Bid to stop W. Md. power plant ends Allegheny Power drops campaign to block Warrior Run

February 21, 1997|By Kevin L. McQuaid and Debbie M. Price | Kevin L. McQuaid and Debbie M. Price,SUN STAFF

Allegheny Power System has abandoned its campaign against a $446 million power plant under construction in Cumberland, which it says will force a 13 percent rise in the electric rates for 192,000 Marylanders from Garrett to Howard counties.

The failure of Allegheny Power to renegotiate or terminate its contract with AES Corp. ends months of public strife over the Warrior Run plant, which is scheduled to begin generating electricity in 1999.

A 13 percent rate rise would add $115 per year to the average residential electric bill, and, Allegheny Power claims, would cost the region more than 1,000 jobs.

AES maintains that a rate rise caused by Warrior Run would be less than 5 percent.

"Allegheny Power has now been informed by AES that AES will not consider any reasonably available options," Allegheny said in a statement issued this week. "Unless AES changes its position or fails to adhere to its contractual obligations, or the contract itself is legally revised by some governmental or judicial body, the project will go forward."

The conflict, played out in full-page newspaper advertisements and public statements, has pitted residents of Allegany County, home to Warrior Run, against Washington and Frederick County residents and businesses who fear higher electric rates.

Western Maryland legislators said yesterday that the General Assembly was unlikely to intervene in the dispute between AES and Allegheny Power, but they are looking for ways to lessen the impact of a rate increase.

"I'm not happy, but I don't know that I have the power to do anything about it," said Rep. D. Bruce Poole, Democrat of Washington County, who opposes the power plant. "I'm going to turn over every stone to see if I do, but I suspect that the state Assembly doesn't have the authority to undo this contract."

House Speaker Casper R. Taylor Jr., whose Allegany County district includes the power plant, said he planned to ask the Maryland People's Counsel to determine whether it was possible to file a lawsuit to force other states served by Allegheny Power to share the increased costs of power generated by Warrior Run.

"I'm going to ask them to explore all the possibilities of solving what I think is a grossly unfair discrimination," said Taylor. Warrior Run power "is going into the mix with the rest of the power. The cost should be shared."

Because the Warrior Run project was approved by the state Public Service Commission to serve only Maryland customers, it is unlikely that neighboring states could be forced to share the rate hike, according to federal law.

Allegheny Power and affiliated subsidiaries supply power to portions of West Virginia, Pennsylvania and Virginia. Those states, however, are not slated to receive power generated by Warrior Run.

The utility company sought to buy out its contract with AES, contending that it can buy or produce power less expensively elsewhere. AES, a publicly traded corporation with 35 power plants worldwide, has declined buyout offers, which it says would cost at least $200 million.

"Allegheny Power remains convinced that the completion of the Warrior Run project will not be in the best interests of Allegheny Power customers or the state of Maryland," the company's statement said. "Notwithstanding Allegheny Power sees no viable method by which [it] can alleviate the burden that will be placed on its customers."

Representatives of Allegheny Power declined to comment beyond the four-paragraph statement.

AES called Allegheny's statement "a victory for the 1,000 people and their families who will directly benefit from working on Warrior Run."

Warrior Run, which is expected to burn 650,000 tons of coal a year, has been touted as a boon to the Maryland mining industry. And in fact, most of the permanent jobs associated with the plant are mining jobs. "AES has shown from day one its flexibility and innovation in working to achieve cost savings," said Steven V. Hase, AES Warrior Run's project manager. "We did so in 1988 and again in 1993, and in keeping with that, we're always looking for ways to improve the project for customers and for all parties involved."

In 1988, the state PSC approved construction of Warrior Run and Allegheny Power agreed to buy power from it.

In 1993, Allegheny Power renegotiated its contract to purchase power from Warrior Run down to 6 cents a kilowatt hour, a deal that would cost it $3.3 billion over 30 years. Since then, electric rates have plummeted to 3 cents a kilowatt hour with a drop in natural gas prices.

The utility industry also has undergone radical changes that make long-term contracts, such as the one Allegheny Power signed with AES, less competitive and desirable.

Warrior Run is the product of a 1978 federal law designed to encourage the development of power plants that would use fuel other than oil.

Pub Date: 2/21/97

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