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.

The 100-page report, Nuclear Power Generation and Fuel Cycle Report 1997, said five new nuclear units were added worldwide to the electric grid in 1996. Watts Bar 1, one of the five, may be the last U.S. commercial nuclear plant. Forty-five plants remain under construction in other countries - seven each in Russia and North Korea. Twenty-seven more units are planned. EIA expects worldwide nuclear capacity to increase to 391 net gigawatts-electric by 2010, falling to 360 net GWe by 2015 mostly due to retirement of many U.S. plants at license expiration.

Ten thousand metric tons of uranium are expected to be discharged as spent fuel from world nuclear reactors in 1997; the U.S. will account for about 2,000 metric tons. From 1997 through 2015, worldwide discharge is projected at 206,000 metric tons of uranium, including about 38,000 metric tons in the U.S.

EIA said DOE hopes to complete by 1998 an assessment of viability of Yucca Mountain as a nuclear spent waste repository, which is scheduled to begin receiving waste in 2010. Copies of the report are available at www/eia/doe/gov.

WISCONSIN TASK FORCH GIVES ADVICE ON RELIABILITY

A task force appointed to study Wisconsin's electric reliability problems has reported that recurring power shortages are costly and disruptive, and has recommended several changes to improve the situation, including building more generation and transmission lines.

An 11-member energy supplier group also submitted recommendations and agreed with most of the findings submitted by the task force.

The Customer Task Force, formed July 24 by Gov. Tommy G. Thompson (R-Wisc.), said that a near crisis in supply for much of eastern Wisconsin in 1995 and shortages in summer 1997 together marked a "pattern" of unreliability in the state. The task force's Sept. 30 report calls for increasing generating capacity in eastern Wisconsin by 500 megawatts to 600 MW, building transmission lines, increasing transfer capacity at interfaces and speeding up the permitting process at the Wisconsin Public Service Commission. It also recommended the PSC establish maintenance and repair standards.

Since construction could not be completed until 1999 at the earliest, a 1998 gap must be addressed by several tariff changes, market-based solutions, communications improvements and short-term repairs, the report said.

The energy supplier task force, comprising IOUs, munis, rural co-ops and one IPP, agreed that additional transmission system capacity is vital. The group's Oct. 1 report also called for faster PSC approval of transmission projects, which they claim takes 44 months on average, despite a statutory limit of 180 days.

Wisconsin Power & Light, Wisconsin Public Service Corp. and Northern States Power, which together provide 85 percent of the energy delivered in Wisconsin, said they support the building of merchant power plants to meet the need for new generation. They also prefer a regional independent system operator over a Wisconsin-only ISO.

A splinter group composed of Madison Gas & Electric, the Wisconsin Public Power Inc. SYSTEM, the Municipal Electric Utilities of Wisconsin, and the Wisconsin Federation of Cooperatives disagreed with suggestions for ISO control and building of new plants. The faction proposed ending monopoly control by IOUs over the state's transmission lines by creating an ISO for eastern Wisconsin. They believe the interfaces to the west and south are controlled by three utilities that "act in inconsistent and self-interested ways."

The group agreed that construction of a 500-MW gas-fired plant in eastern Wisconsin should begin by April 1, 1998. The group said utilities must agree up front to purchase the output of the plant for six to 10 years.

OKLAHOMA TO RESTRUCTURE GAS INDUSTRY

Oklahoma appears poised to restructure the state's natural gas industry.

The Oklahoma Corporation Commission has proposed rules that would require each utility to identify and propose recovery of stranded costs by July 1, 2001. The recovery plan also must include mitigation strategies and transition periods. If stranded cost recovery is allowed, then they would be recovered on a system-wide basis from all classes of end users over a maximum of five years.

Standards of conduct for qualified gas providers would require offering service through pricing structures. Companies would update the following data monthly: number of end-users served and gas volumes delivered by city, county and local distribution system; logs of complaints; signed fact sheets; signed contracts; pricing schedules; evidence of surety bond and insurance coverages.

The proposed rules also include certification procedures for service providers, service reliability requirements and regulatory safeguards to ensure gas service availability and service at reasonable costs for residential ratepayers. A public hearing on the rules has been set for Dec. 3.

ENTERGY SUES UNION PACIFIC

Two Entergy Corp. subsidiaries, Entergy Services Inc. and Entergy Arkansas Inc., have filed a lawsuit against Union Pacific Railroad Co., alleging breach of coal shipping contracts.

Union Pacific and Entergy have a contract for Union Pacific to ship coal by rail from the southern Powder River Basin of Wyoming to two plants in Arkansas - the 1,659-megawatt White Bluff Steam Electric Station and the 1,678-MW Independence Steam Electric Station. The plants are capable of burning 13 million tons of coal annually.

Entergy filed the lawsuit in the U.S. District Court for the Middle District of Louisiana, alleging that Union Pacific breached service standards by failing to meet transit time standards and failing to comprise trains of the required length. Entergy claims that the result is impairment of ability to serve its customers and has asked for damages of more than $1 million.

S&P DOWNGRADES FOUR U.K. UTILITIES

Standard & Poor's has downgraded ratings of four of the largest utilities in the United Kingdom, reflecting a combination of the windfall tax on privatized utilities, capital restructuring, and leveraged acquisition financings.

About $7.5 billion of rated debt is affected.

