Wind turbines operate at Iberdrola SA's Maple Ridge Wind Farm near Lowville, about 60 miles northeast of Syracuse.

State regulators Wednesday unanimously approved the $4.5 billion merger between Energy East Corp. and Spanish power producer Iberdrola SA, clearing the way for new owners to take over New York State Electric & Gas Corp. if they accept the conditions imposed on the deal.

The state Public Service Commission voted, 4-0, to approve the merger, ending a lengthy review that led to state regulators imposing a host of conditions on the deal, including a reduction of as much as 5 percent, or $275 million, in electricity and natural gas delivery rates over five years.

Those conditions also include a commitment by Iberdrola to spend $200 million on new wind power facilities in New York within roughly two years, which PSC officials would add about 100 megawatts of renewable generating capacity.

That condition, which was added Wednesday, is double the $100 million commitment that previously was being considered. Iberdrola has said it is considering up to $2 billion in investments in wind power and other renewable energy projects in New York if the deal was approved, but that pledge was not part of the merger so it was not considered as part of the debate at the PSC.

Commissioner Maureen Harris, however, said she is was her "expectation and hope" that Iberdrola would follow through with its pledge to make a bigger investment in renewable energy projects. Adding 100 megawatts of new wind power would provide enough electricity for up to 30,000 homes, according to the American Wind Energy Association.

"There is no doubt that, on the risk side of the scale, there are some risks" associated with the merger, said Garry A. Brown, the PSC chairman. "We allayed those concerns as well as we could."

But Brown said the $275 million in potential savings to customers "is a very significant balance that gets me to a net positive."

Hurley said the potential savings are "a good thing" for customers at a time when the economy is sputtering. The PSC risked having Iberdrola walk away from the deal if the commission pushed for even greater savings for consumers, she said. "This isn't a perfect deal and it may not even be a great deal," she said. "But in my opinion, it's a good deal."

The PSC next will issue a formal order spelling out the terms and conditions of its approval of the merger. An Iberdrola spokesman said the company would review the order "to determine the next steps."

NYSEG provides electric service, and some natural gas service, to about 175,000 customers in some suburban and rural portions of Western New York.

The commission also imposed several conditions to limit the market power that Iberdrola would gain by owning wind energy projects at the same time that it owns electricity transmission systems within the state.

The PSC, for a decade, has pushed for the state's utilities to divest their conventional power generating plants and focus their operations on transporting and delivering electricity to their commercial and residential customers.

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 permitted to own substantial wind power facilities, as well as the power lines that transmit that electricity and that of competing power plants.

Iberdrola would be barred from owning any New York power plants that are powered by fossil fuels, such as natural gas, coal or oil. The company also would be required to sell fossil fuel-powered generating stations currently owned by RG&E. Iberdrola would be allowed to continue owning Energy East's hydroelectric plants.

The PSC doubled the size of the $200 million "binding commitment" it demanded that Iberdrola make for investments in new wind power projects in New York within two years of the merger taking effect. If Iberdrola fails to meet that $200 million target, the company then will be obligated to set aside 25 percent of any unspent portion of that $100 million increase for economic development initiatives within its service territories.

The approval "sends a clear and strong signal that New York welcomes investment in the Empire State," said Gov. David

A. Paterson. "In its decision, [the PSC] struck a well-considered balance between providing Iberdrola with an opportunity to grow and flourish in New York, while guaranteeing the company's 1.7 million ratepayers in New York receive safe and reliable utility service at just and reasonable rates."

Sen. Charles E. Schumer, D-N. Y., who had pushed for approval of the deal as a way to increase the state's supply of renewable energy, also praised the commission's vote.

The ruling "appears to strike a good balance between protecting New York consumers and encouraging investment in alternative energy," he said in a statement. "The ruling asks for Iberdrola to share benefits with New York State ratepayers, but it also gives the company a lot of latitude to develop new wind power facilities."

Energy East and Iberdrola agreed to the deal in June 2007, and since then, the merger has won the backing of federal regulatory agencies, as well as regulators in all of the other states where Energy East operates. New York was the last state to grant regulatory approval for the deal.