Article published Sep 27, 2001

GPU, FirstEnergy clear hurdle

 By Peter Panepento

Staff writer

The Securities and Exchange Commission stands as the final regulatory roadblock to the proposed merger of electricity providers GPU Inc. and FirstEnergy Corp.

The New Jersey Board of Public Utilities formally approved the merger Wednesday, ending months of often-tense negotiations between the companies, regulators and consumer advocates in the Garden State.

And as the merger moves closer to the finish line, details about the combined company are becoming more clear.

The negotiations in New Jersey, coupled with an equally tense process in Pennsylvania that ended this summer, have created a merger agreement that has satisfied both companies and will lead to service improvements and rate protection for the 4.3 million customers in the combined company's footprint, according to GPU officials.

In their application with New Jersey regulators, GPU and FirstEnergy said the combined company plans to eliminate 1,250 nonunion jobs, or about 9 percent of its combined work force.

Despite those cuts, however, staffing levels are expected to remain constant in Erie, Martin Grzasko, area manager for GPU Energy's Erie office, said in an interview last week.

GPU employs 117 in the Erie region, he said.

That total represents fewer than 1 percent of the combined company's total work force, which will service a territory that stretches from Toledo, Ohio, to the New Jersey shore. The combined company will have 4.3 million customers, $8.5 billion in equity and produce annual revenues of $12 billion.

But while that massive new company will bring job cuts and streamlined services in some areas, Grzasko said the Erie region actually stands to benefit from more responsive service under the new structure.

GPU, he said, has taken some deserved flak for pulling back on its service commitments in the Erie region, particularly for centralizing its decision-making at a corporate office in Reading.

Since the merger announcement, however, the company has been making moves to become more responsive to its Erie customers, and to assimilate into FirstEnergy's corporate culture.

"Everything had been centralized in Reading until the merger announcement," Grzasko said. "Now, it gives local employees, from the lowest meter reader, the opportunity to handle problems locally."

With the merger looming, GPU has been working to repair broken street lights in the city of Erie, improve its underground transformers and decrease the frequency and length of power outages.

Grzasko said those efforts have been working. The Erie region's average customer interruption, the average amount of time a customer is without electricity, was 118 minutes through Aug. 31. Through Aug. 31, 2000, that number was 172 minutes.

"(FirstEnergy) is more measurement oriented," Grzasko said. "That's one of the main parts of their culture that works well."

Despite the local improvements, however, GPU's attempt to merge with FirstEnergy has not been a seamless process.

The merger plan, which was first announced in August 2000, has been met with considerable resistance from consumer groups in Pennsylvania and New Jersey. Though it has now received approval from the boards in both states, some advocates are still trying to stop the merger from moving forward.

Citizen Power and the Clean Air Council have filed a joint appeal in Pennsylvania Commonwealth Court that seeks to reverse the Pennsylvania Public Utility Commission's approval of the merger.

The suit alleges that the PUC violated its regulatory code in issuing its order. In addition, officials from both organizations say they are concerned that the combined company would damage the state's air quality.

Citizen Power is also pushing for Ohio's version of the PUC to put the companies through a formal merger application process, rather than just signing off on the deal, according to Citizen Power executive director David Hughes.

But with the decisions in Pennsylvania and New Jersey behind them, officials at GPU and FirstEnergy are confident they have cleared all but one of the major regulatory hurdles.

"Neither one was an absolute slam dunk," GPU spokesman Ned Raynolds said Wednesday. "We're just pleased that the process is moving along. We're near the end of the road now."

PETER PANEPENTOcan be reached at 870-1707. Send e-mail to [email protected].