Schumer Seeks Meeting With PSC Chair To Discuss Stringent Demands On Iberdrola; Will Urge Them To Ratify Deal That Brings Renewable Wind Energy, Jobs And Protects Customers In Upstate NY

Press Release

With Gas at $4/Gallon and NYS Lagging in Wind-Power Development, Iberdrola's Billions of Dollars in Investment Would Boost Upstate Economy - Create Jobs, Deliver Clean Energy

Iberdrola's Energy East Takeover Threatened by Recent PSC Staff Review and Administrative Law Judge Decision To Reject the Deal; But PSC Commissioners Still Have Power to Negotiate Final Deal With Key Business and Environmental Groups' Backing, Schumer Formally Requests a Meeting with PSC Chairman - Will Urge PSC to Drop Divestiture Demands, Broker Deal to Deliver Wind Power and Protect Low Rates for Consumers

U.S. Senator Charles E. Schumer today formally requested a meeting with the Chairman of the New York State Public Service Commission (PSC) to discuss the recent Administrative Law Judge recommendation that threatens to derail Iberdrola's proposed takeover of Energy East. With the support of key business and environmental groups--as well as the state Department of Environmental Conservation and Empire State Development Corporation--Schumer will urge the chair of the 5-member commission to modify the recommendations that Iberdrola be barred from owning or developing renewable energy sources such as wind when they take up the matter later this summer. Schumer will instead urge the PSC to concentrate on keeping customer rates low and ensuring system reliability.

"The PSC staff demands are irrational and illogical. With gas at $4 a gallon, we desperately need alternative energy sources, yet they are trying to place severe restrictions on the world's leading wind power producer," Senator Schumer said. "At issue are upstate jobs and a $2 billion investment in our economy-need I say more? The buck stops with the PSC Chair and the Commissioners; they are not bound by these previous recommendations and can negotiate a win-win deal here. I am requesting this meeting to discuss the importance of brokering a deal that will keep customer rates low, provide system reliability and bring much-needed wind power to New York. "

This past week, Administrative Law Judge Rafael Epstein recommended that the Public Service Commission reject the acquisition without stringent conditions, such as a commitment that neither Iberdrola nor its subsidiaries would be allowed to own or operate energy generating facilities--including wind power--within the Energy East service area. Parties to the merger will have 20 days to offer comments and rebuttals, after which point the ALJ, in consultation with the Department of Public Service Staff, will write a recommendation to the 5-member Public Service Commission. The PSC, chaired by Gary Brown, has the ability to accept, reject or modify the recommendation.

Iberdrola, a Spanish utility company, is currently bidding to purchase Energy East which is the parent company of NYSEG and RG&E, serving over 1.5 million ratepayers, spanning communities across Western NY, the Finger Lakes Region, the Southern Tier and Hudson Valley, the Capital Region and North Country. New York State's regulatory approval process for Iberdrola's to purchase Energy East began nearly 10 months ago and is now approaching the final stages. While every other state where Energy East owns assets, including Maine, Massachusetts, Connecticut and New Hampshire, has approved the acquisition, New York State has failed to sign off on it.

This week, a state Administrative Law Judge recommended that the state's Public Service Commission deny Iberdrola S.A.'s acquisition. The PSC will make the final ruling in the acquisition. Two weeks ago, Iberdrola said it would invest $2 billion in wind power for New York if the deal was approved. In light of the news, Senator Schumer wrote a letter to the PSC calling for the agency to drop its divestiture demands and broker a deal that would keep customer rates low, provide system reliability and bring much-needed wind power to New York.

Iberdrola has said that one of the most significant outstanding issues between the PSC and the utility is whether it is allowed to retain the wind power assets it currently owns in New York State and if it is allowed to invest in new projects. Already, the utility has a 50 percent stake in the Maple Ridge Wind Farm in Lewis County, the largest wind farm in the state. And it has ten others in development in New York State. It has already promised at least $100 million investment in wind power upon commencing the acquisition.

The benefit of wind power is just being realized across New York State. Maple Ridge Wind Farm, for example, began operating in September 2006 and provides $8 million annually in local property taxes, pays landowners $1.65 million each year in lease payments, and has created 164 new local long term jobs. Additionally, according the American Wind Energy Association, using wind power cut carbon dioxide emissions by 28 million tons in 2007.

Overall, Iberdrola is the largest producer of wind energy in the world, holding nearly 7,000 mw of generation in capacity. In 2006 alone, it invested $1.32 billion in renewable technologies and has 41,000 MW of renewable resources in their pipeline.

Iberdrola has said that New York State's aggressive renewable energy goals--the state wants to get 25% of its power through renewables by 2013--creates the right incentives for bringing that expertise in wind to New York State. The state is currently at 19 percent renewable power, and many of the gains will have to come from new wind power.

Despite progress in the last several years, New York State is still far from reaching its wind power potential. Currently, only around 1% of New York State's 30 GW peak load, 411 MW, comes from wind energy. New York currently ranks below Texas, California, Minnesota, Iowa, Washington, Colorado, Illinois, Oklahoma and New Mexico when it comes to wind power production. The wind power capacity in Texas is nearly 10 times that of New York. However, as far back as 2004, studies from New York's Independent System Operator (NYISO) found that New York transmission lines can handle as much as 7000 MW of wind energy, and that at least 10% penetration of total capacity, or 3000 MW, could be brought on line. Achieving this ambitious threshold is consistent with New York's goal of having our energy portfolio contain 15% from renewable sources by 2015. Several hundred megawatts of new wind projects are in the pipeline, but many more projects will have to be proposed, permitted and built to meet this goal.

Despite the essential need for more wind power across the state, and Iberdrola's ability to fill this void, the PSC has stipulated that the energy company sell off its current wind power holdings and pledge to not invest in any wind power in the future. PSC argues that despite the benefits of wind power and the utilities' promise of investment, "Iberdrola's ownership and development of wind generation is a detriment, and not a benefit to this transaction."

This rigid approach employed by the PSC has led to Iberdrola in recent weeks stating that if state regulators continue to require the sale of wind farm assets in New York State they will walk away from the deal. The PSC has argued that if the utility is allowed to retain their wind generation, they will naturally engage in anticompetitive practices to dissuade their competitors.

The New York State Consumer Protection Board has called PSC's position "unreasonable" and groups ranging from the Empire State Development Corporation to the Natural Resources Defense Council to the Greater Rochester Enterprise have argued that Iberdrola should be allowed to stay in the wind business because of the significant economic development potential it holds for New York State.

With news that Iberdrola will put $2 billion towards wind power investments in New York, Schumer blasted the PSC and called on the agency to withdraw its demand for Iberdrola to divest its wind power assets. "It's nonsensical for PSC to work against the interests of its own state - and its consumers," added Schumer. "We have an opportunity here to embark on a new future in wind power, while ensuring that customer's keep their rates low."

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