Pepco, FERC seek federal court intervention in Mirant case

WASHINGTON, Sept. 5, 2003 — Pepco, a unit of Pepco Holdings, Inc., and the Federal Energy Regulatory Commission Friday sought relief from a federal district court in Texas to block an effort by bankrupt Mirant Corp. to bar FERC from requiring Mirant to honor its power contracts with Pepco.

Pepco and FERC together asked the U.S. District Court for the Northern District of Texas to remove jurisdiction to hear Mirant’s motions filed Aug. 28 from the bankruptcy court in Ft. Worth. In their joint filing, Pepco and FERC said that resolving Mirant’s motion will require the consideration of non-bankruptcy federal laws over which FERC has jurisdiction under the Federal Power Act.

Dennis R. Wraase, Pepco Holdings’ chief executive officer, called Mirant’s attempt to reject the contracts an effort “to enrich Mirant’s banks and bondholders at the expense of Pepco and its customers.”

Mirant, which filed for bankruptcy July 14, operates several power plants in the Washington, D.C. region which it purchased from Pepco in 2000 and supplies power to Pepco customers under a contract with Pepco, a Pepco Holdings subsidiary. The contract included both purchase of the assets and a commitment to honor power purchase agreements. In its Aug. 28 filing with the bankruptcy court, Mirant sought permission to reject Mirant’s commitment to reimburse Pepco for the cost of electricity supplied under terms of power purchase agreements with third parties. Mirant did not seek to reject the agreements under which it supplies power to Pepco customers, but indicated that it wants to renegotiate the terms of those agreements with Pepco and implied that if Pepco did not accede to its demands it would seek to reject these agreements as well.

The bankruptcy court, at Mirant’s request and without hearing from Pepco or FERC, also issued a temporary restraining order barring the federal regulator from requiring Mirant to continue buying or selling power to Pepco and preventing Pepco from encouraging other parties to seek to protect their rights under the Federal Power Act.

“Mirant’s attempts to prevent Pepco from advocating for its customers and to circumvent FERC’s jurisdiction is unprecedented,” Wraase said.

Wraase also noted that while there is no anticipation of interruption of power supply to Pepco customers as a result of Mirant’s actions, there are other consequences that could negatively affect Pepco’s customers by leading to higher rates. He said that Mirant’s actions have already resulted in Pepco’s debt being placed on credit watch for potential downgrade.

About PHI: Pepco Holdings, Inc., is a diversified energy holding company with headquarters in Washington, D.C. Its principal operating utilities, Pepco and Conectiv, deliver 50,000 gigawatt-hours of power to more than 1.8 million customers in the District of Columbia, Delaware, Maryland, New Jersey and Virginia. PHI engages in regulated utility operations by delivering electricity and natural gas, and provides competitive energy and energy products and services to residential and commercial customers.

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