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News Digest

Fortnightly Magazine - July 15 1998

Acquisitions

ELECTRIC CONSOLIDATION. Consolidated Edison Co. of New York Inc. says it will acquire Orange and Rockland Utilities Inc. for $58.50 per share, or $790 million. The figure represents a premium over the May 8 O&R common stock closing price of $42.25. O&R would become a wholly owned subsidiary of ConEd, creating a combined base of 3.3 million electric and 1.2 million natural gas customers.

ConEd anticipates merger savings of $50 million per year over 10 years from elimination of duplicate corporate and administrative programs, and increased efficiencies. The approved New York restructuring plans for both utilities will continue to be implemented. Those plans call for generating plant divestiture. The utilities plan to use resulting funds to finance the O&R purchase.

In response to the announcement, Standard & Poor's affirmed the credit ratings of ConEd, and placed the ratings of O&R on CreditWatch with positive implications. S&P believes that due to the disparate sizes of the utilities -- O&R is less than one-tenth the size of ConEd -- that O&R should benefit from the stronger credit profile of ConEd.

TELECOM SPINOFF. Moody's Investors Service placed all the debt ratings of Citizens Utilities Co. on review for possible downgrade because the company plans to separate its telecommunications operations from its utility businesses.

If approved by regulators, Citizens would create a new corporate entity for all its telecommunications businesses. This entity would consist of Citizens' basic landline and wireless operations, in addition to Electric Lightwave Inc., a competitive local exchange carrier, of which Citizens owns 83 percent. The company's electric and natural gas transmission facilities and water distribution and waste water treatment would remain the sole assets of Citizens.

PUCs

NEED FOR POWER. The Michigan Public Service Commission rejected a request by the Detroit Edison Co. to solicit bids for new capacity assuming that the utility will not need new capacity until 2004. It also approved a new experimental wheeling program to assist the company in meeting its capacity needs and directed it to produce a plan to meet a capacity need of at least 417 megawatts in 1998 as identified by PSC staff.

The PSC said the company's capacity forecasting methods were too hypothetical and that recent events had cast doubts on the reliability of its projections. It noted significant press coverage of the need by the utility to curtail interruptible customers with little or no notice to meet peak need during the prior summer. In a dissenting opinion, Commissioner John C. Shea said that the commission's ruling "smacks of the very intrusive, Soviet-style program of centrally planned procurement of electricity" previously rejected by the PSC. He said that the commission had never developed the expertise necessary to serve the needs of an ever-growing base of electric customers and noted that Detroit Edison still would be required to provide firm stand-by service for retail wheeling customers under the newly approved plan. Case No. U-10840, April 14, 1998 (Mi.P.S.C.).

GAS TRANSPORTATION RATES. The New York Public Service Commission directed Brooklyn Union Gas Co. to provide gas transportation service to a proposed 80-megawatt independent electric