Court rules in Southern`s favor in TVA suit

BIRMINGHAM -- A federal judge has ruled that the Tennessee Valley Authority improperly stepped outside its congressionally mandated "fence" when it attempted to sell electricity to a power marketing affiliate of Louisville Gas and Electric.

The ruling came in a suit filed by Alabama Power and two other Southern Company subsidiaries against TVA and LG&E Power Marketing, Inc. Judge Robert B. Propst of the U. S. District Court in Birmingham, AL, said TVA cannot sell power to LG&E Power Marketing.

TVA, under the 1959 Bond Act, is prohibited from selling electricity outside its congressionally mandated territory, with the exception of 14 power generators on TVA`s borders with whom it already was exchanging electricity as of July 1, 1957. The exchange exceptions were made so TVA could maintain the reliability of its electric power system. Louisville Gas and Electric was one of those generators, and LG&E Power Marketing and TVA claimed the power marketer, formed in 1990, should also have the "grandfathered" status.

"This court cannot, however, defer to TVA and hold that a separate corporation which was not even conceived of until 1990 is part of a 1957 organization," Propst writes in his opinion. "An apple does not become an orange because TVA says that it is."

The judge went on to question whether the 14 companies exempted in 1959 can purchase power from TVA simply to re-sell it.

In the lawsuit, filed in January, Southern subsidiaries Alabama Power, Georgia Power and Mississippi Power argued that the legal status could not be passed from Louisville Gas and Electric to its power marketing affiliate. Unlike a traditional utility, a power marketer simply buys electricity from the cheapest source and re-sells it, hoping to turn a profit from its transactions. TVA, with its numerous subsidies and tax breaks, could undercut the prices of tax-paying corporations if allowed to sell to power marketers.

"The ruling makes clear that TVA cannot use its advantages as a federal agency to compete unfairly with corporations in power marketing," said A. W. Dahlberg, chairman, president and chief executive officer of Southern Company.

Atlanta-based Southern Company (NYSE: SO), the national`s largest producer of electricity, is the parent firm of five electric utilities: Alabama Power, Georgia Power, Gulf Power, Mississippi Power and Savannah Electric. Other subsidiaries include Southern Electric International, Southern Communications Services, Southern Nuclear, Southern Development and Investment Group and Southern Company Services. Southern Company`s common stock is one of the 20 most widely held corporate stocks in America.