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Allegheny, FirstEnergy merger gets Md. regulatory approval

January 19, 2011|By JULIE E. GREENE | julieg@herald-mail.com

The Maryland Public Service Commission has approved the proposed merger of FirstEnergy and Allegheny Energy, leaving the Pennsylvania Public Utility Commission as the sole regulatory hurdle to the merger.

Maryland's PSC approved the merger Tuesday with 20 conditions, according to an online filing.

FirstEnergy spokeswoman Ellen Raines said the merging utilities have 30 days to respond to the commission's order. The commission's conditions were largely consistent with the settlement agreement filed by the companies and several parties to the case, she said.

One change was related to how the rate credit for customers is to be paid. Merger approval was conditioned upon customers receiving the credit at one time, to be distributed within three months of the merger's completion, rather than in monthly installments over four years, according to the filing.

FirstEnergy is to pay the $6.5 million credit for customers of Potomac Edison, as the power company will be called in Maryland. That would amount to about $29 for each residential customer, according to the filing at the PSC's website at http://webapp.psc.state.md.us/Intranet/home.cfm.

Also, Potomac Edison cannot seek to recoup merger costs through rates, according to the condition list in the filing.

FirstEnergy, based in Akron, Ohio, announced in February that it would buy rival Allegheny Energy for about $4.7 billion in stock. The deal would create one of the nation's largest power companies, with customers from Ohio to New York.

The merger already has cleared U.S. Department of Justice review and was granted approved from the Federal Energy Regulatory Commission, the West Virginia Public Service Commission and the Virginia State Corporation Commission.

Shareholders of Allegheny, based in Greensburg, Pa., would receive 0.667 shares of FirstEnergy common stock in exchange for each share they own, the companies said in February.

The merger will improve the mix of power generation at a time when regulations on pollution, including carbon dioxide, are expected to get tougher, Allegheny spokesman Todd Meyers said last week.

Allegheny depends on coal for much of its generation. FirstEnergy relies on nuclear power along with coal, natural gas and renewable sources.

The companies in February said 80 percent of the generation from the combined company will come from nuclear power and super-efficient coal plants, The Associated Press reported.

FirstEnergy serves 4.5 million customers in Ohio, Pennsylvania, New Jersey and New York with utilities that include Ohio Edison, Cleveland Electric Illuminating, Toledo Edison and Jersey Central Power and Light.

Allegheny has 1.6 million customers in Pennsylvania, West Virginia, Maryland and Virginia.

The merger proposal has included maintaining regional headquarters in Allegheny's service areas for Potomac Edison, West Penn Power and Mon Power — formerly known as Monongahela Power, Allegheny Energy officials said. The one for Potomac Edison will be in Western Maryland but a site has not been selected yet, Meyers said last week. Meyers said the local headquarters is not expected to be in the Downsville Pike building that served as Allegheny Energy's headquarters from 1996 to 2004.

Another condition set by the Maryland Public Service Commission  is that, for at least two years, the merger will not result in any net job losses for its utility operations in Maryland due to involuntary attrition from the merger, according to the filing.

Allegheny has about 380 Maryland-based workers.

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