Utility customers face 13 percent rate hike

November 20, 1996


Staff Writer

Allegheny Power customers could face a 13 percent increase in their utility bills unless the company can get out of a deal to buy power from a planned co-generation plant in Cumberland, Md.

The proposed rate increase was announced this week by Allegheny Power in a meeting with larger power users in Frederick, Md. The company plans to meet with other commercial customers across the region in the coming weeks.

A 13 percent hike would increase the monthly bill of an average residential customer in Maryland by about $9, said Cyndi Shoop, Allegheny Power spokeswoman. An average residential customer uses 1,000 kilowatt hours of electricity and currently pays about $70 a month for service, Shoop said.


Allegheny Power said Tuesday that buying power from the Cumberland plant could cost Maryland customers $1.7 billion more over 30 years than if the power came from a source other than the Applied Energy Services (AES) Warrior Run project in Cumberland.

The prediction is enough to make a company that uses a lot of electricity leave the area, one company official said.

Maryland Paper in the 70-81 Industrial Park near Williamsport is one of Allegheny Power's largest customers in the state. Company President Mathew Chakola said he wouldn't hesitate to move his operation in search of more affordable rates.

Chakola said he pays $60,000 a month for electricity.

"We would have no choice but to go elsewhere," Chakola said. "Paper making uses an intense amount of power."

Maryland Paper is in the process of doubling its full-time workforce of 56 at an average hourly pay of $10, Chakola said.

AES Warrior Run Development Director Steven Hase, contacted at his Cumberland office Tuesday, said a deal's a deal.

"It's a little late to try to get out of this," he said. "We expect them to live up to their end of the bargain.

"Allegheny Power is trying to scare rate-payers to pressure us to sell out," Hase said. "What about the jobs and economic benefits we have promised?"

AES said the Warrior Run project will generate more than 600 construction jobs, create 270 permanent jobs, pay $100 million in taxes and add $3 billion to the state's economy.

The competition created by deregulation, which Allegheny Power claims has created cheaper power sources, is the same competition that will enable consumers to shop around for electricity, Hase said.

AES has raised the $400 million needed for the coal-fired power plant under construction in Cumberland, Hase said. It's expected to be operational in three years.

Under a 1988 agreement between the two companies, the Warrior Run plant would generate 180 megawatts of electricity to be wholesaled to Allegheny Power, officials of the companies said.

Hase said the agreement was approved by the Maryland Public Service Commission with the understanding there would be a single increase when the plant starts generating power.

Utilities are required by the federal Public Utility Regulatory Policies Act (PURPA) to negotiate future purchases of electricity with nonutility generators.

Allegheny Power has increased its average rates in Maryland by 23 percent over the past five years, Officials said.

Allegheny Power said it intends to honor its contract with AES and is only attempting to buy out the contract. There's no estimate of how much Allegheny Power will offer to get out of the deal, Shoop said.

An economic study commissioned and released by Allegheny Power found that the deal with AES has the potential for economic disaster because competition has resulted in lower cost alternatives which weren't available eight years ago when the agreement was signed.

The study found that a 10 percent increase in electric rates would mean the loss of at least 88 jobs a year in the utility company's Maryland service area, which includes Western Maryland and parts of Carroll, Howard, and Montgomery counties.

More than 190,000 customers are in the service area, Shoop said.

Allegheny Power successfully negotiated a buyout in May of a PURPA project planned for Greene County, Pa., Shoop said.

The buyout cost the utility $31 million, but customers there saved $665 million in higher energy rates that would have been necessary over the 30-year life of the contract, the company said.

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