Public Service argues utility takeover proposal

A utility takeover proposal winding its way through the state’s regulatory process will potentially

A utility takeover proposal winding its way through the state’s regulatory process will potentially impact the New York operations of one of the world’s largest wind power developers.

Spanish utility company Iberdrola SA wants to acquire regional utility Energy East Corp. for $4.6 billion. It wants to retain its wind power interests as it does so, and build new wind farms as well. Regulators object to this on anti-competitive grounds.

Negotiations between staff of the Department of Public Service and Iberdrola failed to reach a resolution in March, sending the matter to a judge.

In court briefs filed earlier this week before Administrative Law Judge Rafael Epstein, staff of the Department of Public Service argued that if Iberdrola is allowed to continue to own wind energy farms within the electrical service territories it would acquire from Energy East Corp. it could enable Iberdrola to exert “vertical market power” over the price of wholesale electricity generated by wind farms in that area.

Independent Power Producers of New York President Gavin Donohue said Friday he agrees with the staff of the state Department of Public Service and their objections.

“They’re not saying Iberdrola can’t own wind farms in New York state, they’re saying they can’t own them in their service territory. They can own them … in the other utility areas. That’s a big distinction,” Donohue said. “The reason you can’t own [a wind farm] in your own service territory, from our perspective, is you control the transmission and distribution systems.”

The Independent Power Producers of New York submitted its own brief for the case, arguing that a company that owns both a service territory and wind farms within it could favor its own farms vs. other companies that might want to locate within the territory.

“Iberdrola has a great reputation as a wind developer, but the problem that we have is not so much Iberdrola as a company, it’s the whole philosophy of [companies] coming in and owning the utility [and wind farms within its territory],” Donohue said.

Energy East services 3 million customers from upstate New York to Maine and owns Rochester Electric and Gas Corp. and New York State Electric & Gas Corp. In New York’s Capital Region, NYSEG serves parts of Saratoga and Rensselaer counties.

Iberdrola argued in its court brief that it should be allowed to continue to own its wind farms, in part because the company plans to invest $100 million in wind farms in New York over the next three years.

“Iberdrola’s commitment to invest in wind generation in New York and its considerable expertise in renewables development will directly further the state’s public policy goals,” wrote lawyers for Iberdrola and Energy East. “For the goals of these programs to materialize, the state of New York needs the presence of companies, like Iberdrola, with successful track records in renewables development.

According to the brief, Iberdrola has about 7,000 megawatts of wind energy capacity installed around the world and nearly 50 percent of the company’s 41,000 MW of total installed capacity is emissions-free.

New York’s Renewable Energy Portfolio Standard calls for 25 percent of the state’s energy to come from renewable energy sources, including hydroelectric power, by 2013. Without counting hydro electric power, the U.S. Energy Information Administration estimates New York only generated about 2 percent of its electricity from renewable energy sources in 2006.

Gov. David Paterson, in his second executive order since taking office, created the state Energy Planning Board, chaired by Deputy Secretary for Energy Paul DeCotis.

DeCotis said the board will be reviewing all of the issues pertaining to New York’s energy needs and submitting a report in March 2009. He said meeting the state’s renewable energy goals will be important to the Energy Planning Board.

“There is nothing to prevent Iberdrola from investing $100 million in wind today, absent any agreement on an acquisition,” DeCotis said.

Going forward, Epstein is expected to issue a recommendation to the New York Public Service Commission within a month, along with comments on his recommendation from Iberdrola and New York Department of Public Service staff members. Then the five members of the Public Service Commission board will rule on whether Iberdrola can go forward with the acquisition.

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