Iberdrola seeks FERC approval for takeover of UIL Holdings

Affiliates of Iberdrola out of Spain filed on March 25 at the Federal Energy Regulatory Commission for approval of a recently-announced takeover of northeast U.S. power company UIL Holdings Corp.

Iberdrola S.A., Iberdrola USA Inc., Iberdrola USA Networks Inc. and Green Merger Sub Inc. (collectively called the “Iberdrola Applicants”), and UIL Holdings Corp. requested approval of a transaction whereby UIL will merge with and into Merger Sub, a direct, wholly-owned subsidiary of IUSA and an indirect subsidiary of Iberdrola, and after that the transfer of Merger Sub, which will be renamed UIL Holdings Corp., to Networks, a direct, wholly-owned subsidiary of IUSA. This is all under a Feb. 25 merger deal.

As a result of this merger transaction, the wholly- and partially-owned public utility subsidiaries of UIL will become wholly- and partially-owned subsidiaries of the new UIL Holdings Corp. (f/k/a Merger Sub), IUSA and Iberdrola.

IUSA, a New York corporation, is a direct, wholly-owned subsidiary of Iberdrola and holds all of Iberdrola’s energy-related operations in the United States. IUSA directly and wholly owns two intermediate holding companies: Networks (i.e., Iberdrola USA Networks), which holds Iberdrola’s transmission-owning public utility affiliates in New York and Maine; and Iberdrola Renewables Holdings Inc., which directly or indirectly holds (a) through Iberdrola Renewables LLC, all of Iberdrola’s competitive generation businesses in the United States, making Iberdrola Renewables LLC the second largest wind operator in the United States, and (b) through Iberdrola Energy Holdings LLC, all of Iberdrola’s gas storage and gas marketing businesses in the United States, with approximately 67.5 MMdth of gas storage installations and 59.6 Bcf of contracted or managed capacity in North America.

Under the category of Iberdrola’s Transmission-Owning Public Utility Affiliates are:

  • New York State Electric & Gas Corp. (NYSEG), a direct, wholly-owned subsidiary of RGS Energy Group Inc., which, in turn, is a direct, wholly-owned subsidiary of Networks, is a New York corporation and franchised electric and gas public utility regulated by both FERC and the New York State Public Service Commission (NYPSC). NYSEG is engaged in, among other things, the business of purchasing, transmitting, generating, distributing and selling electric power and natural gas. NYSEG’s electric system includes hydroelectric and small gas turbine generating stations, substations and transmission and distribution lines, substantially all of which are located in the state of New York. NYSEG sold a majority of its generation assets in 1999 and most of its remaining generation assets in 2001. NYSEG currently owns approximately 70 MW of generation, consisting primarily of hydroelectric facilities, and has power purchase contracts from third-parties.
  • Rochester Gas and Electric Corp. (RG&E), a direct and wholly-owned subsidiary of RGS Energy, is a New York corporation and franchised electric and gas public utility regulated by both FERC and the NYPSC. RG&E is engaged in, among other things, the business of purchasing, generating, distributing and selling electric power and natural gas. RG&E’s electric system includes coal-fired, combustion turbine and hydroelectric generating stations, substations and transmission and distribution lines, all of which are located in the state of New York. RG&E owns 69.4 MW (seasonal) of operating electric generation (excluding the 257 MW Russell facility which was decommissioned in 2008 and for which a demolition and remediation plan has been accepted for filing by the NYPSC). RG&E also has power purchase agreements for energy and capacity from third-parties.
  • Central Maine Power Co. (CMP), a direct and wholly-owned subsidiary of CMP Group Inc., which, in turn, is a direct and wholly-owned subsidiary of Networks, is a franchised electric utility regulated by both FERC and the Maine Public Utilities Commission (MPUC). CMP is primarily engaged in transmitting and distributing electricity generated by others to retail customers. CMP no longer owns generating assets but retains some power entitlements under long-term contracts with non-utility generators and other market entities. CMP sells its power entitlements for periods ranging from one to three years under auctions approved by the MPUC.
  • Maine Electric Power Co. (MEPCO) is a transmission-only utility organized under the laws of the state of Maine. MEPCO’s sole asset is a 182-mile, 345-kV transmission line connecting the state of Maine and New Brunswick Power.

Takeover target UIL is also fairly light on power generating assets

Under the category of Iberdrola’s Competitive Generation is the fact that IRHI owns and operates its competitive generation segment in the United States through a number of indirect subsidiaries. In ISO New England—the only market where there is an overlap with generation controlled by UIL and its affiliates—Iberdrola indirectly owns approximately 100.5 MW, all of which is committed under long-term power purchase agreements.

UIL is incorporated under the laws of the state of Connecticut and is headquartered in New Haven, Connecticut. UIL’s primary business is the ownership of its operating regulated utilities businesses, which serve more than 725,000 electric and natural gas utility customers in 67 communities across Connecticut and Massachusetts. UIL is a holding company system under the Public Utility Holding Company Act of 2005, and its common stock trades on the New York Stock Exchange (NYSE) under the symbol “UIL.”

The United Illuminating Co. is an investor-owned public utility organized and operated under the laws of the state of Connecticut. United Illuminating is a wholly-owned subsidiary of UIL and is engaged in the purchase, transmission, distribution, and sale of electricity for residential, commercial, and industrial purposes in a service area of approximately 335 square miles in the southwestern part of Connecticut.

United Illuminating is developing a 2.8 MW fuel cell-powered generator in the New Haven, Conn., area, which is expected become operational in April 2015, and another 2.8 MW fuel cell-powered generator in the Bridgeport, Conn., area, which is expected to become operational in August 2015. Both generators will sell into the ISO-NE market.

United Illuminating owns 50% of the equity interests in GCE Holding LLC, which, in turn, wholly owns GenConn Devon LLC and GenConn Middletown LLC. GCE Holding also wholly owns GenConn Energy LLC. The remaining 50% of the equity interests in GCE Holding is owned by NRG Connecticut Peaking LLC and NRG Yield Operating LLC, neither of which are affiliated with UIL or party to this application.

  • GenConn Devon owns and operates a 187.6 MW (summer) dual fuel-fired peaking facility in Milford, Connecticut, which is in the Southwest Connecticut (SWCT) submarket of ISO-NE. GenConn Devon commenced commercial operations in June 2010.
  • GenConn Middletown owns and operates a 187.6 MW (summer) dual fuel-fired peaking facility in Middletown, Connecticut, which is in the Connecticut Import interface (CT) submarket of ISO-NE. GenConn Middletown commenced commercial operations in June 2011.
  • GenConn Energy acts as an agent for GenConn Devon and GenConn Middletown in the ISO-NE market.

The application noted that the applicant companies together own or control, conservatively including potential imports from the New York ISO region, reflect only 0.36% and 0.55% of the installed capacity in the ISO-NE market, respectively, for a combined market share of less than 1%.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.