County Council Considering Resolution Urging State To Reject Acquisition of Washington Gas

County Council Considering Resolution Urging State To Reject Acquisition of Washington Gas

Maryland Public Service Commission reviewing request for multi-billion-dollar purchase by AltaGas

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The Montgomery County Council is considering urging the Maryland Public Service Commission to reject a company’s proposed acquisition of Washington Gas.

AltaGas, a Canadian company, has proposed a $6.4 billion deal to purchase WGL Holdings Inc., the parent company of Washington Gas. WGL’s website says Washington Gas serves more than one million customers in Maryland, Virginia and Washington, D.C.

Council member Marc Elrich is asking the County Council to approve a resolution calling for the PSC to oppose the deal. The council is expected to vote on the resolution next week.

A press release from Elrich’s office said the opposition is due to the likelihood of “predictable harms that this transaction will impose on Washington Gas customers and the State of Maryland.”

WGL Holdings and AltaGas have said their boards unanimously approved a plan to combine the two companies and that it’s expected to close in the second quarter of 2018.

AltaGas is to pay $88.25 per share of WGL in an all-cash transaction of about $4.5 billion, according to a press release about the deal. Also, AltaGas would assume about $1.9 billion in debt, according to WGL spokesman Bernie Tylor.

The PSC is in the midst of an evidentiary hearing on the proposal. It started on Oct. 3 and is expected to continue through Oct. 17, PSC spokeswoman Tori Leonard said. The PSC is accepting public comment through Oct. 20.

The new combined company would have an enterprise value of about $17 billion, according to a January press release posted by WGL.

A WGL statement Tylor emailed to Bethesda Beat says the acquisition would let Washington Gas customers “realize the benefits associated with being part of a larger, financially strong combined company that embraces the potential of today’s advanced energy company.”

The statement says that the gains expected through the deal include:

  • $30.5 million in one-time bill credits
  • $4 million in benefits within five years related to the combination
  • A $4 million affordable-housing multifamily natural gas initiative
  • $1.1 million over two years to develop and fund supplemental low-income weatherization and energy-efficiency programs in the Maryland service territory
  • $1.5 million of supplemental funding to the Washington Area Fuel Fund for bill-payment assistance
  • Development of 5 megawatts of either electric-grid energy or a form of renewable energy; also, commission a renewable natural gas study
  • No rate increases in Maryland related to the acquisition.
  • No changes to WGL facilities.

“We are confident of the benefits of this proposed combination as it is built on the solid foundation of providing continued great service at affordable rates, more clean energy choices, more investment in the community, and a continued commitment to good, secure jobs in Maryland,” the WGL statement says.

WGL says it received approval from the Federal Energy Regulatory Commission in July and has other required federal approvals.

The deal also requires the approval of public service commissions in Virginia and Washington, D.C.

The County Council’s resolution cites other opposition to the acqusition—by the PSC staff, the Office of the People’s Counsel, and the Apartment and Office Building Association of Metropolitan Washington.

The resolution indicates that Howard E. Lubow, testifying on behalf of the PSC staff, urged the commission to turn down the acquisition request, calling it “not consistent with the public interest …”

The resolution also refers to opposition by Ralph C. Smith on behalf of the Office of the People’s Counsel, an advocacy entity representing the state’s utility customers. According to the resolution, Smith testified that the deal “presents increased risks to Washington Gas in terms of credit rating downgrades, higher financing costs, a more complex organizational structure, several entities above Washington Gas that could issue additional debt, and a wider array of affiliates that would be allocating and charging cost to Washington Gas whose accounting records are not maintained with the Washington Gas service area. AltaGas has a weaker balance sheet and lower credit ratings than WGLH’s or Washington Gas, and being a Canadian company has exposure to currency exchange risk”

The proposed Montgomery County resolution says the council accepts the conclusions found in the analysis done on behalf of the PSC staff “that there are no benefits to be offered that could sufficiently improve the terms of the merger ….”

Under the agreement between the two companies, the headquarters of Washington Gas would remain in Washington, D.C. AltaGas, which is based in Calgary, would relocate its headquarters of its U.S. power business to the D.C. area.

Washington Gas would continue to operate under its current name, “maintaining employee staffing and existing investment programs—under the same company names and brand," the WGL press release on the deal says.

WGL Holdings also is the parent company of WGL Energy, WGL Midstream and Hampshire Gas.

Washington Gas Light Company dates to 1848. AltaGas was formed in 1994.

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