Press Release

Includes Guaranteed Rate Cut in 1999

    Harrisburg, Pa. ¾ The Public Utility Commission (PUC) announced today that West Penn Power will decrease its rates by 2.5 percent in 1999 under a settlement agreement reached between the utility and the parties to its restructuring proceeding, saving customers an estimated $25 million. In addition, two-thirds of West Penn customers will be able to shop for competitive electricity in 1999 as part of the state’s Electric Choice Program. The PUC tentatively approved the settlement 5-0 at today’s public meeting.

    "This is a good deal for West Penn customers, who already pay some of the lowest rates in the state," said PUC Chairman John Quain. "The guaranteed rate cut in 1999 will save customers approximately $25 million. And those who opt to shop for the generation component of their electricity may see additional savings as well."

    Parties signing the settlement include the Office of Consumer Advocate; Office of Small Business Advocate, environmental representatives and representatives of commercial and industrial customers.

    The settlement:

• Provides a guaranteed 2.5 percent rate cut for all customer classes in 1999, regardless of whether customers shop for electricity. The rate cut will save customers approximately $25 million in 1999;
• Provides a system average price to compare of 3.16 cents per kilowatt-hour in 1999. Customers save money when they purchase electric generation for less than the price to compare;
• Gives two-thirds of West Penn’s customers the opportunity to select a generation supplier by January 2, 1999. All customers will be able to choose in 2000;
• Guarantees that the regulated rates charged by West Penn for the transmission and distribution of electricity will not increase through December 31, 2005 ¾ four and one-half years beyond the period required by the Electric Competition Law;
• Extends a rate cap on electricity purchased from West Penn, as the supplier of last resort, through 2008. This is important for customers who opt not to shop for power;
• Establishes a sustainable energy fund for the development and use of renewable energy and clean energy technologies;
• Provides approximately $8 million in 1999 in assistance and energy conservation programs for low-income customers;
• Commits $4 million to the Energy Cooperative Association of Pennsylvania, a licensed aggregator, for a four-year program to provide lower priced electricity to rural and low-income households in Western Pennsylvania;
• Creates an option for customers to choose another licensed supplier to provide metering and billing services beginning September 1, 1999;
• Permits West Penn to recover $670 million in stranded costs over a 10-year period beginning in January 1999. In the event the corporate merger of West Penn’s parent, Allegheny Power, and DQE is consummated, the allowed stranded costs will be $630 million; and
• Allows West Penn to securitize up to $670 million (or up to $630 million in the event of the merger) in stranded costs and guarantees that 75 percent of the savings would be passed on to customers.

    Following the vote, Quain thanked the parties for their commitment to implementing electric choice. "We’ve worked hard to make this difficult transition as smooth as possible," he said. "I’d like to thank all of the parties for negotiating in good faith to fashion an amicable solution that benefits the utility, its customers and the various other groups."

    Today’s vote will be issued as a tentative order. It will be followed by a 12-day public comment period and an anticipated final PUC vote on Thursday, November 19. Under the settlement, West Penn and other parties agree to withdraw all legal challenges if the PUC approves the deal. The PUC approved West Penn’s restructuring case on May 21, but the utility challenged the ruling in state and federal court.

    West Penn, doing business as Allegheny Power, is based in Greensburg and serves approximately 663,000 customers in southwestern and central Pennsylvania.

    For recent news releases, or more information about the PUC, visit our Internet home page: http://puc.paonline.com. Additional information on electric competition can be found at www.electrichoice.com or by calling 888-PUC-FACT.