Power struggle in Western Md. Electricity: When the Warrior Run generating plant comes on line in 1999, customers will see utility bills rise. The question is by how much.

February 16, 1997|By Kevin L. McQuaid and Debbie M. Price | Kevin L. McQuaid and Debbie M. Price,SUN STAFF

South from Cumberland along Route 51, the story of Allegany County's economy unfolds. The giant plate-glass plant is closed; a new federal penitentiary, unwelcome elsewhere, has been embraced as a major employer.

And then there are the unfinished concrete walls of a $446 million power plant -- and, some contend, the future.

To the residents of Allegany and Garrett counties, the AES Warrior Run power plant, built to burn Maryland coal to generate electricity, offers a toehold on 21st-century prosperity with its promise of construction jobs, rejuvenation of the mining industry and the touted "spinoff" employment throughout the region.

But for other Western Marylanders, scant miles east in Washington and Frederick counties, AES Warrior Run raises the specter of economic disaster.

When Warrior Run fires up in 1999, electric rates for 192,000 customers from Garrett to Howard County will increase. The big question is how much.

Allegheny Power Co., which is slated to buy power from Warrior Run, claims that a 13 percent rate increase is inevitable under its current 30-year contract with AES. Such an increase could be devastating to manufacturing businesses and economic development, and would increase the average residential bill by $115 a year.

AES counters that the anticipated increase will be about 5 percent and that an Allegheny-engineered buyout of the contract would be much more costly for utility customers.

AES, a 15-year-old publicly traded corporation with 35 power plants worldwide, and Allegheny have launched public relations campaigns replete with contradictory numbers. The conflict has pitted Western Marylander against Western Marylander, divided the legislative delegation and spread the twin fears of job loss and higher utility bills.

"This is the sleeper business issue for 1997 in Western Maryland," said Del. D. Bruce Poole, a Hagerstown Democrat who opposes the plant.

At the heart of the controversy are issues of cost and need.

In 1992, Allegheny Power agreed to pay 6 cents a kilowatt hour for electricity generated by Warrior Run. Four years later, the cost of electricity plummeted to 3 cents a kilowatt hour with a drop in natural gas prices.

Furthermore, Allegheny Power contends the region doesn't need Warrior Run's power, and won't for years to come.

"This is the white elephant to end all white elephants in Western Maryland," said Alan J. Noia, Allegheny Power's president and chief executive.

AES argues that the region is growing far faster than Allegheny calculates and that the state agreed back in 1987 that Warrior Run was needed.

"Everybody has known since the beginning that there would be a rate increase," said House Speaker Casper R. Taylor Jr., whose Allegany County district is home to Warrior Run. "Everybody went into the contract with open eyes. No one had a gun held to anyone's head."

Two years away from completion, the plant has already cost more than $200 million for construction and design, according to AES. Last year, Allegheny offered to buy out its $3.3 billion contract with AES for about $100 million, a figure that AES rejected as too low, sources said.

Although neither side will discuss specific offers, AES contends that a buyout to cover its cost so far would add at least 10 percent to utility bills.

If Allegheny were able to negotiate a buyout, the utility would seek to pass the entire cost along to customers through increased rates, AES officials say. Such a rate increase would require approval of the state's Public Service Commission, which regulates the utility industry.

"We could buy out AES, build our own new plant and still save customers money in the first year and in every year going forward," said Michael P. Morrell, an Allegheny Power senior vice president and its chief financial officer.

AES argues that Warrior Run will save customers as much as $876 million, by providing a stable source of power unaffected by market fluctuations.

"The sky is not falling on the electric customer, as has been alleged by Allegheny," said Steven V. Hase, project manager for AES. "They are trying to hold our project hostage, and make us a scapegoat if they want to raise rates."

Dueling campaigns

To make their cases, Allegheny Power and AES have taken to the streets -- and the pages of local newspapers.

"It's Time We Took A Stand," shouts an advertisement paid for by Allegheny Power and signed by 19 major businesses in Washington and Frederick counties.

At an Annapolis news conference last month, AES was joined by dozens of supporters wearing "Yes! AES" buttons. One after another, Allegany County's business and civic leaders took to the microphone to extol Warrior Run's benefits and openly bash the utility.

"This is the cruelest thing to happen to Western Maryland since the closing of Kelly-Springfield Tire and the PPG glass plant," said Terry Bowman, president of a regional construction trades council, of Allegheny Power's campaign.

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