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Arbitration Holds LG&E to Power Contract

December 27, 1999
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Arbitration Holds LG&E to Power Contract

A three-member arbitration panel ruled that Oglethorpe Power Corp.'s power marketing contract with LG&E Energy Corp. and LG&E Energy Marketing Inc. is valid and must be honored. LG&E began its challenge to the contract in 1998. The company said the decision will cause it to increase its fourth quarter after-tax accrued loss on disposal of discontinued operations by $175 million. The loss stems from increased load demands, higher than anticipated future commodity prices and other factors. The increase in the loss reserve will be recorded in discontinued operations.

The ruling resolves an arbitration claim filed by LG&E and its marketing subsidiary that sought to void their Oglethorpe contract. The contract, which was executed in November 1996 and went into effect in early 1997, provides for LG&E to supply about one-half of Oglethorpe Power's total system load for up to 15 years, subject to early termination rights by Oglethorpe at five years and by LG&E at 8 years. LG&E has continued to supply power under the contract while the matter has been in arbitration.

Oglethorpe said the contract, the largest of its kind when it went into effect in 1997, has yielded significant savings for the cooperative and its member systems since its inception. Oglethorpe Power is a power supply cooperative providing wholesale electricity to 39 of Georgia's 42 customer-owned EMCs, which serve more than 2.9 million customers.

Joe Fisher, Houston

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