Allegheny Energy settles on terms of merger plan

Tuesday, October 26, 2010

The merger of Greensburg utility Allegheny Energy and Akron, Ohio-based FirstEnergy has come one step closer to completion with a settlement designed to help preserve jobs and provide a range of benefits for customers.

The two companies have agreed to a proposed settlement with 18 parties who opposed their merger application with the state Public Utility Commission. The settlement, filed late Monday afternoon with the PUC, includes provisions regarding local employment levels over the next five years, nearly $11 million in customer credits for West Penn Power residential customers over a three-year period, and a distribution rate freeze through Oct. 1, 2012, for customers of FirstEnergy's current Pennsylvania electric companies, Metropolitan Edison, Pennsylvania Electric and Pennsylvania Power.

Local employment was one of the first major issues raised by observers when the $8.5 billion deal was announced May 14. Now, state Sen. Kim Ward, R-Hempfield, whose 39th District includes Greensburg and who said the companies' initial assurances of job retention in the area were not strong enough, has signed on to the agreement.

Under the deal, Allegheny Energy's current staffing of 845 will not fall below 800 in the first year after the merger, 675 in the second year, 650 in the third year and 600 in the fourth and fifth years.

The agreement also contains a bundle of commitments geared toward customers of Allegheny Energy subsidiary West Penn Power, including improved reliability, increased funding for the West Penn Power Customer Assistance Program, a credit for costs related to energy-efficiency and conservation programs, contributions to the West Penn Power Sustainable Energy Fund and outreach to West Penn Power customers to promote and encourage customer choice and shopping.

A commitment to solar power helped to bring Citizens for Pennsylvania's Future on board. The agreement stipulates the merged company will enter into long-term contracts for the purchase of Pennsylvania Solar Photovolatic Alternative Energy Credits between 2011 and 2021.

Other signatories to the proposed settlement include the PUC's Office of Trial Staff, the state Office of Consumer Advocate, the Department of Environmental Protection, and the Clean Air Council.

But some opposition remains.

Frank Lacey, director of products for energy supplier Direct Energy, said his company did not sign on because it believed that "the merger will be harmful to the competitive markets."

David Hughes, of Citizen Power, a public policy research organization, said the resulting company, with 6 million customers in seven states and $16 billion in annual revenues, would be a "behemoth" that no one could compete against or oppose. He also said the agreement offered no provision for reducing carbon emissions by Allegheny Energy's coal-burning power plants.

"We thought one of the substantial affirmative benefits would be a commitment from FirstEnergy to clean up the most egregious of Allegheny's plants," he said.

Parties who did not sign the agreement will have the opportunity to file briefs with the PUC before an administrative law judge offers a recommendation on the case, likely by the end of the year.

The merger also must be approved by Maryland and West Virginia public utility commissions, the Federal Energy Regulatory Commission and the U.S. Department of Justice.

Elwin Green: or 412-263-1969.