Rendell blasts utility merger as job-killer

By Joe Napsha
PITTSBURGH TRIBUNE-REVIEW

Wednesday, October 13, 2010

Gov. Edward Rendell on Tuesday called for state regulators to reject FirstEnergy Inc.'s proposed $8.5 billion acquisition of Greensburg-based Allegheny Energy Inc., but the utility companies countered that the merger would help the state's consumers and not hurt the economy.

A few hours before the Public Utility Commission opened an evidentiary hearing into the proposed merger, Rendell said he directed the state Department of Environmental Protection to urge the commission to oppose the merger because it "could kill 980 good-paying jobs in Southwestern Pennsylvania and harm competition in electricity markets at a time when prices are rising."

"This merger would be a great deal for Wall Street and Ohio, but terrible for Pennsylvania's workers and consumers," Rendell said in a statement.

The issue of reduced competition from combining the companies is being looked at also by federal regulators and Maryland's Public Service Commission, said Paul Patterson, a utility analyst at Glenrock Associates LLC in New York.

For the merger to be approved, the companies must show the PUC that there is an "affirmative public benefit" to the deal, that it improves service and safety of the public "in some substantial way," commission spokeswoman Jennifer Kocher said.

While they respect the governor's opinion, the companies are confident the PUC will make its decision based on the evidence and the merits of the proposed merger, FirstEnergy spokeswoman Ellen Raines said. The companies said the merger will result in savings that will benefit consumers.

FirstEnergy operates in Pennsylvania through Pennsylvania Power Co., Pennsylvania Electric Co. and Metropolitan Edison.

The PUC historically does not reject merger requests from electric utilities, said David Hughes, executive director of Citizen Power, a Squirrel Hill-based nonprofit advocacy group on environmental and economic issues. Citizen Power has filed to oppose the merger.

"The PUC (Public Utility Commission) historically has been pro-company," Hughes said.

Hughes said that utility companies involved in mergers typically negotiate with opposing parties to reach a resolution on their differences, but "FirstEnergy is being almost unresponsive." He declined to comment on specifics of his group's negotiations with FirstEnergy and Allegheny Energy.

FirstEnergy said it has committed to locating its regional headquarters in Allegheny Energy's current headquarters building in Greensburg. It has pledged there will not be a net job loss at Allegheny Power as a result of any layoffs, Raines said. Some employees may retire, while others may transfer, she said.

"If this merger is destined to go through in lieu of all the opposition that continues to surface, I am imploring the PUC to protect the jobs at the Allegheny Energy headquarters and hold FirstEnergy accountable to their commitment to a Greensburg headquarters," state Sen. Kim Ward, R-Hempfield, said in a statement.

Allegheny Power has about 1,125 employees in Westmoreland County, including 890 in the Cabin Hill headquarters.

The hearings that began yesterday are scheduled to continue daily through Friday, with testimony from CEO Paul Evanson of Allegheny Energy and CEO Anthony Alexander of FirstEnergy. The executives would be open to cross-examination by parties that oppose the deal.

The PUC hearing examiner will review testimony from the hearings, then issue a written recommendation next month, at which time the utility companies and opponents can file briefs in support of or opposition to the recommendation, Kocher said. A vote by the five-member commission on the merger likely will not be held until next year, she added.

Virginia regulators have approved the deal and the companies said they hope to get the remaining state and federal permission by the first half of next year.

The Federal Energy Regulatory Commission also must approve the merger.

Joe Napsha can be reached at jnapsha@tribweb.com or 724-836-5252.