By William Opalka

Connecticut environmental officials are at odds with utility regulators over whether the state should seek cleanup of an abandoned power plant as a condition for Iberdrola’s acquisition of UIL Holdings.

Attorney General George Jepsen, the state Department of Energy and Environmental Protection and the City of New Haven see the merger as the best chance to clean up the contaminated site in the city, but the Public Utilities Regulatory Authority doesn’t seem inclined to force the issue.

Spanish conglomerate Iberdrola announced in February it would acquire UIL Holdings, which has electric and gas units in Connecticut and Massachusetts, in a $3 billion cash and stock deal. (See Iberdrola Broadens Northeast Footprint in $3B UIL Deal.)

English Station

The power plant that has emerged as a flashpoint is the English Station, a coal- and oil-fired generator that dates to the 1920s and sits on a man-made island in the Mill River. The plant was shut down by United Illuminating, the electric utility subsidiary of UIL, in 1992 and sold eight years later.

The new owner intended to revive the plant, but environmental problems killed that plan. It was later sold to a real estate developer.

State environmental regulators have closed the site pending an estimated $30 million cleanup of toxins. DEEP’s environmental remediation order for the site — while not yet final — would require UI and the subsequent owners to clean up the site.

In a brief filed June 5, the attorney general said the state should require the merger applicants to place $30 million in an escrow fund to pay for cleanup of the site, with an additional promise that Iberdrola pay any additional costs more than that amount. Jepsen said UIL “bears a significant portion of responsibility” for the contamination.

The utilities and PURA say that the environmental issues are beyond the scope of the merger.

‘Devoid of Evidence’

In a reply filed Friday, the companies rely on a recent PURA order that removed English Station from the merger’s consideration. “The record is devoid of any evidence upon which the authority could base a condition such as that recommended by the AG. As such, the authority should not entertain conditions related to matters it has already decided are beyond the scope of the proceeding and its authority and upon which it has no record evidence to decide,” they wrote.

PURA had said its docket is not the “appropriate forum” on responsibility for the cleanup.

“English Station property is already the subject of pending legal actions in other appropriate forums such as [DEEP] and the U.S. Environmental Protection Agency,” it wrote in a May order.

FERC Approval

Iberdrola USA owns utilities New York State Electric & Gas and Rochester Gas & Electric in New York, Central Maine Power in Maine and significant wind power assets from coast-to-coast.

The Federal Energy Regulatory Commission approved its takeover of UIL on June 2 (EC15-103).

FERC said acquiring an electric utility in Connecticut and gas distribution companies in Massachusetts and Connecticut presented no significant concerns about the combined companies’ market power.

In the PURA docket, however, Jepsen has listed other objections to the takeover, joining the state’s consumer counsel in saying consumer benefits promised by the merging companies are elusive or non-existent.