Southern Energy Buys 5,889 MW Of Generation from Pepco
Southern Energy agreed last week to purchase four Potomac
Electric Power Co. (Pepco) power plants for $2.65 billion, giving
the power generator an additional 5,889 MW of capacity, and direct
access to the mid-Atlantic states market.
Southern Energy is an independent power production and energy
marketing subsidiary of Atlanta's Southern Co., which has more than
48,000 MW of electric generating capacity worldwide.
The four Washington, D.C.-area power plants will become
Southern's first facilities linked to the PJM Interconnection,
responsible for the day-to-day electricity grid operations for New
Jersey, Delaware, D.C., most of Pennsylvania and Maryland, and
parts of Virginia. The PJM also operates a wholesale energy market
in the region.
Southern spokesman David Mould declined to comment on details of
the sale, or whether Southern Energy was planning future purchase
agreements in the region, citing the company's filing earlier this
year with the Security and Exchange Commission (SEC) for its initial
public offering (see NGI, April 24). The
SEC is expected to make a decision on the filing in the next few
months, Mould said.
The power plants purchased are the 2,423 MW Chalk Point Station,
Prince George's County, MD, which is fueled by coal, oil and
natural gas; the 1,412 MW Morgantown Station, Charles County, MD,
which is fueled by coal and oil; the 837 MW Dickerson Station,
Montgomery County, MD, which is fueled by coal, oil and natural
gas; and the 482 MW Potomac River Station, Alexandria, VA, which is
fueled by coal.
In the agreement, Southern Energy also acquired the Piney Point
Oil Pipeline, a 51.5-mile pipeline serving the Maryland power
plants, Pepco's rights and obligations to the 84 MW Southern
Maryland Electric Cooperative combustion turbine, and an
engineering and maintenance service facility.
For the next four years, Southern Energy also agreed to sell
power back to Pepco "at prices below Pepco's current average cost
of production." However, Southern may decide where the power comes
from - it does not have to be provided by Pepco facilities, said
Pepco President Dennis R. Wraase. Southern owns power generating
systems in every major region of the country.
When the sale is completed, probably by the fourth quarter, an
agreement approved by Maryland and District of Columbia regulators
will require Pepco to share its profits with customers. Pepco's
Wraase said he did not know how much customers could expect to
receive because it would depend on how many of them stayed with
Pepco or switched to another energy provider.
"I am confident there will be some profit sharing," Wraase said.
The sale agreement also eliminated customers' exposure to paying
for "stranded costs," relating to the transition to a deregulated
Details on the agreement have taken several weeks to iron out, but
news of it was not a surprise. In January, Pepco announced the
beginning of what it thought would be a year-long auction process by
which it would sell its electric generating facilities. Pepco decided
to exit the generation business early in 1999 to focus on delivering
electricity into the newly deregulated energy markets, and to sell new
products and services from its subsidiaries (see NGI, Feb. 7). The Public Service Commissions of
the District of Columbia and Maryland approved the divestiture plan in
Carolyn Davis, Houston