Energy East payouts possible by LARRY RULISON

ALBANY -- Top executives at Energy East Corp. stand to make $100 million if they lose their jobs as part of Spanish utility Iberdrola SA's $4.5 billion acquisition, according to one member of the state Public Service Commission. It's unclear just how important the issue will be as part of the PSC's deliberations on the $4.5 million deal.

PSC commissioners, who discussed the case at their monthly meeting this week, have scheduled a special meeting on the merger Wednesday. A vote also is likely that day.

At publicly traded companies like Energy East, top executives typically have so-called change-in-control clauses in their contracts, which allow for lump-sum payments and other benefits if they lose their jobs immediately after a merger.

PSC Commissioner Robert Curry made the $100 million assertion during questioning of PSC staff about the merger. He wanted to know when Iberdrola planned to take operational control of Energy East, which has 1.7 million electric and natural gas customers in upstate New York.

Rafael Epstein, an administrative law judge who has overseen the case, told Curry there was no set date for Iberdrola to assume management of Energy East's subsidiaries in New York, which include New York State Electric & Gas and Rochester Gas & Electric.

"They attach substantial value to the on-the-ground experience of local management," Epstein said.

Curry went on to note that when Iberdrola acquired ScottishPower in 2007, it replaced the chief executive of the Scottish utility and provided him with a $6 million severance.

That's when he calculated that Energy East's top officers stood to reap $100 million if replaced, Curry said.

Iberdrola officials declined to comment. However, a Sept. 24 document filed by the company in the case notes there are "no retention payments, merger completion bonuses or incentive payments in place" for Energy East affiliate employees.

The document does show that these employees are due up to $45 million in change-in-control payments if they were to lose their jobs immediately after the merger.

However, it's unclear if that document includes top executives and directors of Energy East, the holding company that owns those affiliates.

A proxy statement filed by Energy East last October -- sent to shareholders seeking their approval of the deal -- shows that top Energy East executives are owed $43 million under their change-in-control agreements if they are replaced.

An Iberdrola spokesman could not immediately verify whether those change-in-control arrangements were separate from the amounts detailed in the Sept. 24 PSC document.

It's unclear if the change-in-control agreements that Curry talked about will be addressed again on Wednesday.

The commissioners have several complex issues to consider as part of the merger, including whether to allow Iberdrola to own and build wind farms in the state.

The commission must also determine how much Iberdrola should return to consumers in exchange for the deal. Senior advisory staff recommended amounts to the commissioners that ranged between $202 million and $300 million.