August 7, 1997

Pittsburgh plans merger challenge

City officials say consolidation corners customers

By ANTHONY BREZNICAN

The Associated Press

PITTSBURGH (AP) -- The city said Wednesday it will challenge the proposed merger of two large power companies because the combination would drive up the cost of electricity and reduce competition, a councilman said.

In April, Allegheny Power Systems Inc. announced its plan to purchase Duquesne Light Co. The merged company would be called Allegheny energy; the plan is currently before regulators.

Council President Jim Ferlo said the city will spend $75,000 to tell the Pennsylvania Public Utility Commission the merger would curtail utility competition and crimp economic development in the Pittsburgh area.

"[Duquesne Light] consumers have, for too long, lived under the yolk of excessive electrical rates," Ferlo said.

Mayor Tom Murphy said the city's biggest concern is the problem of "stranded cost." Stranded costs are investments power companies can not recoup with electricity fees alone. Duquesne Light paid $10 billion to build two nuclear power plants, an investment that consumer activist David Hughes called a "mistake" customers should not have to pay for.

Pennsylvania is deregulating the electricity industry, which would let consumers choose electricity suppliers by 2001. In a merger plan sent to the PUC Aug. 1, Allegheny Power said the combined companies would produce stranded costs of $2 billion through 2005.

The PUC is expected to rule on the merger by May 1998.

Because the proposed Allegheny Energy would control power lines in the Pittsburgh area, it could add stranded costs to a customer's bills even if the customer seeks cheaper electricity from another company.

If the two companies stay separate then they can at least compete with each other, Pittsburgh's mayor said.

Terri Glueck, spokeswoman for Duquesne Light, said the city has " an extremely narrow focus of competition."