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Feds hasten Allegheny case

December 19, 2002|by TARA REILLY

tarar@herald-mail.com

HAGERSTOWN - Federal energy officials on Tuesday denied an attempt by an Allegheny Energy subsidiary to dismiss a complaint by California officials over a $1.3 billion supply contract.

The Federal Energy Regulatory Commission, however, also ruled to speed up the California complaint proceeding by deciding to hear the case directly, rather than sending it to an administrative law judge first, according to the document.

The subsidiary, Allegheny Energy Supply Company, filed an emergency motion in October asking the FERC to uphold the contract and dismiss complaints filed in February by the California Department of Water Resources and the California Electricity Oversight Board.

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California officials requested the hearing before an administrative law judge in an attempt to void or reduce the price structure of an 11-year contract with Allegheny Energy Supply. State officials signed the contract in March 2001 following an energy crisis and at a time when energy prices were higher than normal.

The price reached in that agreement, $61 per megawatt hour, is higher than the current market for power on the West Coast. The current market is about $30 to $40 a megawatt hour, according to the California Electricity Oversight Board.

At the time the contract was signed, the market for a megawatt hour was $250 to $350, Lantz said.

The FERC states in the Tuesday ruling that it was in the public's interest to try to get the matter resolved quickly.

Company spokeswoman Janice Lantz said Wednesday that while Allegheny Energy Supply's motion was rejected, the company is pleased that the case will be expedited.

"This should reduce the amount of time for a final decision," Lantz said.

She said a final decision probably will come sometime after Jan. 27, the deadline for briefs to be submitted to the FERC.

If the matter had gone before the administrative judge first, the case would have lasted for a few months beyond Jan. 27.

Lantz said Allegheny Energy Supply will try to settle the matter with the California officials sooner than that. If that doesn't happen, she said she's confident the FERC will rule in favor of Allegheny Energy Supply.

Allegheny officials in Hagerstown could not be reached for comment Wednesday, nor could California officials.

Allegheny officials had hoped the matter would be quickly resolved because they claim it is "inflicting significant financial harm" on Allegheny Energy and its energy trading subsidiary, Allegheny Energy Supply, according to a FERC filing.

The Oct. 29 filing stated that Allegheny Energy had lost about $4.6 billion in shareholder value since April as a result of the complaint.

Allegheny officials have stated in FERC filings that the uncertainty over the California matter led to its debt rating being downgraded to "junk" status.

The uncertainty also had affected Allegheny's efforts to get favorable loan terms and amounts, they said.

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