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Power Struggle
Following major acquisitions, NU, Energy East square off
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Business New Haven
7/12/1999
By: Michael C. Bingham
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Executives at Connecticut utility giant Northeast Utilities (NU) probably supposed they were flexing their muscles when their company gobbled up the Meriden-based Yankee Energy System in mid-June in a deal valued at $679 million. In acquiring the state's largest natural gas distributor, NU moved a step closer to its goal of becoming the dominant full-service energy provider in Connecticut and the region.
Suddenly NU has company. A hitherto little-known upstate New York-based company, Energy East Corp., has made an aggressive foray into the Nutmeg State, first with a late April deal to acquire the Connecticut Energy Corp., parent of the Southern Connecticut Gas Co., and then on June 30 with the surprising announcement of a $575 million deal to acquire CTG Resources Inc., which owns the Connecticut Natural Gas Corp. and the Energy Network Inc.
The latest coup came as a shock to officials at NU, which earlier this year had itself attempted to buy CTG Resources. No deal was reached. Now NU finds itself with an aggressive competitor clearly on the make.
How aggressive? Following consummation of both the Connecticut Energy and CTG deals - both of which must be approved by the state's Department of Public Utility Control and the federal Securities & Exchange Commission - Energy East will find itself with more than 300,000 residential, commercial and industrial customers in Connecticut.
Moreover, Energy East will also have about 60 percent of the natural-gas market in the state, while NU - New England's largest utility company - will control just 40 percent.
For the time being, NU will still be the dominant player in the electricity business with about 80 percent of the market statewide. Much of the remainder is served by the New Haven-based United Illuminating Co. (UI).
Energy East is blocked from entering the electricity market until 2001, when electric deregulation takes full effect.
However, the sheer pace of consolidation in the once-sleepy utilities industry leads many observers to wonder how long UI is likely to remain independent.
NU officials acknowledged that the Energy East-CTG Resources deal caught them by surprise. At the time of the announcement, the pact had already been approved by the boards of directors of both companies.
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