WARWICK, R.I. (WPRI) – Lawyers clashed Wednesday over whether Rhode Islanders would see their monthly bills increase as a result of the pending $3.8 billion sale of National Grid’s local gas and electricity operations.

R.I. Attorney General Peter Neronha’s office is seeking to halt the deal, which represents one of the largest business transactions in state history, arguing the R.I. Division of Public Utilities failed to appropriately apply the law when considering the merits of the sale.

The legal challenge has stalled a yearlong effort by Pennsylvania-based PPL Corp. to purchase Narragansett Electric Co. from National Grid PLC, a deal that would result in PPL paying $5.3 billion. (Under the terms of the transaction, PPL is assuming $1.5 billion in debt, putting the net value of the deal at $3.8 billion.)

If finalized, National Grid’s 780,000 Rhode Island customers would start receiving monthly bills from PPL instead.

“It’s a $5.3 billion transaction – one of the largest that’s ever occurred in Rhode Island,” said Sarah Rice, deputy director of the attorney general’s public protection bureau, during a Superior Court hearing at Kent County Courthouse.

“If this transaction closes, it cannot be undone,” she added.

Rice argued the energy companies failed to provide substantive financial information about how the deal would affect costs to ratepayers down the road, highlighting that Rhode Islanders would be on the hook to pay at least some of the more than $200 million in transition costs tied to transferring control from National Grid to PPL.  

The lack of specific details, she added, raised questions about whether PPL could help the state accomplish its aggressive goals for emission reductions, create an effective storm-response strategy, improve overall services and reduce costs to ratepayers.

“Are Rhode Islanders worse off by the transfer of Narragansett Electric to PPL? That’s the bottom [line] question – the one that’s articulated in the statute and the one that needs to be answered when we’re talking about what’s consistent with the public’s interest,” Rice said. “It cannot be that consistent with the public’s interest means that people could be charged more for worse electricity service.”

National Grid and PPL attorneys rejected the attorney general’s arguments, saying the state hearing officer who scrutinized their agreement over the course of a year appropriately applied the law when making his decision. They also pushed back on the idea that services would be diminished or costs would increase, arguing Rhode Islanders would see either similar or better services and rates – a premise that was laid out clearly in the more than 300-page decision issued by state regulators last week.

“We have the argument by the attorney general that there’s going to be an increase in rates here by PPL – that’s the boogie man being thrown out there: that rates are going to go up,” said Jerry Petros, an attorney representing PPL.

Attorney Jerry Petros represents PPL Corp.

“There is no evidence that rates are going to go up,” he added.

Petros also highlighted that utility companies don’t control rate increases, as that power is held by the R.I. Public Utilities Commission, which regulates energy pricing and development in Rhode Island. The panel sets rates each year based on energy trends from past years, along with recommendations from National Grid, which controls the vast majority of the state’s energy distribution infrastructure.

Petros also argued that while there would be transitional costs associated with the deal, any expenses recouped from ratepayers would be capped. And those would only be allowable if the outcome resulted in improved services to Rhode Islanders.

For example, he pointed to a plan to install a new IT system to replace the existing one operated by National Grid, arguing the project would benefit customers because the existing system is five to 10 years old. Overall, he said, PPL would be less expensive than National Grid.

“When PPL assumes the operations of Narragansett Electric Co., if this transaction is approved and closes, it will have lower operating costs than National Grid did,” he said.

The arguments were made before Superior Court Judge Brian Stern, who oversees a part of the state’s court system known as the business calendar that deals with high-level corporate disputes. Stern told the attorneys he would try and make his decision on the motion to stay the approval by Friday.

If the stay is granted, Stern would subsequently take a more thorough look at everything that went into the state’s decision to approve the deal as part of a full appeal process. If denied, the attorney general’s effort to further scrutinize the deal would fall short.

Under both scenarios, Stern’s decision could be appealed to the state’s Supreme Court.

Eli Sherman (esherman@wpri.com) is a Target 12 investigative reporter for 12 News. Connect with him on Twitter and on Facebook.