As part of their proposed $11.9 billion merger, GPU and First Energy agreed to cap electric generation rates through 2010 and invest $15 million in renewable energy sources such as wind and solar power.
The companies, along with Pennsylvania Consumer Advocate Sonny Popowsky and statewide environmental group Citizens for Pennsylvania's Future, say the deal is a victory for consumers and the environment.
"We are very proud of our environmental record," said Ralph DiNicola, First Energy's public relations director. "I think the fact that we were able to reach an agreement with such disparate groups is evidence that we are willing to compromise."
But two environmental organizations -- Clean Air Council and Citizen Power -- refused to sign the settlement. They are upset that the utility companies would not commit to specific ways to spend the $15 million, and say the agreement could actually result in the creation of more "dirty" power.
David Hughes, executive director of Citizen Power, said First Energy has a poor environmental record. He noted that eight of its power plants are ranked among the top 100 polluting facilities in Ohio by Environmental Defense, a New York-based environmental group.
First Energy also is being sued by the U.S. Environmental Protection Agency and Department of Justice for violating the Clean Air Act with emissions from its 2,233-megawatt Sammis coal plant in Ohio.
"We simply don't trust this company to spend the [money] on really bona fide renewable energy projects," said Hughes, whose organization promotes renewable energy and advocates its development before state and federal agencies.
DiNicola said First Energy spent $426 million making environmental improvements at the Sammis plant and is operating the facility under the provisions of an agreement the company made with the EPA in the mid-1980s.
First Energy is negotiating with the EPA and hopes to reach a settlement in the Sammis case soon, he said.
Despite the environmentalists' objections, the Pennsylvania Public Utility Commission approved the merger settlement June 14 by a 3-0 vote.
Although GPU and First Energy still need permission from New Jersey and federal regulators before the merger can be completed, PUC approval was a major step forward.
The combination of First Energy, based in Akron, Ohio, and GPU, based in Morristown, N.J., will create the nation's sixth-largest investor-owned utility. The new company will serve about 4.3 million customers in New Jersey, Pennsylvania and Ohio.
GPU has 1.1 million electric customers in Pennsylvania, including 54,800 customers in Northampton County and 131,500 customers in Berks County.
Under the PUC-approved merger settlement, First Energy will deposit $5 million into two GPU Sustainable Energy Funds within 60 days of the merger's completion.
The Sustainable Energy Funds, created by GPU as part of Pennsylvania's effort to deregulate the electric industry, are administered by a board of company officials and community residents. Money is used to promote conservation and greater use of renewable energy sources in GPU's Pennsylvania service territories, said Peter Adels, a Penn Future attorney who helped negotiate the settlement.
But Michael Fiorentino, the Clean Air Council's Harrisburg director, said the $5 million that First Energy has agreed to is actually less than what GPU had already pledged under a prior agreement with the PUC.
As part of a 1998 deregulation settlement, GPU agreed to funnel a portion of its electric distribution revenue into the Sustainable Energy Funds. At the time, officials estimated the deal would have generated about $8.2 million for renewable energy investment, but Fiorentino now says the amount could have been as high as $11 million.
"We fought for that $8.2 million," Fiorentino said. "To see it cut nearly in half is totally unacceptable."
Besides depositing $5 million in GPU's Sustainable Energy Funds, First Energy agreed to spend another $10 million over five years on renewable energy projects, including the possibility of using $3 million to develop a wind-powered generation plant.
"I think it's really a tremendous result, given what we were faced with," said Adels, the Penn Future attorney.
Adels also praised First Energy's willingness to develop a program that will use real-time electric metering and other technology to reduce electricity usage during times of peak demand.
He said such a program will cut down on smog production during times when power plants are working hardest. And it will also improve the reliability of the electric grid for everyone and help reduce wholesale prices by lowering demand when supplies are scarce, he said.
"To me, from a genuinely environmental and consumer perspective, that is the most important part of this agreement," Adels said. "They [First Energy] seem genuinelyopen to working with us and creating programs that meet the guidelines of the agreement."
But Clear Air Council and Citizen Power note that the settlement only requires First Energy to consult with environmental groups on ways to spend the $10 million, leaving the final decision in the hands of the company.
"If there's nothing but the best intentions with the funding, then why refuse to specifically earmark the funding for wind?" Fiorentino asked. "You could have 100 megawatts of wind [generation] up in this state in a year if you wanted to do it. It just takes the will to do so."
Opponents also are concerned that distributed generation is listed among the acceptable uses for the $10 million.
Distributed generation is the practice of installing relatively small power generation equipment close to where it will be used. Although some forms of distributed generation, such as fuel cells and natural gas microturbines, are considered environmentally friendly, others emit more pollution.
Fiorentino said GPU recently began installing diesel fuel generators around the state under its distributed generation program, and he fears part of the $10 million provided in the settlement could be used for more diesel units.
"To say that there's $10 million in this deal for renewables, and then to allow the use of this money for those kind of units, it's just not the kind of agreement that we could sign in good conscience," he said. "We just think that's a travesty to air quality, and they are going to be adding to the ozone problem."
But Adels said Penn Future decided to support the settlement because the organization believes it can do more good by working with First Energy than by fighting the company.
"On the $10 million, they simply wouldn't agree to a precise way to spend it," Adels said. "The bottom line was we were not going to get them to agree, and we decided it was preferable to sign on and work with them to spend the money wisely. If they don't do it, we can litigate it."
DiNicola said First Energy is committed to working with Penn Future and other groups to make positive environmental advances.
"You just have to understand something," DiNicola said. "You just can't produce electricity with absolutely no impact on the environment. We continue to balance our customers' need for electricity with environmental responsibility."
Although he acknowledged that coal plants are not popular with environmentalists, he said the company is interested in using new technology to reduce plant emissions.
"We've been involved in more clean coal projects than any other utility in the country," DiNicola said. "Because two-thirds of our power comes from coal, we need to burn coal cleanly."
Popowsky, Pennsylvania's consumer advocate, said the settlement offers a lot of potential, but stressed that trust and cooperation is needed from both sides.
"There's always a trade-off in getting companies to invest in [environmental] programs like that," Popowsky said. "The goal is to get the commitment and move forward. Hopefully, everyone will work together in good faith."
Reporter Christian Berg
610-820-6517
The Sustainable Energy Funds, created by GPU as part of Pennsylvania's effort to deregulate the electric industry, are administered by a board of company officials and community residents. Money is used to promote conservation and greater use of renewable energy sources in GPU's Pennsylvania service territories, said Peter Adels, a Penn Future attorney who helped negotiate the settlement.
As part of a 1998 deregulation settlement, GPU agreed to funnel a portion of its electric distribution revenue into the Sustainable Energy Funds. At the time, officials estimated the deal would have generated about $8.2 million for renewable energy investment, but [Michael Fiorentino] now says the amount could have been as high as $11 million.
Fiorentino said GPU recently began installing diesel fuel generators around the state under its distributed generation program, and he fears part of the $10 million provided in the settlement could be used for more diesel units.