Exhibit d.4
January 13, 2000
VIA HAND DELIVERY
Mary L. Cottrell, Secretary
Department of Telecommunications
and Energy
One South Station
Boston, MA 02110
Re: Merger of Consolidated Edison, Inc. and Northeast Utilities
Dear Secretary Cottrell:
As announced on October 13, 1999, the Boards of both Consolidated Edison,
Inc. ("Consolidated Edison") and Northeast Utilities ("NU") approved a
definitive merger agreement to combine the two companies. Western
Massachusetts Electric Company, a subsidiary of NU, is a company subject to
the jurisdiction of the Department of Telecommunications and Energy
("Department"). Under the agreement, Consolidated Edison will acquire all of
the common stock of NU for $25.00 per share in a combination of cash and
Consolidated Edison common stock, subject in the case of the common stock, to
certain collar provisions. Because Consolidated Edison and NU are both
holding companies, the merger does not require the approval of the
Department. However, Consolidated Edison and NU believes that an element in
the review of the merger by the Securities and Exchange Commission ("SEC")
may be certifications from the relevant state regulatory commissions
regarding each commission's jurisdiction and resources over the operating
companies in their state. Based on previous cases, it is possible that the
SEC will want the Department to certify, in a manner similar to that required
in Section 33(a)(2) of the Public Utility Holding Company Act of 1935
("35 Act"), that the Department has the authority and resources to protect
ratepayers in matters such as rates, financings, affiliate transactions and
financial integrity, and that the Department intends to exercise its authority.
In our view, the Department has the existing authority and resources to
protect Western Massachusetts Electric Company's ("WMECO") customers in each
of the areas in which the SEC wants assurances. The proposed merger will not
affect the Department's jurisdiction or authority over WMECO in any way. For
instance, the Department will continue to have full jurisdiction over WMECO's
rates under G.L. c. 164, Sections 93 and 94; the companies' financings will
still be subject to approval under c. 164, Section 14; affiliate transactions
will be subject to Department review and approval under c. 164, Sections 76A,
85 and 94B; and the Department also retains general supervisory authority
over the companies with the ability to make all inquiries needed to assure
itself that the "safety and convenience" of the public is protected. Nor
will the merger adversely affect the Department's resources to protect
WMECO's customers. To eliminate any concerns the Department may have with
regard to the acquisition premium and its allocation, we agree that neither
the above requested certification nor the approval of the merger by the SEC
under the 35 Act and any allocation of the acquisition premium to WMECO
resulting from SEC's jurisdiction over the merger will have any pre-emptive
effect on the Department's consideration of the amounts, if any, of the
acquisition premium it will allow in rates in any future proceeding by WMECO
seeking recovery of such acquisition premium in their retail delivery rates.
As a result, for ratemaking purposes, the Department will have complete
authority to establish the appropriate allocation of the acquisition premium
to WMECO and the amount of the recovery of that premium in WMECO's rates.(FN1)
Additionally, because we want the Department to have a full understanding of
the merger and its benefits to ratepayers we are making an informational
filing describing the transaction. This filing includes testimony submitted
by WMECO's affiliate, The Connecticut Light and Power Company with the
Department of Public Utility Control. Included is: 1) testimony of Michael
G. Morris, Chairman, Chief Executive Officer and President of NU who
discusses the merger and how it will affect the operation of the operating
companies of NU and the benefits of the merger; 2) testimony of John J.
Roman, Vice President and Controller of NU who explains the effects of NU's
merging with Consolidated Edison on the costs, accounting and rates of the
operating companies of NU; and 3) testimony of Hyman Schoenblum, Vice
President and Controller of Consolidated Edison who will introduce
Consolidated Edison, discuss the merger and demonstrate that Consolidated
Edison has the necessary financial, technological and managerial suitability
to become the parent holding company for NU and its subsidiaries.
The Consolidated Edison/NU merger is important in allowing WMECO to continue
to provide high quality, low cost delivery service to our customers in the
western portion of the Commonwealth.
Very truly yours,
cc: George B. Dean, Esq.
/s/ Robert F. Sidney, Esq.
footnote:
(1) A simple example will illustrate the effect of this commitment. If
WMECO were allocated $100 of acquisition premium following this transaction,
the Department would be free to disallow its recovery either on the grounds
that the $100 was not reasonably allocated to WMECO or that WMECO had not
demonstrated sufficient offsetting savings to warrant recovery. Thus, the
Department would have the authority to limit WMECO's recovery of the
acquisition premium to $80 if the Department determined $80 was a reasonable
allocation, even though WMECO had demonstrated that $150 of savings had been
produced by the transaction.
