It appears that Pennsylvania utility companies Allegheny Power and PSE&G will be the last electricity providers to securitize in 1999, sources say, as both companies are next in line to issue their rate reduction bonds, and are expected to be in the market before the year is out.

"Both are currently working out structure and ratings," said a source close to the situation.

Allegheny's $600 million deal will be led by Morgan Stanley Dean Witter, and PSE&G's possible $2.5 billion transaction will be managed by Lehman Brothers.

Most utility deals have exposure to political risk, because the deals are made possible through language set down in deregulation legislation for the particular state they reside in. But the marketplace, after seeing well-attended, liquid deals from California, Illinois and lately Pennsylvania, seems to have gotten comfortable with the political aspect of the rate reduction bonds.

"It's sort of lost its buzz," said an analyst. "It's just not a hot topic."

While the source believed the upcoming deals will be well received and executed, debate concerning the political risk involved in this type of securitization is "past its prime."

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