Edison Boosts Plans for Pennsylvania Presence

Edison International Inc., the fifth-largest U.S. utility, on Thursday said it plans to sell electricity in Pennsylvania next year to further its effort to compete in the northeastern U.S. electricity market.

Edison said its Edison Source subsidiary signed a three-year agreement to sell electricity to Philadelphia Gas Works, Philadelphia’s municipally owned natural-gas utility, which would resell it to its customers. The Philadelphia City Council is expected to approve the agreement after its summer recess. The value of the agreement would depend on how many Philadelphia Gas Works customers want to buy the electricity.

Analysts said it could be difficult for the Rosemead-based company to make a profit in Pennsylvania because of the thin margins on electricity sales.

In addition, the Philadelphia Gas Works alliance would put Edison in head-to-head competition with Peco Energy Co., the region’s dominant utility.

“Local utilities have a lot of brand equity,” said Kyle Rudden, an analyst with J.P. Morgan Securities. “It will be tough for any out-of-state player to compete in a different market.”

Most Pennsylvania residents will gain the right to shop for an electric company next year, with the rest in 2000.

Because of Pennsylvania’s location, it’s attractive to out-of-state utilities eager to enter the Northeast region’s lucrative electric market.

The Philadelphia Gas Works agreement is Edison’s second move in Pennsylvania this month. Edison said Aug. 3 that it is buying a coal-fueled generating plant in western Pennsylvania for $1.8 billion. Edison isn’t sure if the electricity from that plant would be sold to Philadelphia Gas Works, said Linda Yanna, a spokeswoman for the Edison Source unit.

For its part, Philadelphia Gas Works is optimistic it would attract customers from Peco, said Chief Executive James Hawes III.

Peco is “indifferent” to Philadelphia Gas Works’ plans, said Michael Wood, a Peco spokesman.

“We do look forward to the day that we can market natural gas in the city of Philadelphia,” he said.

There aren’t any plans to open Philadelphia’s gas market to competition, Wood said.

Edison shares rose 13 cents to close at $28.19 on the New York Stock Exchange.