Power Generation Plants Change Hands Along Housatonic

By Kendra Bobowick

The power generation plants associated locally with the Shepaug and Stevenson dams and on through properties in Massachusetts are about to change hands. Northeast Generation Service Company (NGS) — a wholly-owned subsidiary of Northeast Utilities and a “competitive generation asset” — is part of a pending sale to New Jersey/San Diego-based Energy Capital Partners (ECP). Northeast Utilities announced the $1.34 billion sale Monday.

The sale will not create changes for residents, said NU Vice President of Corporate Communications Mary Jo Keating. According to a recent release, ECP could close as soon as the end of 2006 on the high priced purchase.

The previously rumored sale had been one of several recent concerns for lakeside property owners also learning the specifics behind shoreline management plans required by the power company’s federal licensing agreement.

As NGS held open public hearings in past weeks and announced its intentions to begin satisfying the terms of its federal operating license, several primary concerns arose. First, residents worried about potential fees associated with lakeside structures such as docks and gazebos along Lake Lillinonah. Residents also raised concern about possible increases in the water levels, which the licensing allows. Reassurances have come from NGS representatives that water levels will remain the same, but proposed fees met resistance from Attorney General Richard Bloomenthal. Fees had been in place previously, but enforcement was lax, officials stated.

Lastly, word of a new company taking over power generating plants worried residents. The newcomer will operate under and be bound by the same licensing issued to NSG by the Federal Energy Regulatory Commission (FERC), however. Concerns were dispelled by spokesmen.

“When the new buyer takes the [power generation] plants, they will have the same responsibilities that we do,” said Ms Keating. The NGS company sites including the Stevenson Dam plant will become part of the new company she confirmed. Explaining further, she said, “I don’t think there will be any issues.”

Ms Keating clarified that the new owner is bound by the same licensing stipulations.

“Basically, there will be no effect,” she said. “Locally, you won’t see any changes.”

The FERC license stipulates that a Shoreline Management Plan be in place to essentially maintain stewardship of the water and lake properties. The plan impacts residents along lakes Zoar, Lillinonah, and Candlewood, and may bring potential fees for residents bordering Candlewood and Lillinonah.

Reacting to Monday’s news of the power company sale, Attorney General Richard Blumenthal issued a statement addressing the water level and possible fees. He said he would “continue the fight to preserve and protect environmental values and private property owner rights at risk around Lillinonah and Candlewood Lakes.” He had recently joined residents in their environmental and financial concerns during public hearings held as part of the shoreline management process.

Down to Business

The new company, which has tentative plans to open another office in Connecticut, will likely maintain the roughly 200 personnel involved with the two local dams, explained Northeast Utilities spokesperson Donna Powell.

During a meeting held Monday by the ECP management, employees learned that their jobs were not being eliminated.

Ms Powell said, “Management of the new company expressed that they would need substantially all employees to continue to operate…”

She could not clarify if “substantially all” accounted for any personnel changes or lay-offs.

“From day one, they have had to look at the specifics and did not give any indication that it would not be a great opportunity for all employees,” she said.

Mr Blumenthal issued a brief but direct statement regarding the sale, in which he wrote, “We will monitor promises by the new owners to maintain jobs for current plant employees…”

Although the sale is currently an agreement to purchase, and no money has been exchanged, Ms Powell compared the deal to a real estate purchase.

“Now it is an agreement…this is the equivalent of intent [to buy] and still to come is the closing.”

Neither Fire Marshal Bill Hallstead nor First Selectman Herb Rosenthal were available to comment on this topic.

According to a recent release, Energy Capital Partners is a private equity firm whose management has substantial experience leading successful energy companies and investing in North America’s energy infrastructure.

Recent comments from Mr Blumenthal are at odds with comments presented in the Northeast Utilities release discussing Energy Capital Partners. “We are very enthusiastic about the competitive generation business owing to the outstanding track record and credentials of the employees as well as the exceptional quality of the asset fleet,” said Sarah Wright, a partner of ECP. “We look forward to working collaboratively with the employees, community and other stakeholders to grow a reliable and profitable regional company. We are also dedicated to achieving a seamless transition for all employees and neighboring members of the community.”

Mr Blumenthal, however, had a message for lawmakers. “I also call on the legislature to heed this wakeup call. This purchase perpetuates the status quo of a failed energy market where the highest electricity prices prevail, regardless of the cost of producing the power. Instead, these plants might have been purchased by the Connecticut Electric Authority — providing lower energy prices to consumers, at cost — if the legislature had adopted the energy proposal that I made last session to create the authority.

“This sale potentially short circuits a historic opportunity to keep our low-cost hydro and coal plants out of the dysfunctional wholesale market that the FERC has created.”

The sale includes 15 generating plants at 14 sites with a total output of 1,442 megawatts, the largest of which is the 1,080-megawatt Northfield Mountain pumped-storage facility located in Northfield, Mass., and owned by NU Enterprises, Inc subsidiary Northeast Generation Company. Also included is Mount Tom Station, a 146-megawatt coal-fired plant in Holyoke, Mass., owned by NU subsidiary Holyoke Water Power Company.

“We are very enthusiastic about the competitive generation business owing to the outstanding track record and credentials of the employees as well as the exceptional quality of the asset fleet,” Sarah Wright, a partner of ECP, said. “We look forward to working collaboratively with the employees, community, and other stakeholders to grow a reliable and profitable regional company. We are also dedicated to achieving a seamless transition for all employees and neighboring members of the community.”

The sale is expected to close by the end of 2006. NU will use sale proceeds to invest in its regulated businesses, retire debt, and pay taxes.

The sale is subject to certain regulatory approvals. J.P. Morgan Securities Inc acted as financial advisor to NU on the transaction. For additional information about the companies, visit www.nu.com and www.ecpartners.com.