- The Washington Times - Tuesday, July 15, 2003

Mirant Corp.’s bankruptcy has fueled the chance of higher electricity bills in the Washington area.

The Atlanta energy company, which filed for Chapter 11 bankruptcy protection Monday night, supplies all the power for Pepco, the main electricity supplier in the Washington area with 700,000 customers.

Mirant sells power to the utility at below-market prices under a four-year agreement struck when Mirant bought the company’s electricity plants for $2.65 billion in 2000, Pepco spokesman Bob Dobkin said.

Mirant may seek to void the contract after filing the largest U.S. Chapter 11 bankruptcy case this year, he said.

Mirant has asked for court permission to cancel “burdensome” or “unnecessary” agreements, including power and natural-gas sales contracts, according to court documents.

For now, Mirant continues to supply Pepco under the contract terms and prices and the lights will stay on, Mr. Dobkin said.

“If we had to replace that contract at spot prices, we couldn’t withstand it,” Pepco Chief Financial Officer Andrew Williams said at an investor conference in New York last month. “We’d have to go back to regulators” for rate increases.

Pepco’s rates are regulated by the public service commissions in Maryland and the District.

The company said it plans to use legal action to keep the Mirant contract, but it has other power options.

Those options include signing contracts with power vendors like PPL Corp., Public Service Enterprise Group Inc. and Constellation Energy Group Inc., Mr. Williams said.

Mirant had promised to honor its contracts in refinancing plans rejected by its lenders. While the energy producer is re-evaluating its business plan and doesn’t plan immediate action on its contracts, it has started a program to ensure that its operations and contracts are carried out during bankruptcy, spokesman James Peters said.

“All of our companies are producing and delivering electricity as usual,” he said.

Washington Gas Energy Services (WGES), a WGL Holdings subsidiary, also has contracts with Mirant to provide power to 79,000 customers in the District and Maryland.

Washington Gas, which continues to buy energy from Mirant, said it has $30 million in collateral to cover replacement power costs if the company ends its contracts. WGES natural gas customers are not affected by the bankruptcy.

“Regardless of the course of the bankruptcy case, WGES electric customers should not experience an interruption in their electric service due to this development,” company President Harry Warren said in a statement.

Mirant’s bankruptcy filing is the largest in the nation since WorldCom Inc. filed in July 2002 and the 11th biggest in U.S. history by assets.

In its petition, the company listed $20.6 billion in assets, $11.4 billion in debt and $1.17 billion in cash.

Mirant is the third energy producer to file for Chapter 11 protection in two months, after NRG Energy Inc., owned by Xcel Energy Inc., and Bethesda-based National Energy Group, owned by PG&E; Corp.

Both companies have sought to terminate power contracts.

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