Allegheny, DQE Merger Raises Competition Concerns
FERC last week put off a final ruling on the troubled merger of
Allegheny Energy and DQE Inc., parent of Duquesne Light, until the
partners decide how they want to resolve some serious competitive
concerns. The Commission gave them the option of divesting DQE's
570-MW Cheswick Generating Station or proceeding to hearing on
their own mitigation measures, which include relinquishing control
of the Cheswick output on a short-term basis and joining the
Midwest independent system operator (ISO).
But all of this may be moot since Allegheny Energy and DQE
lately have been acting more like a divorced couple rather than
soon-to-be corporate newlyweds. In this case, "it's not
clear...whether the bride is going to come strolling down the
aisle, or whether she's going to run out of the church and catch
the first bus to someplace else," said Chairman James Hoecker.
"Staff has expended a lot of resources in expectation of some form
of connubial bliss," but it's "apparent that there is trouble in
paradise here." DQE said it plans to terminate the merger agreement
by no later than Oct. 5th if the "material adverse financial
effects" of the proposed deal aren't remedied by then.
Although the merger is in doubt, the Commission went ahead with
its review of the transaction, particularly focusing on the
infrequently used measure of divestiture as a means to mitigate the
market power of the combined electricity concern.
Commissioner Curt Hebert Jr. noted that divestiture should only
be used as an "extreme measure, just as I would not amputate a
patient's arm if his wrist swelled." Unfortunately, the merger
partners haven't left FERC with much choice to do anything else, he
said. "The problem here arose [when] Allegheny failed to put some
flesh on the bones" of its proposed mitigation measures.
Allegheny Energy, a registered public utility holding company,
owns Allegheny Generating, Monongehela Power, The Potomac Edison
Co. and West Penn Power. The companies provide wholesale and retail
electric service in Pennsylvania, Maryland, Virginia, West Virginia
and Ohio. DQE, an exempt holding company, owns Duquesne Light,
which is engaged in the generation, distribution and sale of energy
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