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  Not your father’s utility DQE is straining the definition of a power company as it diversifies in unusual directions By Ken Zapinski, Post-Gazette Staff Writer When Duquesne Light Co.’s parent, DQE Inc., scuttled its proposed merger with Allegheny Energy Inc. in July, it was one more step in the power company’s amazing evolution.
One consequence of dropping the $4.3 billion deal is that Duquesne Light will be forced by the Pennsylvania Public Utility Commission to sell off its Beaver Valley nuclear power plant and its other electric generating plants. That’s just fine with the executives on the 16th floor of DQE’s headquarters in the old Chamber of Commerce building Downtown. It might seem strange for an electric utility to want to get out of the business of making power, but DQE is not your typical utility. Just take a look at the bottom line. Last year, nearly 31 cents of every dollar in DQE profits came from doing something other than selling electricity to Duquesne Light’s 580,000 customers: Managing energy consumption at Pittsburgh International Airport and the H.J. Heinz processing plant on the North Side; Producing a synthetic coal substitute from recycling wastes; Creating the largest privately owned water utility company in the state of Texas; Even owning a stake in a pair of high-speed ferries sailing the Irish Sea. And DQE’s outside interests are growing rapidly. They accounted for $61.2 million of DQE’s $199 million in earnings last year, or 30.7 percent. That’s up from just 1 percent in 1992. It’s part of President and Chief Executive Officer David D. Marshall’s plan to transform DQE from a stodgy old-line power company to a conglomerate with its fingers in all manner of utility services. Some are more traditional, such as owning a share of power plants from the Netherlands to Vietnam. But others reach directly into customers’ homes, such as providing free long-distance service, satellite television equipment and home security systems. Wall Street likes the direction. As Marshall bragged at last year’s shareholders meeting, DQE was the nation’s top-performing utility stock over the previous 10 years. DQE officials have repeatedly refused to discuss their subsidiary businesses. The information in this story is taken from DQE annual reports and filings with the Securities and Exchange Commission. DQE’s local power plants could be sold off as early as next year. Even so, the company will remain in the Western Pennsylvania power business. Duquesne Light will continue to own the wires that carry electricity to homes and businesses in Allegheny, Beaver and Westmoreland counties. The rates it charges its customers for that delivery service will remain regulated by the PUC. But DQE’s other businesses are beyond the control of state regulators.
Duquesne Enterprises. This diverse subsidiary, according to the company, "makes strategic investments beneficial to DQE’s core energy business." To limit the utility company’s risks, many investments are in the form of joint ventures or shares of existing companies. One arm, Property Ventures Ltd., owns and develops real estate in Southwestern Pennsylvania. Another arm owns the energy facilities at Pittsburgh International Airport. (Another DQE subsidiary operates the facilities.) One joint venture provides home security equipment and monitoring. Another joint venture is with MCI WorldCom Inc. to provide local telephone service in the Pittsburgh market using, in part, the fiber-optic network that Duquesne Light uses to monitor its electrical system. Another joint effort with BroadPoint Communications pitches free long-distance phone service to people willing to listen to a few ads before they make their call. DQE Energy Services. As its name suggests, this subsidiary has interests in a variety of energy-related ventures. Besides managing energy for the Heinz plant, it has a share of companies developing power plants in Vietnam, Pakistan and India. One arm is also in an alliance to produce E-Fuel, a cleaner-burning synthetic industrial fuel made from mixing coal with byproducts from the recycling of paper and plastics. The company has an E-Fuel manufacturing plant in Tarentum. DQEnergy Partners. Among its other deals, this subsidiary owns AquaSource Inc., formed last year to purchase small and mid-size water and sewer companies in Texas. Through the first quarter of 1998, AquaSource was on schedule to spend $47 million on acquisitions. More recent information was unavailable. Montauk. The most profitable of the DQE subsidiaries, Montauk is a financial services company which generates tax breaks for the DQE system through investments in affordable housing and other areas. In its portfolio, it has interests in several power plants in the Netherlands and the HSS Stena Explorer and the HSS Stena Voyager, two high-speed ferries on the Irish Sea. Not all of Montauk’s investments are quite so exotic. An SEC filing notes that the company also owns two forklifts and two trucks leased by the Weirton Steel Corp.
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