Energy East buyer wary of PSC

State regulatory issues may derail the purchase of Rochester Gas & Electric's parent company by a Spanish energy giant.

Iberdrola SA Chairman Ignacio Sanchez Galan said conditions imposed by the New York Public Service Commission might cause the company to reconsider its planned $4.5 billion purchase of Energy East Corp.

As Iberdrola held its annual shareholder meeting Tuesday in Bilbao, Spain, Galan said, "If the regulator's demands are unreasonable, we'll rethink the deal," Bloomberg News reported.

Company spokesman Luis Carlos Martinez said later Tuesday that Iberdrola still hopes to close on the purchase this summer. He did not elaborate on what regulatory issues are matters of concern.

If Iberdrola were to drop its bid for Energy East, Martinez said, the company "would look for other growth opportunities in the U.S."

Energy East is the parent of a pair of publicly regulated utility companies — RG&E and New York State Gas and Electric.

Iberdrola already has taken sizable steps to get New York's approval, agreeing to sell five RG&E power-generating plants, one of them being the Russell Station in Greece.

Iberdrola also agreed to spend more than $100 million over the next three years developing wind-generated power in New York and to review RG&E's remediation plans and schedules for its Beebee Station and Andrews Street site with the city of Rochester.

Public Service Commission spokesman James Denn said the regulatory agency's staff is "simply working to ensure that the best interests of ratepayers are kept in mind."

Energy East did not return a message seeking comment.

The final say on the purchase will come from the five-member Public Service Commission. After a series of hearings earlier this year on the proposed takeover, the commission received legal briefs from various interested parties. The deadline for those briefs was Monday.

Now all the parties have until April 25 to review each others' arguments for or against the sale and respond.

In its legal brief, the state Consumer Protection Board opposed the takeover in its present form, citing among its reasons too-small rate decreases offered by Iberdrola.

A group of more than 50 large industrial, commercial and institutional energy users in the RG&E and NYSEG service areas filed a joint brief of their own, arguing that the commission should approve the purchase with certain conditions, including rate reductions for customers and more stringent reliability and service quality performance standards.

Conversely, Iberdrola and Energy East argued in their filings that the PSC is trying to erect too high a barrier for Iberdrola to get into the New York market and is requiring immediate benefits for consumers even if the takeover will not produce them. Iberdrola already has pledged that it will not try to recover the cost of buying Energy East through rate increases and that the headquarters of RG&E and NYSEG will remain upstate.

Denn said the PSC has not yet scheduled subsequent steps in its consideration of the deal, such as meetings of the commission members to discuss the matter among themselves.