Settlement Reached on National Grid Sale to PPL UPDATED
Tuesday, May 24, 2022
The sale of National Grid to PPL has cleared a critical hurdle. A settlement was reached on Monday between PPL Corporation, National Grid and Rhode Island Attorney General Peter Neronha.
The Superior Court issued orders dismissing the Neronha's appeal of an earlier order from the Rhode Island Division of Public Utilities and Carriers approving the acquisition and lifting the court's stay of the approval order.
The orders, which followed joint motions by the parties to the appeal, now enable PPL and National Grid to close promptly on the transaction.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTAs part of PPL's settlement agreement with the attorney general, PPL has agreed to:
- Provide $50 million in bill credits to Narragansett Electric customers, both gas and electric.
- Seek Rhode Island Public Utility Commission (RIPUC) approval to forgive more than $43 million in arrearages for low-income and protected customers (approximately $21 million of which is already reserved on Narragansett Electric's books).
- Forgo the potential recovery of transition costs associated with the acquisition and integration of Narragansett Electric, which PPL had already capped in its prior commitments.
- Write off and not seek recovery of more than $20 million in current regulatory assets on Narragansett Electric's books. The regulatory assets are related to information technology and cyber costs incurred by National Grid that will not be used by PPL following the transition period.
PPL will not seek any base rate increases for at least three years after the transaction closes and until there has been at least 12 months of operating experience under PPL leadership following termination of the transition services agreements with National Grid.
The company said it has agreed to additional actions that reinforce the company's strong commitment to grid modernization and decarbonization. PPL will prepare and submit an Act on Climate Report within one year of the acquisition to the RIPUC and attorney general's office. The report will provide input to the Rhode Island Executive Climate Change Coordinating Council as the council develops plans to implement the state's Act on Climate.
PPL will also make a $2.5 million contribution to the Rhode Island Commerce Corporation's Renewable Energy Fund and make available an additional $2.5 million to the attorney general's office to use, if the office deems necessary, to evaluate Narragansett Electric's Act on Climate Report or participate in any future RIPUC proceeding that might be conducted to assess the future of the gas distribution business.
"We're pleased we've achieved this outcome, which further underscores PPL's steadfast commitment to Rhode Island customers and to advancing the state's ambitious decarbonization goals," said Vince Sorgi, PPL president and chief executive officer.
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"We have said throughout the approval process that PPL would bring clear value to Rhode Island, and the additional commitments announced today will provide direct and indirect benefits to customers that we believe will form the basis of a constructive and long-lasting presence in the state," said Sorgi. "At the same time, the acquisition will provide PPL with a more diversified portfolio of assets, reduce the proportion of revenues derived from coal generation as part of our business mix, and create additional opportunities to invest in a sustainable energy future."
PPL said it expects to complete the acquisition this week and will announce the completion upon close. Upon closing, PPL will also announce the date and time of an investor day, during which PPL will provide details of its overall strategy, its clean energy transition strategy, its investment plans, as well as its plans to achieve competitive long-term earnings per share and dividend growth while maintaining one of the strongest balance sheets in the U.S. utility sector.
Neronha's Stance
“This Office appealed the DPUC’s decision to the Superior Court because that decision failed to adequately protect and advance the interests of Rhode Islanders. Up front, it applied the wrong legal standard in reviewing the proposed transaction, requiring a showing far less than what the law requires. In terms of substance, the DPUC would have allowed PPL to impose millions of dollars of transition and other costs on Rhode Islanders, who didn’t seek this transaction and already pay plenty of money for the energy they use. It missed an opportunity to return money to Rhode Islanders by failing to require PPL to provide entirely justifiable rate credits, which this agreement now includes," said Neronha.
"It failed to ensure adequate storm response given that PPL has its main base of operations significantly farther away than National Grid does. And it completely ignored a generational opportunity to address the state’s climate goals in the perhaps the most important context of all: how our energy is produced and delivered,” Neronha added. “Today’s agreement remedies all this. The time to address Rhode Island’s energy delivery system and climate future is now, in this context, not elsewhere and not later. Wherever and whenever necessary, this Office will continue to fight for Rhode Islanders. Because Rhode Islanders deserve no less.”
Purchase Announced in 2021
In March of 2021, GoLocal that PPL Corporation was purchasing National Grid's Rhode Island utility business, The Narragansett Electric Company, for $5.3 billion including the assumption of $1.5 billion in debt.
The deal is a blockbuster and is expected to be a positive change for Rhode Island customers. The UK-owned National Grid has been highly criticized for its operations in Rhode Island and PPL is highly ranked by its customers, according to J.D. Power rankings. PPL has landed the top spot among large electric utilities in this region for 17 of the 22 years that J.D. Power has been conducting its electric utility residential customer satisfaction study.
In early April, Superior Court Judge Brian Stern issued a 21-page decision found in favor of RI Attorney General Peter Neronha’s petition to block the Division of Public Utilities and Carriers' approval of the $5.3 billion deal selling National Grids holdings to PPL.
The Division previously had approved the mega-deal in March and Neronha filed to block the deal. Stern's decision stops the deal from moving forward in the short-term.
“Petitioner’s [Peter Neronha] Emergency Motion to Stay the Division of Public Utilities and Carriers’ Order is granted. This Court recognizes the importance of the underlying transaction in this matter and the impact the transaction will have on Rhode Island as a whole,” wrote Stern.
Once the deal closes, David J. Bonenberger, PPL vice president of Operations Integration, will serve as president of The Narragansett Electric Company upon PPL’s planned closing of the acquisition. He has moved to Rhode Island in anticipation of the deal.
This story was updated at 7:00 AM 5/24/2022
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