UK utility to buy KeySpan

BY ROBERT P. MADER OF CONTRACTOR'S STAFF WESTBOROUGH, MASS. British utility holding company National Grid is buying New York and New England utility KeySpan Corp. for more than $7 billion. KeySpan's unregulated sales and service operations have long competed against independent contractors. A little more than a year ago, KeySpan sold its mechanical contracting operations back to their owners or management

BY ROBERT P. MADER
OF CONTRACTOR'S STAFF

WESTBOROUGH, MASS. — British utility holding company National Grid is buying New York and New England utility KeySpan Corp. for more than $7 billion.

KeySpan's unregulated sales and service operations have long competed against independent contractors. A little more than a year ago, KeySpan sold its mechanical contracting operations back to their owners or management teams after losing millions of dollars. KeySpan was ranked as the 15th largest mechanical contractor in the country in CONTRACTOR's Book of Giants with revenues of more than $190 million (May 2005, pg. 28). The utility, however, still operates KeySpan Home Energy Services that sells and installs all types of plumbing, heating and cooling products to homeowners.

The transaction greatly expands the size of National Grid's U.S. operations and creates the third-largest energy delivery utility in the United States, with both electricity and gas businesses serving nearly 8 million customers in the New York state and New England regions. It is the purchase of KeySpan that provides the natural gas portion of the business.

National Grid entered the U.S. market when it began buying local electric utilities in 2000. It owns Massachusetts Electric Co., Niagara Mohawk Power Corp., Narragansett Electric Co., Nantucket Electric Co., Granite State Electric Co. and New England Power Co.

National Grid announced earlier this year that it is buying the Rhode Island gas distribution business of Southern Union Co. National Grid has heretofore operated as an electrical distribution company, buying electricity from others.

KeySpan, on the other hand, is the largest natural gas distributor in the Northeast and the biggest electrical generator in New York state. It generates 6,650 mW of power serving more than 1 million households in New York City and Long Island.

KeySpan operates the Long Island Power Authority's transmission and distribution system under contract to LIPA. LIPA is a nonprofit electric utility, which owns the retail electric system on Long Island.

"It appears the purchase of KeySpan is to fill in pieces of the puzzle in Massachusetts," said Hugh Kelleher, executive director of the Plumbing-Heating-Cooling Contractors of Greater Boston.

"We still have issues with KeySpan that are unresolved," Kelleher said. "Our fear is that a company like National Grid is so large that they won't be able to direct their attention to this issue of anti-competitive practices. However, I want to say this, at the state level our coalition has been building up a great deal of force. This involves the open shops, the union shops, and both the plumbing and electrical unions in eastern Massachusetts, as well as the wholesalers. Everyone here is really up in arms over the continuing problems of utility companies, including National Grid and KeySpan, continuing to use ratepayer assets to hurt private contractors."

Kelleher had to allow that KeySpan makes a token attempt at separating its sales and service operations from its utility operations. The Home Energy Services vehicles and its toll-free phone number are the same as the utility's. It does, however, have its own personnel, Kelleher said, unlike some other particularly troublesome utilities such as NStar and Bay State Gas that make no pretense of separating their operations.

"Just this week, we were pleased that the state senator who oversees utility regulations in Massachusetts has called officially for an audit of one of the smaller utilities, Bay State Gas," Kelleher said. "Part of our approach right now will be to ask our Department of Telecommunications and Energy, which oversees the utilities and sets utility rates, to take a good, hard look at how the utility companies are actually deploying personnel and other assets. We will be considering using this kind of approach with the National Grid companies here in Massachusetts. We have concerns and we don't intend to give these guys a free pass."

Upon completion of the transaction, expected in early 2007, KeySpan will become a wholly owned subsidiary of National Grid and will continue to operate as KeySpan. National Grid will continue to have operations in Massachusetts, New Hampshire, New York and Rhode Island, and will maintain a significant corporate presence in Massachusetts; Brooklyn, N.Y.; and Upstate New York, as well as an operations center in Hicksville, N.Y.

National Grid will honor all labor agreements in effect with the KeySpan unions.

National Grid defines itself as an international energy delivery business. The company owns the high-voltage electricity transmission network in England and Wales and operates the system across Great Britain. It also owns and operates the high-pressure gas transmission system in Britain.