Duquesne Light agreement drops some energy costs

By Kim Leonard

Friday, February 23, 2007

Duquesne Light Co. would provide a discount on electricity service to new or expanding companies under terms of a settlement agreement tied to its parent company's acquisition by an investment group.

The markdown -- designed for large businesses that are boosting their power needs and payrolls -- was among dozens of points that the Downtown-based company worked out this month with business and consumer groups and others who questioned Duquesne Light Holdings' $3 billion deal with the Macquarie Consortium, six investment funds led by Australia's Macquarie Group.

The settlement was filed last week with a state Public Utility Commission administrative law judge, who can recommend its approval by the five-member commission, reject it or change it. Duquesne Light Holdings, the parent of Duquesne Light, needs the PUC's approval in order to complete its ownership change. Duquesne Light said Thursday the PUC could make its decision in the next few months.

The acquisition "will keep Duquesne Light part of our local community for years to come," Chief Financial Officer Mark E. Kaplan told investors yesterday during a conference call that followed the company's release of its quarterly and 2006 earnings report.

On the consumer side, the company promised not to seek another power distribution rate increase until at least 2010 and to maintain its Pittsburgh headquarters.

It agreed to specific customer service standards such as answering 76 percent of calls within 30 seconds, and to expand programs for low-income customers and maintain its local corporate giving at the 2006 level -- about $2.9 million -- for five years.

"Duquesne Light is such a vital part of that region," state Consumer Advocate Irwin A. "Sonny" Popowsky said. "You want to make sure they maintain that corporate presence."

David Hughes, executive director of Squirrel Hill-based Citizen Power, said his consumer advocacy group pushed successfully in settlement talks for a ramped-up program to help low-income customers reduce their energy use. Citizen Power failed, though, to get Duquesne Light to promote solar energy use.

Hughes said he sees little value in Duquesne Light's promise not to ask for a distribution rate increase, since the company just raised that rate for the first time in nearly 20 years.

Popowsky disagreed. "Times have changed" with utilities' requests for rate increases becoming more frequent, he said.

Under the discount plan for companies, Duquesne Light agreed to offer new or expanding companies a 50-megawatt block of energy at up to $3 per megawatt hour below market prices, for three years. A business must increase its load by at least 10 megawatts and add two full-time jobs per megawatt to enjoy the savings. One megawatt powers about 800 homes.

"This is an attractive thing to a new customer looking to build in Duquesne's territory," mainly Allegheny and Beaver counties, said Pam Polacek of McNees Wallace & Nurick LLC, a Harrisburg law firm that represented a group of businesses known as the Duquesne Industrial Intervenors in the PUC case.

A manufacturing plant with a 10-megawatt load could expect to save about $262,800 in a year with the $3 discount, said Polacek, and the lower rate would apply whether or not the business buys its power supply from Duquesne Light.

The company yesterday reported fourth-quarter net income of $28.2 million, or 32 cents a share, compared to $14.1 million, or 18 cents, for the last quarter of 2005. Revenue totaled $220.2 million, compared to $201.2 million a year ago.

Kim Leonard can be reached at kleonard@tribweb.com or (412) 380-5606.

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