Commonwealth Court Sides With Citizen Power and Rejects $316 Million Rate Relief Request of GPU. Orders PUC to Determine Amount of Merger Savings and Ratepayers’ Share

PITTSBURGH, February 21/PRNewswire--In a major victory for consumers, the Commonwealth Court of Pennsylvania today sided with arguments made by Citizen Power, holding that GPU was not entitled to any of the $316 million in rate cap relief it had sought to collect from customers. The Court also ordered the PUC to determine the amount of merger savings and the share ratepayers will receive, and that the merged company would be bound by a Code of Conduct barring its affiliates from favoring each other in business dealings.

Citizen Power is disappointed that the Court chose to uphold the PUC’s approval of the FirstEnergy-GPU merger. Citizen Power argued that the companies failed to meet their burden to show that the merger would not harm retail competition.

Last year, GPU, the parent company of Metropolitan Edison Company and Pennsylvania Electric Company, petitioned the Pennsylvania Public Utility Commission (PUC) for approval of its merger with FirstEnergy, and for $316 million in annual relief from the rate cap it had agreed to just a few years earlier. As a part of a contested settlement opposed by Citizen Power and others, the PUC approved the merger and granted GPU the rate cap relief it requested. The Court rejected GPU's rate relief request in its entirety. Finally, the Court agreed with Citizen Power that the PUC acted arbitrarily when it approved a contested settlement that exempted affiliates of the merged company from a Code of Conduct that would have prevented the merged company from granting preferential treatment to those affiliates.

"I am deeply gratified by the Court's decision today overturning the PUC's decision approving a contested settlement that would have granted GPU hundreds of millions of dollars in unjustified relief from a rate cap bargain it struck just a few short years ago," said David Hughes, Citizen Power's Executive Director. "There was no basis for GPU's claim and the Court rightly reversed the PUC's expedient decision to act on the basis of a contested settlement between a few parties rather than on the basis of actual facts. I am also heartened by the Court's direction that the PUC determine the amount of merger savings and the share that ratepayers will receive." Hughes concluded.

Until the PUC approved its elimination, GPU was subject to a Code of Conduct that the Court correctly noted was “intended to prevent GPU affiliates from favoring each other through cross-subsidization in market transactions, thereby protecting fair and open competition.” The Court’s rejection of the PUC's elimination of this protection was important, particularly in a post-Enron era where the dangers of affiliate abuse have been made so abundantly clear.