FERC last week put off a final ruling on the troubled merger ofAllegheny Energy and DQE Inc., parent of Duquesne Light, until thepartners decide how they want to resolve some serious competitiveconcerns. The Commission gave them the option of divesting DQE’s570-MW Cheswick Generating Station or proceeding to hearing ontheir own mitigation measures, which include relinquishing controlof the Cheswick output on a short-term basis and joining theMidwest independent system operator (ISO).

But all of this may be moot since Allegheny Energy and DQElately have been acting more like a divorced couple rather thansoon-to-be corporate newlyweds. In this case, “it’s notclear…whether the bride is going to come strolling down theaisle, or whether she’s going to run out of the church and catchthe first bus to someplace else,” said Chairman James Hoecker.”Staff has expended a lot of resources in expectation of some formof connubial bliss,” but it’s “apparent that there is trouble inparadise here.” DQE said it plans to terminate the merger agreementby no later than Oct. 5th if the “material adverse financialeffects” of the proposed deal aren’t remedied by then.

Although the merger is in doubt, the Commission went ahead withits review of the transaction, particularly focusing on theinfrequently used measure of divestiture as a means to mitigate themarket power of the combined electricity concern.

Commissioner Curt Hebert Jr. noted that divestiture should onlybe used as an “extreme measure, just as I would not amputate apatient’s arm if his wrist swelled.” Unfortunately, the mergerpartners haven’t left FERC with much choice to do anything else, hesaid. “The problem here arose [when] Allegheny failed to put someflesh on the bones” of its proposed mitigation measures.

Allegheny Energy, a registered public utility holding company,owns Allegheny Generating, Monongehela Power, The Potomac EdisonCo. and West Penn Power. The companies provide wholesale and retailelectric service in Pennsylvania, Maryland, Virginia, West Virginiaand Ohio. DQE, an exempt holding company, owns Duquesne Light,which is engaged in the generation, distribution and sale of energyin Pennsylvania.

Susan Parker

©Copyright 1998 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.