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DOJ Sues Utility for Threats, Bribes

Fortnightly Magazine - September 1 1997

The U.S. Department of Justice is suing Rochester Gas & Electric Co. for allegedly threatening and attempting to bribe the University of Rochester and for its anti-competitive power supply contract with the school.

The Justice Department called the suit an "effort to loosen the stranglehold" the utility has over the university providing electricity to Rochester.

The lawsuit, filed June 24 in U.S. District Court for the Western District of New York, claims that Rochester Gas & Electric tried to coerce the university into abandoning plans to build a cogeneration plant. The suit alleges Rochester Gas threatened to cut off the university's research grants and offered financial rewards totaling hundreds of thousands of dollars for conservation programs.

The DOJ also charges that the utility attempted to prevent the university from participating in projects that would provide Rochester's customers with energy from an alternative supplier. The complaint alleges that utility gave the university an exceptionally low electric rate as part of the arrangement. (The New York Public Service Commission allows utilities to deviate from their regulated rates to compete for customers who have alternative sources of electric available.)

The DOJ's Antitrust Division said the agreement deprives some Rochester Gas & Electric customers of alternative low-cost electricity. DOJ asked the court to prohibit the utility from enforcing its existing agreement or offering anything of value to induce a competitor not to compete with Rochester Gas & Electric in the sale or generation of electricity.

"This case should send a wake-up call to electric utilities," said Joel I. Klein, acting assistant attorney general in charge of the DOJ's Antitrust Division. "We will not tolerate private arrangements designed to thwart the introduction of competition into this important industry."

But Rochester Gas & Electric denies it has engaged in any anti-competitive activities. The utility said its multi-year, reduced-rate contract was signed in 1994 and recognizes the wisdom of keeping large electric customers on its system to keep costs stable for all customers. The utility pointed out that neither the university nor the PSC has objected to any part of the contract, and neither has been sued by the government. Also, it believes the government's contention that the university was constrained from entering the energy generation and supply business is purely speculative.

"We can only surmise that this lawsuit is the federal government's way of saying it wants to be involved in the electric deregulation process," said Rochester Gas & Electric President and COO Thomas Richards.

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