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Editorial

April 14, 1997

Faced with low generating costs that made it a potential target for a takeover and legislation that may soon force every electric company to compete for a every customer, Allegheny Power opted to take on a partner, DQE, Inc. to help it through the challenging times ahead. Financial analysts who cover the power industry say the creation of Allegheny Energy is a bold move, and one that will result in a stronger utility that should be able to deliver lower rates to an estimated 2 million customers in five states.

Those same analysts say the merger is good fit for two reasons. One is that neither firm, by itself, was big enough to handle the challenges that will come with full competition.

The second is that because Allegheny serves primarily rural customers and Duquesne has mostly urban accounts, the utilities will be able to complement each other, since Allegheny's peak demand is in winter, while Duquesne's is in the summer. By combining forces, the two can share generating capacity instead of building new plants, a move that, with other economies, could save the new company $1 billion in the next 10 years.

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Is this a big deal? You bet it is; the new company will be worth $10.6 billion and have an 11,000 megawatt capacity. It will also be headquartered in Hagerstown, the first company of its size we're aware of to place its corporate headquarters here.

That makes Maryland's commitment to install a $13 million interstate interchange to serve the company's Friendship Technology Park look more like a wise move than a costly risk. It also gives Washington County's economic development specialists something else to point to when they're touting this area's advantages. If Allegheny Energy considers this the place to be, the argument might be, why not your firm?

In any merger, the joining of two departments with similar functions means some positions will be lost. Allegheny predicts staffing levels will drop by 500, but says this will be accomplished by attrition or early retirement.

Allegheny still has many regulatory hurdles to overcome. We congratulate them on this move and wish them good luck in overcoming the obstacles that remain.

 

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