BGE's intended smooches a rival Pepco undertakes a joint venture with Trigen Energy

November 15, 1997|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Potomac Electric Power Co. and a New York alternative energy supplier have formed a partnership, a move that could have wide-ranging and negative implications for Baltimore Gas and Electric Co.'s planned merger with Pepco.

The joint venture between the Washington utility and Trigen Energy Corp., which directly competes with BGE in downtown Baltimore, was formed to study the potential for heating and cooling federal government buildings in Washington.

"The federal government spends millions of dollars each year to run steam plants in downtown Washington," said Thomas R. Casten, Trigen Energy's president and chief executive. "The plants are expensive and they pollute downtown Washington's air."

The federal government spends about $30 million a year to heat and cool its facilities in Washington. It could not be determined how much the Pepco/Trigen joint venture could save annually.

But, for BGE, which also has a steam heat and cooling subsidiary, the link between Trigen and Pepco sends an ominous signal for its long-delayed, $3 billion corporate marriage with Pepco, because it marks the first time that either company has hooked up -- even potentially -- with a competitor.

BGE, for instance, recently unveiled a joint venture to market power to other utilities and municipalities. That partnership, however, was with New York investment house Goldman, Sachs & Co.

Both Pepco executives and BGE representatives downplayed the significance of the Trigen joint venture, however, saying the fast-changing and newly competitive electric industry calls for strategic links with various partners.

"In today's world, there are certain times that you cooperate and collaborate and certain times you compete," said John M. Derrick Jr., Pepco's president and chief executive. "How does the saying go? It's not a religion, it's a job."

Derrick added of BGE: "I didn't ask their permission."

"We are aware of Pepco's joint venture and the business considerations behind it," said Arthur J. Slusark, a BGE spokesman. "And, until we've completed the merger process, BGE and Pepco must continue to operate as strong, stand-alone companies that make business decisions they feel are in their best interest."

Slusark declined to comment on the ramifications of the Pepco/Trigen link should the merger with Pepco reach fruition.

Under their joint venture agreement, Pepco and Trigen will study the potential for capturing steam from Pepco's 47-year-old, coal-fired Potomac River plant in Alexandria, Va., and using it to fuel heating and cooling mechanisms for some 100 federal buildings -- including the White House.

The steam currently is emitted into the Potomac River and

wasted.

Trigen, which supplies heat and air conditioning to more than LTC 1,500 customers nationwide, would invest roughly $4 million to install pipes under Washington to heat and cool the buildings. Plant modifications to Pepco's plant could cost several more millions of dollars.

James Abromitis, president of Trigen Energy-Baltimore and head the company's federal projects division, said the actual costs to modify the Potomac River plant would be determined during the study, which is expected to take between two and three months.

Pub Date: 11/15/97

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