The state Public Service Commission should reject the proposed takeover of Energy East Corp. by a big Spanish utility, an administrative law judge said Monday in a much-awaited recommendation.

Energy East is the parent of both New York State Electric & Gas and Rochester Gas and Electric.

The Department of Public Service law judge, Rafael Epstein, picked apart the proposed $4.5 billion deal between Iberdrola SA and Energy East, writing that the commission should disapprove the transaction "on the ground that it does not satisfy the 'public-interest' requirement of Public Service Law."

But if the commission does approve the sale of Energy East, there are pre-conditions that should be met, he wrote.

They include forcing Iberdrola to sell its wind power plants in New York, to agree to $646 million in public-benefit adjustments, and to abide by safeguards and rate proceedings as proposed by the PSC staff.

Iberdrola officials had earlier said they would walk away from the deal, which has been approved by other affected states and the federal government, if New York demanded they sell their wind power farms.

Epstein's recommendation sets the stage for the parties in the case to respond -- they have until July 1 to do so -- and then a vote by the PSC.

U.S. Sen. Charles E. Schumer, D-N.Y., said the ruling "defies common sense" at a time when gas prices are around $4 a gallon and "we desperately need to develop alternative sources of energy."

"The ruling could cost us jobs upstate, $2 billion in (wind power) investment and should be rectified by the Public Service Commission," Schumer said.

He said the ruling's attention to ensuring that rates are kept low was one of the few commendable parts of the decision.

Editor's note: The full decision can be read here http://www.windaction.org/documents/16375 .