Spanish power producer Iberdrola SA gave the green light Wednesday to its $4.5 billion deal to buy Energy East Corp., the owner of New York State Electric & Gas Corp.

Iberdrola said it would accept the conditions imposed last week by the state Public Service Commission when it became the final regulatory agency to approve a merger that first was announced in June 2007.

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Under those terms, Iberdrola will grant a $275 million credit to NYSEG and Rochester Gas & Electric customers that could be used to reduce rates by as much as 5 percent over the next five years, or to offset future rate increases.

Iberdrola, which has said it would consider investing up to $2 billion in new wind energy projects in New York, also agreed to spend $200 million on new wind parks in the state.

Iberdrola also will sell RG&E’s fossil fuel-fired plants in New York. The company has agreed to present a plan for the sales within 90 days after the deal closes.

“We are confident that Iberdrola’s record of service, reliability, corporate citizenship and development of renewable energy resources are well matched to the opportunities and needs in New York’s energy sector,” said Iberdrola Chairman and CEO Ignacio Galan in a statement.

NYSEG provides electric service, and some natural gas service, to about 175,000 customers in some suburban and rural portions of Western New York. In all, the two utilities have about 1.7 million customers, or about 16 percent of the state’s electric consumers and 12 percent of its natural gas consumers.

Some PSC commissioners had raised concerns that Iberdrola would have too much market clout — and potentially could unfairly favor its own wind farms — if it was allowed to own wind power facilities at the same time it controlled the power lines that transmit that electricity and that generated at competing power plants.

The deal negotiated with the PSC bars Iberdrola from owning any New York power plants that are powered by fossil fuels, such as natural gas, coal or oil. Iberdrola will be allowed to continue owning Energy East’s hydroelectric plants.

“This is a win-win-win for New Yorkers — the possibility of cheaper power, a cleaner environment and a circuit breaker against higher rates — all flow from this agreement,” said Sen. Charles E. Schumer, D-N. Y., in a statement.

Iberdrola officials said earlier this year that the company would be interested in spending up to $2 billion on new wind energy projects in New York if the merger was approved. An Iberdrola spokesman said he was not authorized to comment on Wednesday.

The company, however, noted that it has identified potential wind power projects that could produce as much as 998 megawatts of electricity in New York. Iberdrola plans to double its 2,400 megawatts of wind power capacity in the United States by the end of 2010 and has obtained all the turbines it expects to need for that U. S. expansion.

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