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Harrisburg, authority fight NRG hostile bid for steam

By , - Last modified: February 11, 2011 at 1:34 PM

The Harrisburg Authority and the city are continuing to try to block Exelon Corp.’s hostile takeover of NRG Energy Inc., as the acquisition bid next week will go before the Pennsylvania Public Utility Commission for review.

The Harrisburg Authority and the city are continuing to try to block Exelon Corp.’s hostile takeover of NRG Energy Inc., as the acquisition bid next week will go before the Pennsylvania Public Utility Commission for review. 

PUC hearings are scheduled July 15-17 in Harrisburg. The PUC judge hearing the case will issue a recommendation to the PUC about the acquisition, but no timeline has been set for a decision, said Jennifer Kocher, PUC press secretary.

The authority owns the city’s incinerator plant that once sold steam that NRG used in the NRG Energy Center, which is a heating plant the company owns at 100 N. 10th St. The authority inked a 20-year steam-purchase agreement with NRG in 2003, but the deal did not take effect until 2006, when a retrofit of the plant was supposed to be completed. The failed renovation has buried the incinerator in more than $300 million of debt.

The authority started selling steam to NRG in January 2007. But on March 19, 2007, the authority stopped selling to the company because a pipe connecting the incinerator to the plant broke and has yet to be fixed, said Michelle Torres, authority executive director in testimony she gave to the PUC last month.

The authority is concerned Exelon won’t continue a steam agreement with the authority, Torres said. And the authority needs the steam revenue to help pay down incinerator debt. Neither Torres or Authority Chairman James Ellison responded to interview requests. Harrisburg Mayor Stephen R. Reed declined to comment on the matter, too.

Exelon has not addressed the agreement in its application to purchase the company, Torres said in her testimony. 

Exelon offered NRG shareholders about $6.2 billion for the company in October based on the company’s stock value the day the offer was made, Exelon spokeswoman Judy Rader wrote in an e-mail. NRG rejected the deal, but on July 2 Exelon pitched a follow-up deal by increasing the per-share price it would pay for the company’s assets. Exelon offered about $7.3 billion the day the offer was made, Rader said.

New Jersey-based NRG funnels heat from the Harrisburg plant to major downtown buildings and businesses, including the Capitol complex, Hilton Harrisburg and Strawberry Square. NRG also owns the cooling plant at 100 S. South Second St. from which it cools the Harrisburg Hospital and other nearby buildings. Both would go to Exelon should the deal go through.

The city fears jobs could be lost at the plants following the acquisition and rates could spike, adversely affecting economic development and prices businesses pay for heating and cooling, said Ed Neilsen, director of the Mayor’s Office of Economic Development and Special Projects, in testimony to the PUC. 

Exelon is committed to retaining managers and employees following an acquisition, Rader said. But the company would have to be able to manage its business and people, she said.

“(Exelon has) to make decisions about long-term steam agreements and other matters through the normal PUC rate-making process that will take place after we own the assets,” Rader said. “(Exelon is) making some significant commitments up front including more than $6 million in capital investments, rate credits and charitable donations in Pennsylvania if the transaction is approved.”

NRG spokesman Sean Connolly declined comment, saying the deal is being reviewed by the PUC and other regulatory commissions in California, New York and Texas. But NRG is contemplating the offer, said Joe Dominguez, Exelon spokesman.

Torres testified that the deal would hurt the authority since Exelon has not stated it will commit to a steam agreement.

“(Exelon) should make voluntary specific assurances to the authority on the continuation of purchases under the steam purchase agreement,” Torres said. “I would propose that the applicants be required by the (PUC) to provide specific factual information concerning the continuation of the steam purchase agreement following the proposed transaction.”

There are eight entities that provided testimony against the acquisition, including the Pennsylvania Office of Consumer Advocate, the Pennsylvania Office of Small Business Advocate and the PUC Office of Trial Staff.

Dominguez did not deny the company is interested in NRG’s nuclear holdings, but the company does have steam background, he said.

In June 26 rebuttal testimony to the PUC, Doyle N. Beneby, senior vice president of Exelon Generation Co., said the PUC should not micromanage Exelon to suit other interests. The company should be allowed to manage itself, he said.

PUC Chairman James H. Cawley declined to comment.

Following next week’s hearings, parties in the case can file exceptions to the judge’s recommendation; and following that, they can file replies to the exceptions, Kocher said. The PUC does not have a formal deadline by which it must make a decision, she said.

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