FirstEnergy Corp.'s acquisition of Greensburg-based Allegheny Energy Inc. got strong approvals Tuesday from both companies' shareholders, setting the stage for final state and federal regulatory decisions in the next few months.
Votes representing 79.1 percent of shares of FirstEnergy's common stock were cast in favor of the controversial $8.5 billion deal, the Akron, Ohio-based electric company said. Of all the shares voted, 97.6 percent were for the acquisition.
Meanwhile, 99 percent of all the Allegheny Energy shares voted were for approval of the acquisition -- which has sparked concerns across Western Pennsylvania about job cuts and more expensive power. Eighty percent of that company's outstanding shares were represented.
Allegheny Energy's corporate offices in Greensburg, which employ more than 900 people, would become the regional headquarters of a local power distribution company. Many of the fears expressed at public hearings held by state utility regulators last month centered on job losses there.
The state Public Utility Commission has scheduled a four-day hearing to start Oct. 12 before an administrative law judge, which will make a recommendation. The full commission, which has to gauge whether the merger provides significant benefits to consumers, is expected to make a decision early in 2011.
"We think FirstEnergy hasn't proven yet that this is in the public interest," said David Hughes, executive director of the Squirrel Hill-based advocacy group Citizen Power.
The merger eliminates competition in both companies' markets, he said, and FirstEnergy has been tough to work with on environmental issues in Ohio, Hughes said, suggesting the company upgrade pollution controls at Allegheny Energy's coal-fired power plants in the state, as a way to make its case before the PUC.
This week, a trial began in federal court in Pittsburgh over claims by Pennsylvania and four other states that Allegheny Energy violated state and federal law for the past 15 years by refusing to bring three Western Pennsylvania power plants into compliance with air regulations.
State Consumer Advocate Sonny Popowsky said some of the savings realized through the merger should go to customers, in the form of lower rates. Popowsky said he also has concerns about service and competitive wholesale prices for power.
West Virginia's Public Service Commission has set a hearing for Nov. 8-10 on the deal. The agency is expected to make a decision early next year. Maryland regulators will signal their approval if they issue no order by Jan. 7. Virginia's State Corporation Commission gave its OK last week.
A decision from the Federal Energy Regulatory Commission to approve, reject or schedule hearings in the case is expected in late October. FERC looks at the acquisition's effect on competition in wholesale electricity markets, ratepayers and state and federal regulation.
Antitrust approvals by the Department of Justice and Federal Trade Commission also could come at any time.
FirstEnergy CEO Anthony J. Alexander, who also would lead the merged company, said the "overwhelming support we've received from our shareholders underscores the value we believe this combination represents to our company."
A FirstEnergy/Allegheny Energy combination would serve 6.1 million customers, making it the largest investor-owned electric utility nationwide with a service area covering 67,000 square miles in seven states. The companies hope to close the acquisition in the first half of 2011.
If the deal is approved, Allegheny Energy's investors will get 0.667 shares of FirstEnergy for each of their Allegheny shares.
FirstEnergy's stock closed yesterday at $36.71, down 63 cents, Allegheny Energy's ended the day at $23.08, down 13 cents.
FirstEnergy owns Pennsylvania Power, with 160,000 customers north of Pittsburgh, plus eight other utilities in Pennsylvania, Ohio and other states. Allegheny Energy operates Allegheny Power, with 700,000 customers in southwestern Pennsylvania.