Critics, advocates assess electric deregulation law

By JASON LEFFERTS
Essex County Newspapers

The takeover of a local electric utility by a large British company is the kind of consolidation that is favored by proponents of the 2-year-old state utility deregulation law.

Working on the promise that bigger means better service, improved technology and lower rates, the state Legislature and utility administrators crafted a law in November 1997 they say is now working just the way they planned.

But opponents say their fears are coming true as the process is played out.

They claim rates may be declining, but as customers are saddled with consolidation costs, even more savings are being sacrificed to increase utility profits.

In December 1998, Britain-based National Grid agreed to take over New England Electric for $53.75 a share and assume $1.4 billion in debt of the local utility.

Through a subsidiary called Massachusetts Electric, New England Electric provides power to many North Shore communities.

Larry Reilly, the president and chief executive officer of Massachusetts Electric, said the larger size of the company will make it more competitive.

Reilly said Mass. Electric and other companies decided during the deregulation process that the best option was to sell off their power-generating facilities, and concentrate on the distribution of power.

Reilly said the merger is a good one for customers. They will still benefit from the services and resources of NEES and they will now also get the backing of a large company's finances.

"The answer was obvious that we needed to be bigger," Reilly said. "The dramatic way to do it and the best way for our customers and investors was to sell to a national company."

Mandatory rate cuts are built into the deregulation law, Reilly said.

Rates were automatically dropped 10 percent, and another 5 percent drop was scheduled for September.

Reilly said the NEES-National Grid merger, which has already received support from Massachusetts, New Hampshire, Connecticut and Vermont, still needs approval from two federal agencies, the Nuclear Regulatory Commission, and the Securities and Exchange Commission. Reilly said he hoped the merger could be completed by the end of 1999.

The industry trend of merging into larger companies is still denounced by the groups and activists that were opposed to deregulation in 1997.

Rob Sargent, the executive director of MassPIRG, says Massachusetts has some of the highest electric rates in the country. The mergers won't help lower those rates, he said.

"For residential customers, there's literally no choice. For business customers, the only people selling energy are wholly-owned subsidiaries of the bigger companies we just broke up," Sargent said.

"I think what we're going to find is that the rhetoric of competition and choice is merely that, rhetoric."

John O'Connor, a former Congressional candidate and the president of Greenworks, an environmental action agency, said the rules of deregulation favor big businesses.

In the end, consumers will be no better off than they were three years ago.

"If you let the big guys swallow up the little guys, there is no competition. Competition comes from choice, and there isn't any choice," O'Connor said. "The law was rigged for the monopolies."

O'Connor argues that it will be more difficult for consumers to deal with the merged utility.

"At least with Mass. Electric you could raise hell with the company and petition and have a regional impact," O'Connor said. "How will people have a voice with a company in Europe?"

Utility officials point to the rate decreases as a benefit, but critics aren't as happy with the rates worked into mergers.

For example, the NEES-National Grid deal freezes rates until 2005.

The rate could be lower, anti-deregulation forces say. O'Connor said the goal should have been to cut rates by 20 or 30 percent.

Critics are also upset that utilities are seeking to hit customers with merger costs.

New England Electric, for example, has filed a rate plan with the state that seeks to charge customers $328 million to pay for its planned takeover of Eastern Utility Associates.

Advocates said lower rates will come as the bigger companies take control.

"We're allowing much more competition. Ultimately we'll have fewer companies, but they'll be competing on a national basis," said Rep. Daniel Bosley, a North Adams Democrat and a key architect of the deregulation law.

Bosley said another benefit of deregulation comes in improved technology, which will reduce the effect companies have on the environment.

"As an average consumer, you need to be concerned about a number of things, one of which is the environment," Bosley said. "This will clean the air, and I think everyone should worry about that."