Tuesday, August 12, 2003

Impact of energy case uncertain

Judge ruled against utility

By Joe Milicia
The Associated Press

A federal judge's decision last week that FirstEnergy Corp. violated pollution control laws when updating a plant sets a precedent but doesn't doom other power companies awaiting trial, analysts say.

The decision may, however, put more pressure on companies already trying to settle cases - such as Cinergy - to close the deals.

U.S. District Judge Edmund Sargus ruled that the Akron-based company should have determined that changes at one of its plants would increase overall pollution emissions.

It was the first trial over government accusations that utilities have rebuilt 36 power plants without installing the state-of-the-art smog controls required under the Clean Air Act.

"It's bound to be a precedent to a degree," law professor Earl Murphy said Friday. "Every judge will have to look at it and say, 'How does my case differ?'"

But Murphy, who teaches environmental law at Ohio State University, wasn't convinced of the sweeping victory that environmentalists quickly claimed after the ruling was issued Thursday.

"I think people who are trying to predict the federal judiciary are not wise," Murphy said. "It's like trying to predict the U.S. Supreme Court."

The Justice Department says FirstEnergy was required to install the best available pollution control technology when work was done between 1984 and 1998 on the W.H. Sammis plant near Steubenville in eastern Ohio.

Prosecutors argued the additional controls were necessary because the improvements were major modifications that extended the plant's life and allowed it to generate more electricity.

The government says the pollution from FirstEnergy and others winds up in the Northeast, where it causes acid rain and health problems.

FirstEnergy maintains that the work was routine maintenance that did not require additional smog controls or increase generating capacity or emissions.

The company has not decided whether to seek Sargus' permission to appeal, spokeswoman Ellen Raines said.

Similar cases are pending against Columbus-based American Electric Power, Illinois Power Co., Duke Energy Corp. and Southern Co.

The Environmental Protection Agency is working on settlements with Cinergy Corp. and Southern Indiana Gas & Electric - something other companies could be more inclined to do following Sargus' ruling, said analyst Paul Fremont of Jefferies & Company Inc.

"It probably adds to their incentive to try and settle the case," Fremont said.

However, the Bush administration is considering easing clean air rules to allow utilities to avoid having to install expensive new antipollution equipment when modernizing plants.

"What the EPA is fighting for in court here might be moot," Fremont said.

Also, Sargus' criticism of the EPA for erratically enforcing clean air laws could have power companies waiting for the next phase of the trial in March, in which the judge will determine penalties against FirstEnergy, Fremont said.

Warwick Busfield, an analyst for Fahnestock & Co., said future court rulings on related cases could be as inconsistent as the EPA's enforcement of clean air laws.

He said it's too soon to predict what will happen in other cases.

The case against AEP, one of the nation's largest power generators, is expected to go before Sargus in January 2005.

AEP spokesman Pat Hemlepp said the facts in their case differ from FirstEnergy's.

"You can't make any assumption on the strength or validity of our case based on the decision made in someone else's case," Hemlepp said.

He said a settlement always has been a possibility.

"We've been consistent in saying we are seeking a reasonable solution to litigation and we continue to feel that way," he said. "But we also strongly believe we've done nothing wrong."

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