The four utilities are Yorkshire Electricity Group Plc., United Utilities Plc., Hyder Plc., and BG Plc. The Yorkshire Electricity downgrade reflects the impact of higher financial leverage on Yorkshire's future debt-servicing capacity following its takeover by U.S. companies, American Electric Power and Public Service Co. of Colorado (now New Century Energies due to a merger).

Ratings were lowered on "multi-utilities" United Utilities Plc., and Hyder Plc., which were removed from CreditWatch with negative implications on July 3 following the announcement of the windfall tax.

NOx CONTROL PROGRAM EASILY FUNDED

Public Service Electric and Gas Co. has released a report finding that competitively neutral nitrogen-oxide caps and emissions trading programs to reduce regional ozone pollution would be cost-effective.

The report also said such programs would cost a fraction of the savings from electric restructuring and prevent need for additional more costly controls on other sectors.

PSE&G commissioned a study, An Environmental and Economic Assessment of NOx Controls for Eastern U.S. Electric Generating Facilities Concurrent with Electricity Deregulation, to assess the impact of a power plant NOx control program under U.S. electric restructuring.

The study points out that the Federal Energy Regulatory Commission projects annual savings of $3.76 billion to $5.37 billion from wholesale competition. The U.S. Energy Information Administration projects savings of $32 billion to $57 billion per year through 2005 from marginal-cost pricing under wholesale and retail electric competition. Those predictions indicate that the $1.5-billion cost for NOx emission controls estimated by the U.S. Environmental Protection Agency would eat up 3 percent to 5 percent of the savings from retail competition.

SIX DOWN, THREE TO GO IN CONECTIVE MERGER

The Pennsylvania Public Utility Commission has approved the proposed merger of Atlantic Energy and Delmarva Power to form Conectiv, a new holding company with more than $2 billion in annual revenues and nearly $6 billion in assets.

The approval was necessary because the companies hold partial ownership in several generating units in Pennsylvania.

State regulators in Delaware, Maryland and Virginia and the Federal Energy Regulatory Commission have approved the merger. The Federal Trade Commission and Department of Justice have not identified any antitrust issues that would hold up approval. Merger approval still is needed by regulators in New Jersey, the Nuclear Regulatory Commission and the Securities and Exchange Commission. The companies anticipate having all approvals by the year's end.

GPU NEGOTIATION TWO SALES

General Public Utilities Corp.'s subsidiary, GPU Nuclear Corp., has been negotiating with an unidentified company for the sale of its Three Mile Island and Oyster Creek nuclear plants.

Although in September PECO Energy and British Energy announced that they were forming a joint venture, AmerGen Energy Co., to buy and operate nuclear plants in the U.S., PECO would neither confirm nor deny that it is the possible purchaser.

Officials at the Nuclear Regulatory Commission have pointed out that the Atomic Energy Act prevents foreign companies from owning U.S. nuclear plants.

JOULES....

AMERICAN ELECTRIC POWER plans to build a 765-kilovolt transmission line from its Wyoming Station near Oceana, W.V., to its Cloverdale Station near Roanoke, Va. Applications were filed with the Virginia State Corporation Commission and the West Virginia Public Service Commission. An application originally was filed in 1991, but AEP was directed to explore alternatives to the route to avoid certain areas. The proposed route is about 132 miles. It crosses nine counties in the two states and will cost $263 million.

Chase Global Power and Environmental Group financed a 130-megawatt, combined- cycle, gas-fired power plant to be built on South Sumatra, Indonesia. Project sponsors include Astratel, a subsidiary of PT Astra International and Coastal Power, a subsidiary of The Coastal Corp. Coastal Power will operate the project. GE Power Systems Inc. will build the plant and a 15-kilometer pipeline. The facility is expected to operate by March 1999. Gas will be supplied by Pertamina, the Indonesian national oil company, through a long-term gas sales and purchase agreement. Electricity will be sold to PLN, Indonesia's national power company, under a 20-year power purchase agreement.

Two of Enron International Inc.'s indirect subsidiaries will transport 1,000 MWs of electricity from Argentina to Brazil under a 20-year power purchase agreement with the Brazilian regional utilities, Eletrosul and Furnas. Enron will supply power at the bid price of $27.50 per MWh, and will build transmission lines and a conversion station to connect the two countries' power grids.

Star Enterprise awarded Parsons a contract of about $250 million to design and build a plant at the Delaware City refinery that will generate electricity and steam using petroleum coke. Star Enterprise is a joint venture between subsidiaries of Texaco and Saudi Aramco. The Delaware Clean Power Project will use proprietary gasification combined-cycle power technology licensed by Texaco.

AllEnergy Marketing Co. L.L.C. will provide an estimated 2.6 million kWh to Rhode Island through the end of 1997 in an agreement that guarantees substantially lower rates. AllEnergy will supply the two largest state facilities, Community College of Rhode Island-Flannagan Campus and Davies Technical High School. New England Electric Systems and Eastern Enterprises own AllEnergy.

CNG Energy Services Corp. signed a subsidiary of Pennsylvania Enterprises Inc. as its first retail marketing alliance partner under CNG's "Plus Network" program. PEI's PG Energy Services will market power provided by CNG to residential and commercial customers in 26 eastern and central Pennsylvania counties under the name PG Energy Power Plus. The Plus Network eventually could include more energy products and other services such as cable TV and home security.

Articles found on this page are available to Internet subscribers only. For more information about obtaining a username and password, please call our Customer Service Department at 1-800-368-5001.