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Quixotic Commission?

Fortnightly Magazine - June 2008

right opportunity.

Fortnightly: I hear talk about Iberdrola being courted by EdF, and about Iberdrola trying to buy British Energy. How does an investment in Energy East figure into Iberdrola’s global business position?

Azagra: We want EE to become the heart of Iberdrola in the United States. It’s small but we will use it for a platform to make big investments. Once we complete the acquisition, the next item is how many billion dollars can we invest?

Fortnightly: What’s your perspective on the U.S. market at this point? What do you think of the way we review and regulate utility mergers?

Azagra: We’re the second largest wind operator today in the United States, and the third largest gas-storage company. We’re very happy with the U.S. market. But the regulatory process is very strange. You can close a $20 billion deal in Europe in three months, but a $4 billion deal in the United States takes a year or more. That’s strange, and something is wrong with one of them. You can guess which one I think.

Regarding regulation and market power policies, you should ask the PSC staff to explain the success of market power policies in New York. After several years of unbundling the state has the third highest market prices in the United States. Why? That’s the question we should be asking.

Fortnightly: If market power isn’t an issue, why do you think the commission has taken its position?

Azagra: If you review the staff’s approach to the last 10 years of deals, you’ll find the answer. They are doing their job as they understand it, and they are trying to put the deal through this approach. But we don’t think we should be making statements on the assumption we are negotiating. When I want $100, I say $100.

We take the regulatory process seriously. But in New York when they want to reach $100, they say $400. When you go through the numbers and requests, people have an issue explaining where the numbers come from.

Fortnightly: Are you saying New York is negotiating to get a bigger payoff?

Azagra: That is what a lot of people would tell you. That’s why only one party would take such an extreme position.

Sometimes these deals are problematic. We have many parties in favor of it, which gives us comfort that we are doing the right things. Maine has a track record of being tough, but we reached a settlement without even $1 being considered. They’ve given a lot of importance to Iberdrola taking over Central Maine Power, and what it means for such a big company to be making such an investment in the state.

We have a lot of companies calling us, asking to do business. We’re not asking to be treated favorably, but just the same as others. Approve the deal in accordance with how you’ve approved deals before, and let me invest.