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Headlines

Fortnightly Magazine - December 1997

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.

FCI Update: Fall 1997 found that the 89 investor-owned utilities, municipalities, and electric cooperatives surveyed scored an average 2.69, an improvement from the previous average of 2.71 on the Fitch Competitive Indicator.

Regulatory and legislative support for a reasonable transition timetable and substantial stranded cost recovery has pushed the likely shakeout of the electric industry past 2000, relieving credit risk for the near term.

The most significant changes since last year's report came as a result of restructuring plans in California, especially generation divestiture and securitization. Combined with an improving state economy, the state's three largest IOUs - Pacific Gas & Electric, San Diego Gas and Electric, and Southern California Edison - improved their FCI scores by 0.33, 0.15, and 0.28, respectively.

The FCI was introduced in October 1994 as a prospective analytical tool to rank U.S. investor-owned and public power competitive risk. It is a composite score ranging from 1.0 (least vulnerable to competition) to 5.0 (most vulnerable). The average score when the indicator was first introduced was 2.66.

NUKE SUPPLIES 17 PERCENT OF WORLD'S POWER

The DOE's Energy Information Administration in a new report found that nuclear-generated electricity throughout the world grew in 1996, mostly due to improved performance at nuclear power plants.

The EIA said that 32 countries use nuclear power to produce electricity, accounting for 23 percent of total generation in those nations. Nuclear power composed 17 percent of electric generation worldwide.

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