From: Panepento.Peter [[email protected]]
[[email protected]]
Sent: Tuesday, March 19, 2002 10:29 AM
To: '[email protected]'
Subject: GPU story

By PETER PANEPENTO
Staff writer
A Commonwealth Court judge ruled Thursday that electric companies -- not
their customers -- are responsible for footing the bill for poor business
decisions.

The ruling, which stems from an appeal of the merger of FirstEnergy Corp.
and GPU Inc. by consumer groups, puts the burden on the combined electric
company to account for its losses associated with a 2001 spike in wholesale
electricity costs.

As a result, it overturns a June 2001 agreement approved by the state Public
Utility Commission that gave the combined company an accounting mechanism to
write off those losses, which totaled more than $300 million, according to
some estimates.

That mechanism -- which came in exchange for an extension of state-mandated
rate caps -- would have forced Pennsylvania consumers to fork over millions
to FirstEnergy, according to David Hughes, executive director of consumer
group Citizen Power, which filed the appeal.

But consumer groups who supported the settlement agreement say the decision
-- while right in making companies fiscally responsible for their losses --
will cost consumers more by rolling back rate caps.

FirstEnergy, meanwhile, said that consumers might also lose out because it
could rescind a part of the settlement that allowed the company's affiliates
to sell its generated energy in the former GPU markets.

Without that agreement, the company's affiliates would be prohibited from
selling to its Pennsylvania affiliates -- a move that officials said would
lead to higher prices for consumers.

``We're considering our options,'' said Ralph DiNicola, a FirstEnergy
spokesman. ``We will strongly work to get this issue resolved.''

PUC officials declined comment Thursday, saying that the commission needs to
review the decision.

What is known is that Thursday's decision will not end the dispute over how
FirstEnergy will be able to account for GPU's 2001 wholesale losses.
FirstEnergy officials said the company might appeal the decision to the
state Supreme Court.

Hughes said Citizen Power is considering its own appeal because the
organization wants the merger to be overturned. The organization claims the
merged companies did not properly detail the benefits of the merger to
consumers.

While consumer groups are at odds over whether the June agreement is good
for former customers of GPU, they agree that Thursday's decision offers
important long-term protections for Pennsylvania consumers.

That's because GPU had been seeking to recover more than $300 million in
losses associated with the 2001 spike in wholesale electricity prices.
Because of those high prices, the company was paying more for wholesale
electricity than it could charge its retail customers in Pennsylvania.
As a result, it was looking for help in recovering those costs.

Consumer advocates and the PUC had opposed GPU's request, saying that the
company is responsible for the losses, primarily because it had previously
sold off its generating plants. If it had held onto that generation, GPU
would not have needed to purchase as much wholesale energy and, in turn,
would not have incurred the losses.

Thursday's decision backed up that claim, saying that the company -- not
consumers -- should absorb the loss.

``You can't use the law to hide behind what were a series of business
decisions that were unsound,'' Nora Mead Brownell, a former PUC commissioner
and a current member of the Federal Energy Regulatory Commission, said of
Thursday's decision. ``The ratepayers can no longer be expected to pay the
bills.''

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

Content Date 2/21/02