A Federal Energy Regulatory Commission administrative law judge issued a 250-page decision Monday - recommending against the proposed merger of Utah Power & Light Co. and PacifiCorp.

The decision by Judge George P. Lewnes now goes to the full commission for review and a final ruling. The FERC's final ruling will either support, modify or overturn Lewnes' decision, a commission spokeswoman said.She said Lewnes' decision denied the merger in its entirety without conditions attached under which the merger could go through.

Although this initial denial creates a major complication in completing the merger, UP&L said it hasn't lost all hope.

Administrative law judge "decisions have been overturned before, so this is not insurmountable," UP&L spokesman John Ward said.

UP&L and PacifiCorp will have an opportunity to file briefs with the FERC on Lewnes' decision. The merger ruling is on an expedited schedule, but no deadline has been set for the final ruling.

Ward declined to comment in any detail on Monday's ruling until the company has read the entire decision.

"We are convinced that this merger holds great benefits for our customers and all of the other constituencies we serve," he said. "A finding that this is not in the public interest frankly doesn't make much sense to us."

UP&L and PacifiCorp announced their intent to merge in August 1987. The proposed merger would create an $8 billion utility serving more than one million customers in seven states.

The FERC and regulators in all seven states, including Utah, must approve the merger before it takes place. Approval has been received from Idaho, California and Montana, and the Utah commission is now deliberating on its ruling.

A denial from any jurisdiction could kill the billion-dollar deal. But Ward said if the FERC concurs with Lewnes' recommendation, UP&L could appeal to a federal court, although that decision hasn't been made. For tax purposes, the merger must be completed in August or be delayed another year.

FERC approval is necessary because of the vast interstate transmission system PacifiCorp would own as a result of the merger.

Both utilities said that combining their transmission systems would enable them to keep their rates low and competitive by balancing their peaking periods and providing access to sell surplus power to lucrative southwest markets.

Opponents to the merger, primarily publicly owned power systems, contend that it would monopolize a strategic transmission system in the West and freeze out competition in wholesale power sales.

"The administrative law judge apparently agrees with the American Public Power Association that the proposed merger is not in the public interest," Larry Hobart, APPA executive director said.

"The creation of a giant utility operating in seven Western states with monopoly control over vital transmission facilities would frustrate effective regulation and harm electric consumers."

None of the parties either for or against the merger had read Lewnes' lengthy decision posted Monday morning.

"I really can't comment on it until I've read the decision and see the basis for the rejection," said Ted Stewart, chairman of the Utah Public Service Commission.

He explained that the FERC's final ruling will have an impact on the Utah commission's decision because it may affect the merger's proposed benefits to Utah ratepayers.

UP&L has promised the merger would cause rates to drop from 5-10 percent in the Please see UP&L on A2

Utility analysts were also unaware of the decision and offered no detailed comments on its impact.

Under the proposed merger, UP&L shareholders would swap their stock for PacifiCorp shares in a transaction valued between $1.8 billion and $2.2 billion. UP&L would become a division of Portland, Ore.-based PacifiCorp, which also owns Pacific Power & Light Co. serving Oregon, Washington, Idaho, California, Montana and Wyoming. UP&L serves Utah, Idaho and Wyoming.

UP&L stock was off Monday afternoon, though it was too early to tell if the drop was the beginning of a tumble triggered by FERC's decision.

UP&L stock had fallen 23/8 pointsto $28.125 by 1:30 EDT.

The stock price shot up $3 on July 29, 1987, on the day UP&L announced its plans to merge with PacifiCorp.

The current value of the stock is still above what it was a year ago. Last year, UP&L stock was selling at $27.50 a share.

How serious or how permanent a drop in UP&L stock could be depends on why the merger request was denied, said Robin Jaffe, first vice president for Dean Witter Reynolds Inc. in New York City.

"If the denial is not for reasons that will delay the merger unnecessarily, I don't think the stock will be hit that much," she said. "These denials happen at FERC for administrative reasons and it is not always permanent."

Mark Luftig of Solomon Brothers said he did not foresee any drop in PacifiCorp stock following the announcement. PacifiCorp stock was up slightly at 1:30 EDT, rising 5/8 pointto $35.875.