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UNITED STATES
SECURITES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-9C-3
QUARTERLY REPORT PURSUANT TO RULE 58
For the quarter ended September 30, 1997
ALLEGHENY ENERGY, INC.
(Name of registered holding company)
10435 Downsville Pike, Hagerstown, Maryland 21740-1766
(Address of principal executive offices)
Inquiries concerning this Form U-9C-3 should be directed to:
Kenneth M. Jones
Allegheny Energy, Inc.
10435 Downsville Pike
Hagerstown, MD 21740-1766
(301) 665-2710
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ITEM 1 - ORGANIZATION CHART
<TABLE>
<CAPTION>
Name Energy or State Percentage
of Reporting gas-related Date of of of Voting
Company Company Organization Organization Securities Held
<S> <C> <C> <C> <C> <C>
Allegheny Energy, Inc. (1)
AYP Capital, Inc. (2)
Allegheny Energy (3) Energy July 23, Delaware 100
Solutions, Inc. 1997
(new)
</TABLE>
Nature of Business:
(1) Allegheny Energy, Inc. holds directly all of the outstanding
securities in AYP Capital, Inc.
(2) AYP Capital, Inc. holds directly all of the outstanding securities in
Allegheny Energy Solutions, Inc.
(3) Allegheny Energy Solutions, Inc. is marketing electric power generation
within the scope of the Pennsylvania retail customer choice pilot program.
Allegheny Energy Solutions, Inc. also offers products and services,
complementing energy sales, to meet the needs of both business and
residential customers.
ITEM 2 - ISSUANCES AND RENEWALS OF SECURITIES AND CAPITAL CONTRIBUTIONS
Company Company Amount
Contributing Receiving Of Capital
Capital Capital Contribution
AYP Capital, Allegheny Energy $1,000 100 Shares of
Inc. Solutions, Inc. Common Stock
AYP Capital, Allegheny Energy $4,321 Capital
Inc. Solutions, Inc. Contributions
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ITEM 3 - ASSOCIATE TRANSACTIONS
Part I -- Transactions performed by reporting companies on
behalf of associate companies
Reporting Associate
Company Company Types of Direct Indirect Cost Total
Rendering Receiving Services Costs Costs Of Amount
Services Services Rendered Charged Charged Capital Billed
No services have been provided by the reporting
company to associate companies to date.
Part II -- Transactions performed by associate companies on
behalf of reporting companies
Associate Reporting
Company Company Types of Direct Indirect Cost Total
Rendering Receiving Services Costs Costs Of Amount
Services Services Rendered Charged Charged Capital Billed
Allegheny Allegheny See attached 346,760 (26,569) - 320,191
Power Energy Service
Service Solutions, Company
Corporation Inc. Agreement.
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ITEM 4 - SUMMARY OF AGGREGATE INVESTMENT
Investments in energy-related companies:
Total consolidated September line 1
capitalization as of 30, 1997 $4,608,222,000
Total capitalization multiplied by
15%
(line 1 multiplied by 0.15) 691,233,300 line 2
Greater of $50 million or line 2 $ 691,233,300 line 3
Total current aggregate investment:
(categorized by major line of
energy-related business)
Allegheny Energy Solutions, 5,321
Inc.
Total current aggregate 5,321 line 4
investment
Difference between the greater of $50 million or
15% of capitalization and the total
aggregate investment of the registered holding
company system
(line 3 less line 4) $691,227,979 line 5
Investments in gas-related companies:
None
ITEM 5 - OTHER INVESTMENTS
Major Line Other Other
of Energy- Investment Investment Reason for
Related in Last in This Difference in
Business U-9C-3 U-9C-3 Other
Report Report Investment
None
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ITEM 6 - FINANCIAL STATEMENTS AND EXHIBITS
Allegheny Energy Solutions, Inc. Statement of Income
for the quarter and year to date ended September 30, 1997
Allegheny Energy Solutions, Inc. Balance Sheet as of
September 30, 1997.
Copy of the Service Company Agreement between
Allegheny Power Service Corporation and Allegheny
Energy Solutions, Inc.
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Signature
Pursuant to the requirements of the Public Utilities
Holding Company Act of 1935, Allegheny Energy, Inc. has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ALLEGHENY ENERGY, INC.
/s/ KENNETH M. JONES
Kenneth M. Jones
(Chief Accounting Officer)
November 28, 1997
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ALLEGHENY ENERGY SOLUTIONS, INC.
STATEMENT OF INCOME
FOR THE PERIODS ENDED SEPTEMBER 30, 1997
Three Months Nine Months
Ended Ended
OPERATING EXPENSES:
Cust. Accts & Services $1,476,917 $1,476,917
Administrative & General 28,491 28,491
Total Operation & Maintenance 1,505,408 1,505,408
Taxes other than income taxes (19,969) (19,969)
Federal and state income taxes (519,904) (519,904)
Total Operating Expenses 965,535 965,535
Operating Income (965,535) (965,535)
Net Income ($965,535) ($965,535)
Unaudited
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ALLEGHENY ENERGY SOLUTIONS,
BALANCE SHEET
As of September 30, 1997
Assets
Current assets:
Cash $1,000
Other 519,904
520,904
Deferred charges:
Other 102,293
Total Assets $623,197
Capitalization and Liabilities
Capitalization:
Common stock $1,000
Other paid-in capital 4,321
Retained earnings (965,535)
(960,214)
Current liabilities:
Accounts payable - Affiliated 320,191
Accounts payable - Other 1,263,220
1,583,411
Total Capitalization and Liabilities $623,197
Unaudited
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Exhibit B
SERVICE AGREEMENT
BETWEEN
ALLEGHENY POWER SERVICE CORPORATION
AND
ALLEGHENY ENERGY SOLUTIONS, INC.
