Northeast Utilities has agreed to a rate credit for customers, a separate rate freeze for distribution costs, $300 million for system improvements and other demands by Connecticut in exchange for state approval of the utility's proposal to buy Boston-based NStar for $4.9 billion.
Gov. Dannel P. Malloy, Attorney General George Jepsen and Elin Swanson Katz, the state's consumer counsel, announced the agreement Tuesday. It includes a $25 million rate credit, a freeze on certain other rates until December 2014, excluding $21 million in executive compensation from rates and other stipulations.
Elected officials in Connecticut have been under pressure to cut electricity rates, which are among the highest in the nation. Malloy said the agreement provides "much needed relief" for utility customers and businesses.
"It will help ratepayers and the economy for years to come," the governor said.
The deal must still be approved by Connecticut regulators. Energy Commissioner Daniel Esty said he expects approval in the next few weeks.
Connecticut officials say the $25 million credit for about 1.2 million customers of the state's largest utility, Connecticut Lighting and Power, averages $16 per customer. Though it's a small amount, Attorney General George Jepsen said it's the beginning of more cost savings expected from the companies' merged operations.
Tom May, president and chief executive of NStar, said in a statement that the two companies can now "move one step closer" to completing the deal.
Northeast Utilities also agreed that the first $40 million in storm-related costs related to the remnants of Hurricane Irene that hit Connecticut in late August and the October snow storm will be excluded from rates.
The company has estimated the cost of both storms at about $260 million.
The Connecticut deal follows an agreement with Massachusetts regulators in February in which Northeast Utilities and NStar will buy more than a quarter of the power produced by the long-planned Cape Wind offshore wind farm as a condition of the deal.
Northeast Utilities also agreed in its arrangement with Connecticut to maintain for at least seven years its principal board and executive offices in Hartford and keep its headquarters of subsidiaries Connecticut Light & Power, Yankee Gas, the transmission business and NU call center in Connecticut. State officials were concerned that NU offices and many functions would be transferred to Boston.
In addition, NU agreed to not reduce the number of line workers in Connecticut and Massachusetts and spend $300 million in improvement to the electric distribution system. Of that, $100 million will be spent immediately.