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Fortnightly Magazine - December 1997
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PITTSBURGH CHALLENGES MERGER; ALLEGES COLLUSION

The city of Pittsburgh has filed an antitrust lawsuit against Allegheny Power Systems Inc., and Duquesne Light Co., to stop the merger proposed by the two companies.

In its Sept. 29 court filing, Pittsburgh claimed the two utilities acted jointly to restrain trade. The city said the companies did this by agreeing to maintain higher rates for electric retail service at two industrial sites targeted for redevelopment zones pending their merger.

"These electric utility giants have acted illegally, in bad faith and in direct opposition to the spirit of Pennsylvania's new electric utility competition statute," said Pittsburgh Mayor Tom Murphy.

In 1996, the city had targeted the two former industrial sites for redevelopment. Allegheny Power and Duquesne Light were the only two providers certified to provide electricity in the redevelopment zones. Allegheny Power agreed to provide retail electric services at rates lower than those offered by Duquesne Light. Then on April 7, 1997, the utilities announced their proposed merger into Allegheny Energy. Allegheny Energy then withdrew its application to serve the redevelopment zones when the Electricity Generation Customer Choice and Competition Act was signed into law.

"While both utilities were in discussion with the city about strategies to lower rates for residents¼ Allegheny Power and Duquesne Light were apparently having private discussions about forming one company with a larger share of the market and agreeing to not pursue agreements reached with the city," Murphy added.

FITCH FINDS CREDIT RISK NOT SO VOLATILE

A new Fitch Investors Service report finds that credit risk has not been as volatile a factor as was expected at the beginning of the move toward competition.

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