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 INDIANAPOLIS, Aug. 17 /PRNewswire/ -- The following was released today by Maurice O. Edmonds, vice president of corporate affairs, IPALCO Enterprises, Inc.:
 The FERC on Monday conditionally approved the proposed merger between PSI and Cincinnati Gas & Electric Company, but only if those two companies agree to conditions which will be difficult, if not impossible, to comply with.
 The first condition is that the merger proposal not be changed at all. The commission stressed that "any change" in the amended proposal would require further commission review. In fact, their proposal changes almost every week. For example, the amended proposal assumes that CG&E will not be required to divest its gas operations. (The commission's order does not discuss divestiture at all.) If CG&E is required to divest, that will be a significant change which requires further commission review. Because we believe that the Securities and Exchange Commission will require divestiture, it is almost certain that PSI and CG&E will have to seek further review from the FERC after the final form of their transaction has been modified by other regulatory agencies.
 Among numerous other conditions, the FERC ordered those companies to upgrade their existing interconnection to 500 MVA, and to obtain transmission service from others for any power transfers which exceed the thermal capacity of their lines. Given the amount of power which they plan to exchange, it will be very difficult for those parties to obtain that transmission service, except at rates which threaten the economic benefits of their transaction. It will be several months, at the very least, before anybody knows whether the conditions imposed by FERC can ever be fulfilled.
 Despite those conditions, the FERC order is still troubling. We find it curious that the FERC would make such a ruling in the face of strong protests from more than 30 intervenors, including the Public Utilities Commission of Ohio (PUCO) and the Public Service Commission of Kentucky (PSKY).
 However, the FERC ruling does not change the fact that the remaining regulatory approvals facing Cincinnati Gas & Electric Company and PSI will be very difficult and time consuming.
 PUCO was particularly concerned that the FERC would approve the CG&E/PSI combination without first determining what authority state commissions would have to "protect consumers from unreasonable affiliate transactions."
 Both PUCO and the Kentucky Commission argued that CG&E and PSI made no real effort to discuss the potential effect if the SEC were to order divestiture of CG&E's gas operations.
 In addition, PSI has yet to file a new application with the Indiana Utility Regulatory Commission (IURC) in the aftermath of the IURC ruling that the original plan by CG&E to acquire PSI was in violation of Indiana law.
 These concerns have not been fully addressed by the commission, and in light of the serious questions raised by these three state regulatory bodies, it seems likely that a CG&E/PSI merger would have a long and rocky road to travel.
 The FERC went out of its way to stress that it was not passing judgment on the relative merits of the IPALCO proposal versus the CG&E proposal. The commission stated its intention is to take a "neutral stance" between the two offers.
 Finally, the commission did not approve any rate plan offered by CG&E and PSI. Instead, the commission required those companies file a rate case within 60 days of completing their proposed merger, and essentially reserved judgment on the rate implications of their proposal until then. This means that no one would know the effect of their merger on rates until long after that merger has been consummated, if it ever is.
 By contrast, IPALCO's rate plan is well known. We at IPALCO have already filed a petition with the Indiana Commission asking for hearings on our plan to combine IPALCO and PSI. While we have started the clock for the one approval we need, CG&E and PSI have yet to file any plans in Ohio, Kentucky or Indiana.
 -0- 8/17/93
 /CONTACT: Marni Lamons, 317-261-8219, or Carla Levy, 317-261-8560, both of IPALCO Enterprises, Inc./

CO: IPALCO Enterprises, Inc.; Cincinnati Gas & Electric Company ST: Indiana, Ohio IN: UTI SU: TNM

MP-OS -- NY034 -- 3500 08/17/93 11:23 EDT
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Publication:PR Newswire
Date:Aug 17, 1993

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