Dismissing an eleventh-hour attempt by a regional utility watchdog organization to hold up its pending merger, Akron, OH-based FirstEnergy Corp. reported last week that it has closed its merger with Morristown, NJ-based GPU Inc. The companies announced that the effective date of the merger was Nov. 7.

“With today’s closing of our merger, we will begin operating as a larger, stronger company, better positioned to provide significant benefits to our customers, shareholders and employees,” said FirstEnergy CEO H. Peter Burg.

In an effort to ensure that the marriage was in the public’s interest, Citizen Power said last week that it had asked the Ohio Supreme Court to order the Public Utilities Commission of Ohio (PUCO) to investigate. The group argued that soon after the merger was announced in Dec. 2000, it petitioned PUCO to make a determination as to whether the proposed merger would harm FirstEnergy customers, but PUCO did not act on its request until September, when it claimed it did not need to examine the merger.

In a petition filed Nov. 2, Citizen Power also requested that the court expedite the hearing schedule because FirstEnergy and GPU were planning to consummate the merger on Wednesday, Nov. 7. “The expedited process is necessary largely because PUCO took so long to answer our petition,” said Citizen Power attorney John McCaffrey.

McCaffrey said Citizen Power filed a complaint in Dec. 2000, shortly after FirstEnergy filed its application at other regulatory agencies to acquire GPU. Citizen Power said it petitioned PUCO to make a determination as to whether the proposed merger would harm FirstEnergy customers, but PUCO did not act on its request until September, when it claimed it did not need to examine the merger.

“Here we have FirstEnergy paying billions of dollars to buy GPU and create the sixth largest utility in the country, a regional behemoth, yet PUCO refuses to even look into how this will impact Ohio ratepayers,” said Roger Odisio, economist with Citizen Power. “It would be nice to know, for example, what role the $9 billion in stranded costs customers are paying FirstEnergy plays in this deal, or who is going to protect FirstEnergy customers from being charged for the costs GPU is still paying for the Three Mile Island fiasco.”

The utility watchdog said that while the Pennsylvania and New Jersey public utility commissions, the Federal Energy Regulatory Commission and the Securities and Exchange Commission were approving the proposed merger, PUCO waited nine months to answer Citizen Power’s petition. Even with the other approvals, McCaffrey said that “none of these investigations looked into the impact this merger would have on the Ohio retail market.”

At the time, PUCO claimed it did not need to assert its jurisdiction to review the FirstEnergy-GPU merger because it intervened in the FERC proceeding. Odisio, who worked as a FERC economist for 12 years, says this claim has no merit. “FERC looks at wholesale markets; it does not examine retail markets unless a state commission asks them to. Citizen Power asked FERC to look at retail effects in Ohio, but it refused because PUCO did not make this request,” Odisio said.

“We hope the Ohio Supreme Court will protect Ohio electricity consumers,” said McCaffrey. “Citizen Power is asking the Court to order PUCO to bring FirstEnergy in and investigate whether its purchase of GPU will be harmful to the fledgling retail market in Ohio. You would think that PUCO would see the importance of conducting such an investigation.”

Despite Citizen Power’s court request, FirstEnergy started its first day as a combined company last Wednesday. “We are continuing to complete our merger and don’t believe that their arguments have any merit,” a FirstEnergy spokeswoman told NGI. “We don’t see how this merger will have a negative impact on customers in Ohio since our Ohio customers are under a rate freeze and our Ohio Edison customers are still paying 1990 rates. That distribution rate freeze will continue through 2007, so we don’t see how this merger will negatively impact the Ohio customers.” If anything, she said the merger will bring benefits to its customers because they will be served by a larger, stronger company.

The newly formed company also announced its new board of directors along with executive leadership positions. Burg, who most recently was FirstEnergy’s chairman and CEO, now holds the position of CEO and vice chairman of the newly combined company. Fred D. Hafer, who was the chairman, CEO and president of GPU, has been appointed to the position of chairman of FirstEnergy. The company said its new board of directors consists of sixteen members — ten from FirstEnergy and six from GPU.

FirstEnergy will remain headquartered in Akron, OH, and will be a registered holding company. The company reported that its various subsidiaries have annual revenues of more than $12 billion, and electric sales of 124 billion kWh. Its seven electric utility operating companies — Ohio Edison, The Illuminating Co., Toledo Edison, Metropolitan Edison, Pennsylvania Electric, Pennsylvania Power and Jersey Central Power & Light — comprise the nation’s fourth largest investor-owned electric system, serving 4.3 million customers in a 36,100-square-mile service area that stretches from the Ohio- Indiana border to the New Jersey shore.

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