WASHINGTON, D.C. – Representative Edward J. Markey (D-MA), a senior Democratic Member of the House Energy and Commerce Committee, today issued the following statement on the announcement by National Grid that it will be acquiring Keyspan in an $11.8 billion merger:

“Today’s merger announcement reflects the reality that the passage of last year’s Republican Energy bill may spawn a huge wave of mergers and consolidations in the electric and gas utility industry.  Whether these mergers actually will benefit utility ratepayers – as opposed to utility shareholders – is still an open question.

“What we do know is this:  The Energy bill’s repeal of the Public Utility Holding Company Act, or PUHCA, previously restricted mergers of multi-state gas and utility holding companies.  While the SEC had loosened those restrictions in recent years – an action I generally opposed – those limits are now completely gone. 

“That law would have mandated an SEC prior review of the financing of these deals to protect shareholders and ratepayers from excessive leveraging or overly complex corporate structures. This would have meant that a federal regulator would have been looking at the debt financing of this deal very closely.  That requirement is now gone.

“So, what is left?

“Under current law, this deal must still go through a review by the Federal Energy Regulatory Commission (FERC) and by state regulators.   Here are some of the questions I think regulators need to ask:

“First, what is the impact of this deal on consumers?  Will they receive any tangible benefits from the deal, such as lower rates, better service, or greater reliability?  Will there be any adverse impacts for consumers in terms of increased market power, higher rates, or reliability?  Exactly where will the more than $200 million in projected efficiencies going to come from, and will any of those savings result from layoffs of workers? 

“Second, press reports indicate that the Grid-Keyspan deal will be largely financed through the issuance of additional debt.  In the past, PUHCA placed some limits on the ability of utility holding companies to take on excessive levels of debt in order to finance mergers.  Early press reports indicate that the bond rating agency Moody’s is now considering a downgrade of Grid’s bond rating as a result all the debt the company is playing.  What will be the full impact of the additional debt that Grid is taking on in this deal?  What happens if this transaction is followed by other utility acquisitions – as is rumored.  Will money be siphoned away from transmission upgrades, maintenance of local distribution lines in order to pay down the debt? 

“Third, will Massachusetts undertake a thorough review of this deal and its impact?  National Grid has indicated to me that it will face state merger reviews in New York and New Hampshire, but that it does not believe that Massachusetts law requires a review.  It is my understanding, however, that the Massachusetts Attorney General’s office may have a different view.

“I would certainly hope that there would be a full review by the Commonwealth of this transaction, particularly as I am not confident that the FERC will give this transaction the kind of scrutiny it needs.  I’ve been telling state regulators all across the country since PUHCA’s repeal, that they really need to beef up their state laws in the aftermath of PUHCA’s demise, and devote increased resources towards addressing the kind of ratepayer protection issues that the SEC used to be responsible for.  This transaction only underscores that need for greater attention to these matters at the state level.

“Fourth, the new deal raises interesting questions about the direction of National Grid.  In recent years, the company has positioned itself to be an energy distributor, arguing that they preferred to own and operate the electricity transmission and distribution grid rather than getting into the generation business.  With the Keyspan acquisition, however, Grid will own 4.2 gig watts of generation.  What impact will this have on the companies’ overall financial performance and what plans does Grid have for them?

“I look forward to learning more about this transaction over the next few months.”
 
For more information Rep. Markey -- check out http://markey.house.gov/