THIS SERVICE AGREEMENT will be effective September 3,
1997, between Allegheny Power Service Corporation, a corporation
formed under the laws of the State of Maryland, (the "Service
Company") and Allegheny Energy Solutions, Inc., a corporation
formed under the laws of the State of Delaware ("AES").
WITNESSETH:
WHEREAS, the Service Company was created to perform
certain management duties on behalf of Allegheny Power System,
Inc. (the "System"), its utility subsidiary companies (the
"Subsidiaries") and its nonutility subsidiary companies (the
"Nonutility Subsidiaries"); and
WHEREAS, the Service Company offers to provide a central
organization to furnish to the System, the Subsidiaries and the
Nonutility Subsidiaries certain advisory, supervisory and other
services in accordance with current practices and procedures; and
WHEREAS, AES wishes to accept the offer proposed by the
Service Company.
NOW, THEREFORE, in consideration of the mutual covenants
and agreements herein contained, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereto, intending to be reasonably bound, hereby agree as
follows:
1. The Service Company hereby offers to furnish to AES
the services detailed on Exhibit I attached hereto and made a
part hereof.
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2. For all services rendered to AES by the Service
Company, AES agrees to pay the cost thereof. For services
rendered to one or more Subsidiaries, Nonutility Subsidiaries
and/or the System and/or AES, the allocation will be based on the
average of the prior three years' direct costs charged by the
Service Company to each Subsidiary, Nonutility Subsidiary and
AES. Until a three-year history for AES is developed, AES's
costs will be deemed to be the same as the average of the
System's prior three years' direct costs, thereby reducing each
Subsidiary's share proportionately. Once a three-year history
for AES is available, APSC will calculate an allocation
percentage for AES. If the difference between that allocation
percentage and the one used for any of AES's first three years is
material, then APSC will recalculate all allocation percentages
for those years in which the difference was material and AES, the
Subsidiaries, the Nonutility Subsidiaries or the System will each
either pay an additional amount or receive a refund of a
particular amount for that year.
3. The payment for services rendered by the Service
Company to the System, the Subsidiaries, the Nonutility
Subsidiaries and AES shall cover all the costs and expenses of
its doing business, excluding only a return for the use of equity
capital, and that each Subsidiary, Nonutility Subsidiary, the
System and AES shall pay its direct or fair proportionate share.
4. Payment shall be made by AES to the Service Company
on a monthly basis on or before the 20th day of the succeeding
month, upon receipt of a statement showing the amount due.
Certain charges billed by the Service Company to AES may not be
due immediately and will be so indicated on the statement of
billing. Monthly charges may be made on an estimated basis, but
adjustments will be made at the end of each calendar year so that
all charges for the calendar year will be in accordance with the
foregoing.
5. Nothing herein shall be construed to release the
officers and directors of AES from the performance of their
respective duties or limit the exercise of their powers as
prescribed by law or otherwise.
6. The offer set forth herein shall become a contract
effective as of the date of signing. Such Service Agreement shall
continue in full force and effect from year to year but may be terminated
by either party upon 60 days' prior notice, and AES may terminate
such contract at any time with or without notice for any cause
deemed by it to be sufficient.
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7. The Service Agreement will be subject to termination
or modification at any time to the extent its performance may
conflict with the provisions of the Public Utility Holding
Company Act of 1935, as amended, or with any rule, regulation or
order of the Securities and Exchange Commission adopted before or
after the making of this Service Agreement and shall be subject
to the approval of any state commission or other regulatory body
whose approval is a legal prerequisite to its execution and
delivery or performance.
ALLEGHENY POWER SERVICE CORPORATION
By /s/ A. J. Noia
President
Attest:
/s/ Eileen M. Beck
Secretary
Allegheny Energy Solutions, Inc.
By /s/ Alan J. Noia
President
Attest:
/s/ Eileen M. Beck
Secretary
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Exhibit I
Allegheny Power Service Corporation Principal Functions
In accordance with the terms and conditions of the
Service Agreement dated September 3, 1997, Allegheny Power
Service Corporation shall perform for AES the following services
as requested:
1.Provide technical support as needed to offer power
marketing services and to manage AES's interest in
Fort Martin Unit No. 1.
2.Planning and implementation of financial programs
to raise the funds required for AES, including
handling arrangements for bank borrowings and sales
of securities and relationships with investors and
analysts.
3.Counsel on corporate, legal and regulatory matters
and on important contractual relationships.
4.Provide general and administrative services
including, but not limited to, the following:
a) Purchasing.
b) Customer billing and accounting.
c) Information services, including computer
applications and programming and electronic
data processing.
d) Preparation of consolidated financial statements
and cost, statistical, and financial data, as required.
e) Assistance with respect to certain personnel matters,
including, but not limited to, employee benefit matters.
f) Preparation and filing of consolidated income tax
returns and following developments in federal and state
taxation regulations.
g) Administration of insurance.
h) Internal auditing.
i) Corporate security.
5. Certain other services in addition to the above as
Allegheny Power Service
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Corporation may be able to provide and/or AES may require or request.
