Deal to double wind power in the state

ALBANY, NEW YORK - State regulators approved a deal that will allow the construction of hundreds of new wind turbines in New York, doubling the amount of wind power capacity within a few years.

The Public Service Commission voted unanimously to allow Iberdrola S.A., a Spanish energy conglomerate, to acquire Energy East, a Maine-based utility with operations in five states.

Iberdrola said earlier this summer that it would invest at least $2 billion in wind turbines across upstate New York if the commission allowed it to acquire Energy East, subsidiaries of which supply electricity or natural gas to 1.7 million customers in the state.

The commissionÂ’s decision was the final hurdle for the $4.6 billion deal, which had been approved by federal and other state regulators, but spent a year under scrutiny by the commissionÂ’s staff, which recommended that it be blocked.

In approving the acquisition, the commission substantially lightened the conditions of sale that had been recommended by its staff, which had been criticized as onerous by Iberdrola and elected officials of both parties. The commission likewise moderated the recommendations made in June by an administrative law judge, who largely endorsed the staff proposal.

For example, the commission said that Iberdrola would need to provide only $275 million worth of rebates to Energy EastÂ’s current New York customers, far less than the $646 million the commissionÂ’s analysts had earlier proposed.

The commissionÂ’s staff had also opposed allowing Iberdrola to build wind turbines in the state, arguing that it would violate a longstanding commission policy to prevent the generation, transmission and distribution of power by a single company, which could leave customers and suppliers vulnerable to price manipulation.

But the commission members said they would allow Iberdrola to develop wind power as long as it obeyed restrictions devised to mitigate the risk of price manipulation.

“Developing renewable energy sources is critically important for New York,” said Garry A. Brown, the commission’s chairman. “Our decision today allows Iberdrola to fulfill its commitment to invest in renewable energy projects in New York State.”

In a statement, Gov. David A. Paterson said the commission had “struck a well-considered balance” in its proposal. “I anticipate the company will readily embrace this decision and accept its conditions, and I welcome Iberdrola to New York,” Mr. Paterson said.

But opponents of the deal, including the Independent Power Producers of New York, a trade group of utilities, said they remained worried that Iberdrola would gain too much market power under the deal.

“My concern is that there are a multitude of wind generators that want to operate in New York, so it is critical that Iberdrola respect the limitations that have been put on them, so that there is not a potential for market manipulation,” said Gavin J. Donohue, the group’s president.

Under the terms of the deal, Iberdrola would be bound to invest $200 million in wind power. But the company has promised to spend 10 times that amount, with plans for numerous wind parks spread throughout upstate New York.

New York is expected to have about 1,000 megawatts of existing capacity by the end of this year, and the plans would add about 1,000 megawatts of wind capacity to the state within a few years.

“It is a really large investment and a very significant number,” said Carol E. Murphy, executive director of the Alliance for Clean Energy New York, a trade group of environmental advocates and wind power producers, including Iberdrola. “This is a major infusion of dollars and investment into our wind industry.”

Under commission rules, the staff will release a detailed version of the proposal in coming days. It will then be up to Iberdrola to agree to the deal, if it so chooses. Elected officials, including Mr. Paterson, said they expected the company to accept it.

In a statement, the company said, “We thank the commission for its time and effort on the matter, and we look forward to reviewing the order to determine next steps.”

The commission recently postponed a vote on the Iberdrola acquisition after one commissioner fell ill; a second commissioner was also absent on the day of the vote and soon announced that she was resigning from the commission for personal reasons. The vote on September 3 was 4-0.

The commissionÂ’s proposal also included a requirement that Iberdrola insulate its New York operations from any financial risks the company assumes in other states or abroad. Iberdrola would also have to divest Energy EastÂ’s fossil fuel generating plants, though it could retain the companyÂ’s hydroelectric power operations.

United States Senator Charles E. Schumer, who was among the critics of the original requirement that Iberdrola drop its wind power plans, also praised the deal.

“We have argued long and hard for Iberdrola’s ability to develop wind power, and we very much urge them to accept this ruling,” Mr. Schumer said in a statement.