory Authority

Docket No. 11-12-07

Dear Ms. Santopietro:

I write to urge the Public Utilities Regulatory Authority (PURA) to determine that it will review and scrutinize critically the proposed merger between Northeast Utilities and NSTAR pursuant to state law. In addition, I request steps to assure that the owner of Connecticut Light & Power Company in any approved merger will have the financial resources and management capacity to efficiently and effectively prepare and respond to widespread power outages or other problems caused by natural disasters.

As I have stated publicly on numerous occasions -- including right after Tropical Storm Irene -- the unacceptably inadequate planning and responses concerning such severe weather events argue for heightened review and scrutiny to protect consumers. A company headquartered and controlled outside the state is potentially less likely to be responsive and to prepare.

In addition, I have requested that the United States Senate Committee on Energy and Natural Resources hold a hearing to determine additional measures to protect consumers and ratepayers -- measures that could affect the merger.

Connecticut Light & Power Company is a public utility -- a private company with a monopoly on the provision of electricity distribution and transmission services in our state. This company -- like other public utilities -- is the sole provider of a critically important service: electricity. State law empowers therefore the PURA with broad authority to ensure that the utility meets its responsibilities while only incurring reasonable and prudent costs to be borne by the ratepayers.

Specifically, Conn. Gen. Stat. section 16-11 provides that the PURA is charged with having "full powers to regulate its public service companies' and that its statutory should be construed broadly to effectuate the purpose of regulating public utilities and promoting local control of these utilities.

In your notice for comments on the Petition, you requested that the comments address a number of questions regarding the application of statutory authority to the proposed merger. The Connecticut Office of Consumer Counsel, the Office of the Attorney General and the NRG Companies have all submitted legal arguments as to why this merger falls under the purview of the PURA's statutory authority to review changes in the control of a public utility (see, Conn. Gen. Stat. section 16-43, section 16-47 and section 16-11).

Consistent with such sound legal arguments, I urge the PURA's review: Under the proposed merger, the legal entity owning Connecticut Light & Power will have changed substantively. NU will survive the merger as the new entity but 44% of its stock will be controlled by current NSTAR shareholders and 50% of the board of directors will be selected by current NSTAR shareholders. This outcome meets the definition of "change in control", especially when state law provides that there shall be a rebuttable presumption of "control" when one person owns 10% or more of voting securities.

PURA review is even more critical because of the blatantly inadequate preparation, incompetent remedial planning and unreliable communication displayed by Connecticut Light and Power before, during and after the massive power outages resulting from Tropical Storm Irene and the October winter storm. While the line workers were true heroes during the clean-up effort, at least one independent analysis of Connecticut Light and Power's performance by Witt Associates has raised significant questions about the adequacy of the company's management expertise and resource allocation to deal with emergencies of the magnitude and scope caused by these storms.

The Witt Report highlights significant shortcomings in the current Connecticut Light and Power management and organization structure and resources. These shortcomings must be addressed and PURA has a legal responsibility to review the merger to determine whether the merged entity will have the management and organization incentives and expertise and resources to correct the serious systemic problems cited in the Witt Report.

Further, the Witt Report raises concerns about mutual aid assistance provided to Connecticut. I have joined with other members of our state's delegation to request a Federal Energy Regulatory Commission (FERC) review of the mutual aid assistance system to determine whether there is a need for federal oversight. In response, FERC has indicated that it will review this system but stated that much of the responsibility for oversight is at the state level.

The FERC response -- while encouraging -- demonstrates the need for critical review by PURA of the proposed merger to determine whether the merged entity will have the will and wherewithal -- sufficient resources and management competence -- to request timely mutual assistance from other utilities. Also at issue is whether the relationship of the merged entity with these other utilities will ensure a prompt and adequate response to requests for assistance.

I urge the PURA to carefully consider its state law authority in light of new information regarding the resources and structure of Connecticut Light and Power during the two recent power outage emergencies and exercise its authority to review the proposed merger to ensure that consumer and ratepayer interests in affordable, reliable electricity are protected.

Sincerely,

Richard Blumenthal

United States Senate

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