By William Opalka

Spanish energy giant Iberdrola SA on Tuesday dropped its bid to acquire UIL Holdings but promised to file a new application by the end of the month that would address objections raised by Connecticut regulators.

The Connecticut Public Utilities Regulatory Authority issued a draft decision June 30 that lambasted the companies’ application, recommending a final rejection, while giving them a week to respond. PURA said the acquisition was not in the public interest and offered no benefit to consumers. (See Connecticut Regulators Threaten to Reject Iberdrola-UIL Merger.)

The companies last week asked for a 60-day extension to address the decision, which outlined conditions including “ring fencing” of the local utilities, a three-year rate freeze and a commitment to keep their headquarters in the state for seven years. PURA immediately rejected that request as not affording enough time for adequate review and said the companies should file a new application that resets the clock at 120 days.

“The applicants hereby withdraw the pending application, in order to have the docket terminated as of this date and the remaining procedural schedule cancelled, which would, in turn, facilitate the applicants’ filing of a new application,” Iberdrola wrote.

Iberdrola has offered $3 billion for Connecticut-based UIL, including its United Illuminating electric distribution utility and three gas distribution companies in Connecticut and Massachusetts.

In a separate filing made hours before the companies dropped their bid, the Connecticut Industrial Energy Consumers praised the PURA draft decision. “CIEC commends the authority for reaching conclusions regarding the public interest of the proposed transaction commensurate with the record evidence,” the group wrote.

In mid-day trading, UIL stock shot up $1.46 after the announcement to $47.19.

PURA said June 30 it would not approve the deal without “ring fencing” provisions to protect UIL’s Connecticut electric and gas distribution companies from bankruptcies by Iberdrola’s other operations.

Regulators also said they “cannot conclude that the applicants will continue to possess the ability to provide safe, adequate and reliable service to the public.” It said Iberdrola’s financial strength and managerial expertise were adequate, but the company did “not possess the requisite suitability and responsibility to acquire UIL Holdings.”