PURA: PURA Approves Iberdrola Proposal to Acquire UIL Companies

2015 Press Release
December 9, 2015
PURA Approves Iberdrola Proposal to Acquire UIL Companies
Revised Commitments Include Enhanced Public Benefits

The Public Utilities Regulatory Authority (PURA) today issued a final ruling approving a change of control whereby the UIL companies - United Illuminating, the Southern Connecticut Gas Company, and the Connecticut Natural Gas Company - will become subsidiaries of Spain-based Iberdrola.
The total consideration to be paid by Iberdrola USA is approximately $3B and involves exchange of each UIL share for one share of IUSA common stock along with a $10.50 premium.
A June 2015 preliminary PURA ruling found that Iberdrola had not met certain public interest standards in its bid to acquire the UIL companies. Iberdrola and UIL subsequently withdrew their request and filed a revised application in July that sought to address areas of concern PURA identified in its preliminary ruling.
In September, Iberdrola, UIL and the Office of Consumer Counsel submitted to PURA a proposed settlement agreement that further attempted to resolve outstanding issues. It expanded upon earlier commitments, adding:
  • $40M in ratepayer credits to UI, SCG and CNG customers;
  • $45.4M in potential avoided cost recovery associated with increasing pipeline safety, storm resiliency activity and rate freezes;
  • $39M in public benefits associated with charitable contributions and customer disaster relief;
  • a $30M pledge to investigate and remediate certain environmental conditions of the English Station site in New Haven;
  • Commitments to keep UI management and headquarters in Connecticut; and
  • Commitments to improve customer service quality, among other regulatory assurances.
PURA concluded that the restructured application submitted by UIL and Iberdrola, augmented by settlement agreement terms and safeguards presented to PURA by UIL, Iberdrola and the Office of Consumer Counsel, meets Connecticut's financial, managerial, technical and public interest requirements.
Vice Chairman John W. Betkoski, PURA's lead commissioner on the docket, stated that "the combination of direct and indirect ratepayer benefits and public benefits in the settlement tip the scale in favor of finding that the enhanced proposal is now in the public interest."
PURA Chairman Arthur H. House stated that "the standard of review places on Iberdrola and UIL the burden of proving that the proposed transaction is in the public interest. While their first proposal had many positive aspects, Iberdrola and UIL took to heart the message we sent in our preliminary ruling, measurably improving both the public benefit content of their proposal, and also making specific, measurable commitments that ensure the flow of benefits to utility ratepayers."
PURA Commissioner Michael A. Caron cast a dissenting vote on the PURA decision. As both Betkoski and House voted in favor of approving the revised Iberdrola proposal, including the settlement reached between the applicants and the Office of Consumer Counsel, the PURA decision passed by a majority vote.
In his written dissent, and at today's public deliberations on the Iberdrola proceeding, Commissioner Caron stated that "Iberdrola is recognized throughout the world as a leader in energy fields. My dissenting vote is not based on any Iberdrola shortcomings nor do I dispute many of the findings reached by my fellow commissioners. Rather, I maintain that the applicants offered insufficient public benefit, particularly with regard to system resiliency efforts that were already underway, and with regard to the timing and recovery of costs associated with those efforts. Likewise, English Station clean-up costs were - in my opinion - previously adjudicated, and an SCG iron main replacement plan would likely have evolved in SCG's next rate case." Caron commented on the change in corporate focus that may result from Iberdrola investor expectations in comparison to the goals of current UIL shareholders, and that the risks of that change in control outweigh the benefits. He noted that the value of hiring commitments needed to be further examined in light of the value provided, and questioned the value of rate freezes that he noted might only delay and increase future costs to be recovered.