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CITY OF PITTSBURGH v. WEST PENN POWER CO.

November 25, 1997

CITY OF PITTSBURGH, Plaintiff,
v.
WEST PENN POWER COMPANY d/b/a ALLEGHENY POWER, ALLEGHENY POWER SYSTEM, INC., DUQUESNE LIGHT COMPANY; and DQE, INC., Defendants.



The opinion of the court was delivered by: MITCHELL

 I. Recommendation

 It is respectfully recommended that the motions to dismiss filed by defendants Allegheny Power and Duquesne Light (Docket Nos. 10 and 13) be granted.

 II. Report

 Presently before this Court for disposition is a motion to dismiss brought by defendants, West Penn Power Company d/b/a Allegheny Power, and Allegheny Power System (collectively "Allegheny Power") and a motion to dismiss brought by defendants Duquesne Light Company and DQE, Inc. (collectively "Duquesne Light").

 Plaintiff, the City of Pittsburgh ("the City"), commenced this action under 15 U.S.C. § 1 ("the Sherman Act") and 15 U.S.C. § 18 ("the Clayton Act") claiming that an agreement entered into between Allegheny Power and Duquesne Light regarding the withdrawal of Allegheny Powers' application before the Pennsylvania Utility Commission ("PUC") and the proposed merger between the defendants are violative of the federal antitrust laws.

 According to the complaint, the City targeted two former industrial sites for redevelopment under industrial sites re-use initiatives. *fn1" Complaint PP 12, 13. It is alleged that the City believed that competition for retail electric utility service in the Redevelopment Zones would attract business and commercial and residential development to the Zones which, in turn, would facilitate redevelopment in these areas. Id. at P 14. Duquesne Light and Allegheny Power are the only electric utilities which possess Certificates of Public Convenience *fn2" from the PUC to provide electric service in Allegheny County. Id. at P 17. Duquesne Light contends that its Certificate of Public Convenience grants it the exclusive right to serve the City and its citizens with retail electric utility service. Id. at P 28.

 The City, nevertheless, entered into discussions with Allegheny Power in the summer of 1996 regarding the possibility of Allegheny Power supplying retail electric utility service for the Redevelopment Zones. Plaintiff acknowledges in the complaint that retail electric utility service as provided by Allegheny Power would be substantially cheaper than if provided by Duquesne Light. Id. at P 26. By letter dated July 9, 1996, Allegheny Power indicated that it was interested in petitioning the PUC so that it could provide electrical service to the Redevelopment Zones and requested that the City first file a petition with the PUC seeking authorization to permit competition within the City. Id. at PP 18-21. In accordance with their agreement, the City filed a Petition in Support of Choice for Retail Electric Service Within City of Pittsburgh on September 4, 1996, and on September 9, 1996, Allegheny Power promptly intervened. Id. at PP 20-24.

 On September 27, 1996, Duquesne Light also moved to intervene in order to oppose the petition filed by the City stating that the Redevelopment Zones are within its authorized service area and not Allegheny Power's as evidenced by its Certificate of Public Convenience. Id. at PP 27, 28. Both the City and Allegheny Power have disputed Duquesne Light's position in this regard in the proceedings presently before the PUC. Id. at PP 28, 29.

 On October 28, 1996, Allegheny Power applied separately to the PUC for approval to begin supplying electrical service to the Redevelopment Zones. On December 6, 1996, Duquesne Light filed a Protest to Allegheny Power's application again stating that it had the exclusive right to service those areas. Id. at PP 30-32. On December 9, 1996, the City sought to intervene in the PUC proceeding initiated by Allegheny Power since it was directly related to the City's previously filed petition. Id. at P 34.

 In the interim, on November 18, 1996, the City, through the Urban Redevelopment Authority of Pittsburgh, solicited competitive bidding from both Allegheny Power and Duquesne Light for the "electric utility infrastructure development" of the two Redevelopment Zones. Id. at P 33. Both defendants responded to the bidding requests on December 16, 1996, with decidedly different proposals. Id. at P 35. The City filed a Supplement to its original petition on January 3, 1997, informing the PUC of the Redevelopment Authorities actions. Id. at P 36.

 A prehearing conference was held on Allegheny Power's Application on February 25, 1997, before the Administrative Law Judge, the Honorable Robert P. Meehan. Id. at P 39. The judge ordered that written direct testimony was to be submitted by the City and Allegheny Power on or before March 26, 1997, and by Duquesne Light on or before April 30, 1997. Hearings were scheduled for the week of June 9, 1997. *fn3" Id. at P 39. The City and Allegheny Power submitted direct testimony on March 25, 1997, as ordered. On April 7, 1997, Duquesne Light and Allegheny Power announced that they had agreed to merge the two companies. *fn4" Id. at PP 41, 42. Once the announcement of the merger was imminent, plaintiff alleges that Allegheny Power and Duquesne Light began to coordinate their efforts with respect to the pending Petition and Application proceedings. Id. at P 46.

 Duquesne Light filed a petition to stay the proceedings before Judge Meehan on April 28, 1997, citing the need to assess the effect of the merger on the PUC proceedings. Id. at P 48. Judge Meehan denied the request on May 1, 1997, finding that a stay was not in the public interest and noting that construction on at least one redevelopment zone was scheduled to begin as early as June 1997. Accordingly, the hearings set for June 9, 1997, were to proceed as scheduled. Id. at PP 50-51.

 On June 6, 1997, the Friday before the Monday hearings were to begin, Allegheny Power filed a Petition to Withdraw Application and Intervention with Judge Meehan, wherein it sought to withdraw its application to provide the Redevelopment Zones with electrical services and to withdraw its Intervention in the City's Petition which was designed to permit choice and competition within the Redevelopment Zones. Id. at PP 52, 53. Judge Meehan canceled the hearings scheduled for the following week and, on June 24, 1997, issued an Order granting Allegheny Power's petition to withdraw both its application and its intervention in the City's petition. Id. at P 54. As a result, plaintiff contends that it has no choice but to obtain retail electric utility service and associated electric ...


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