<PAGE> File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM U-1
_______________________________
APPLICATION OR DECLARATION
under the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
* * *
SOUTHERN OHIO COAL COMPANY
CENTRAL OHIO COAL COMPANY
WINDSOR COAL COMPANY
1 Riverside Plaza, Columbus, Ohio 43215
(Name of company or companies filing this statement
and address of principal executive office)
* * *
AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
(Name of top registered holding company
parent of each applicant or declarant)
* * *
G. P. Maloney, Executive Vice President
American Electric Power Service Corporation
1 Riverside Plaza, Columbus, Ohio 43215
Jeffrey D. Cross, Assistant General Counsel
American Electric Power Service Corporation
1 Riverside Plaza, Columbus, Ohio 43215
(Names and addresses of agents for service)
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS
Southern Ohio Coal Company ("SOCCo"), a West Virginia
corporation, Windsor Coal Company ("Windsor"), a West Virginia
corporation, and Central Ohio Coal Company ("COCCo"), an Ohio
corporation (collectively, the "Companies"), are subsidiaries of
Ohio Power Company ("Ohio Power"), an electric utility subsidiary
of American Electric Power Company, Inc. ("AEP"), a registered
holding company under the Public Utility Holding Company Act of
1935, as amended (the "1935 Act"). The Companies are seeking
authorization herein to sell coal to non-associate companies for
a price in excess of the incremental cost to produce such coal.
A. Background and Operation of SOCCo's Meigs Division
The Meigs Division of SOCCo is located in Meigs and Vinton
Counties, Ohio. The Division operates two underground mines,
Meigs No. 2 and Meigs No. 31 as well as Meigs No. 31 Preparation
Plant. The preparation facility, designed to separate a portion
of the impurities from the raw coal, supports both mines and has
a capacity of more than 2,200 raw tons per hour. Along with the
preparation plant at the Parker Run Portal, there is a large
warehouse, central shop, portal and office/bathhouse facilities.
The Meigs No. 31 mine also has a satellite portal complex near
Wilkesville, Ohio. Meigs No. 2 has a small shop,
office/bathhouse, and warehouse, along with other portal
facilities. The Division office housing engineering and
administrative personnel is located at Point Rock, Ohio.
The coal is produced from the two mines by both longwall and
continuous miner units utilizing UMWA personnel on a curtailed 4
day per week basis. Maintenance is performed on the fifth day.
Meigs No. 31 operates one longwall unit and three continuous
miner units, while Meigs No. 2 operates one longwall unit and two
continuous miner units. The two mines were idled throughout the
month of March 1995 due to reduced coal needs and are currently
projected to produce 4,445,000 tons in 1995 and about 4,700,000
tons per year thereafter. In the past, they have produced as
much as 5,900,000 tons in a year and are still capable of
operating at this level efficiently. A five-mile overland
conveyor carries coal from the Meigs No. 2 mine to the
preparation plant. Coal produced at Meigs No. 31 exits the mine
at the preparation plant. A 10-mile conveyor transports clean
coal from the preparation plant to Ohio Power's General James M.
Gavin Power Generating Plant. The Meigs Division was staffed by
822 active employees, including union and management personnel as
of March 31, 1995.
Production History and Forecast
Year Clean Coal Produced (tons)
1992 - Actual 5,207,629
1993 - Actual 3,744,223
1994 - Actual 4,324,313
1995 - Forecast 4,445,000
1996 - Forecast 4,700,140
1997 - Forecast 4,700,140
1998 - Forecast 4,700,140
1999 - Forecast 4,700,140
B. Background and Operation of Windsor
Windsor is located in Brooke and Ohio Counties, north of
Wheeling, West Virginia. Windsor operates one underground mine
and the 44 Hollow Preparation Plant. The preparation facility,
designed to separate a portion of the impurities from the raw
coal, has a capacity of more than 600 raw tons per hour. The
office complex and portal is located near West Liberty, West
Virginia; the shop and warehouse are located at 44 Hollow.
The coal is produced from the mine by one longwall unit and
two to three continuous miner units utilizing UMWA personnel
primarily staffed on a two shift 5 day per week basis. To meet
Ohio Power's currently reduced coal requirements, the longwall
unit operates 6 out of 10 machine shifts per week. The
continuous miner units operate approximately 17 machine shifts
per week. The mine is projected to produce 1,187,385 tons in
1995, but is still capable of efficiently producing 1,700,000 or
more tons per year. A one-mile conveyor carries coal from the 44
Hollow Preparation Plant through abandoned mine workings to a
barge loading facility on the Ohio River. Coal produced at
Windsor is transported by the Indiana Michigan Power Company
River Transportation Division, primarily to Ohio Power's Cardinal
Plant in Brilliant, Ohio. Windsor was staffed by 213 active
employees, including union and management personnel, as of March
31, 1995.
Production History and Forecast
Year Clean Coal Produced (tons)
1992 - Actual 1,667,873
1993 - Actual 1,678,104
1994 - Actual 1,208,924
1995 - Forecast 1,268,383
1996 - Forecast 1,084,105
1997 - Forecast 995,196
1998 - Forecast 928,661
1999 - Forecast 897,156
C. Background and Operation of COCCo
COCCo's operations are located within 120,000 acres of
Morgan, Noble, and Muskingum Counties, Ohio. COCCo currently
operates one 110 cubic yard (the 2570) dragline, the Muskingum
Electric Railroad and the Unionville Preparation Plant. The
preparation facility, designed to separate a portion of the
impurities from the raw coal, has a capacity of more than 900 raw
tons per hour. Along with the preparation plant there are many
small satellite facilities located on the property, as well as an
office and shop facility that houses engineering, administrative
personnel, the store room, and a major repair shop.
The coal is produced from one dragline pit utilizing UMWA
personnel on a 5 day per week basis. In addition to the 2570
dragline, the mine operates a 17 cubic yard pre-bench shovel with
140-170 ton trucks, and associated coal hauling and reclamation
equipment. Due to reduced coal requirements, the mine is
projected to produce at most 1,123,000 tons in 1995 but is
capable of producing approximately 1,500,000 tons per year. The
Muskingum Electric Railroad transports the coal four miles to the
preparation plant where it is processed and shipped an additional
four and one-half miles on an overland conveyor to the Muskingum
River Plant. COCCo was staffed by 299 active employees,
including union and management personnel, as of March 31, 1995.
Production History and Forecast
Year Clean Coal Produced (tons)
1992 - Actual 2,686,804
1993 - Actual 2,596,774
1994 - Actual 1,309,352
1995 - Forecast 1,123,000
1996 - Forecast 1,100,000
1997 - Forecast 1,100,000
1998 - Forecast 1,100,000
1999 - Forecast 1,100,000
D. Proposed Work For Non-associates
AEP has been in the coal mining business since 1918 when
Central Power jointly purchased with West Penn Power, the Beech
Bottom Mine to provide coal to their Windsor Plant. In its order
dated December 28, 1945 regarding the integration of the AEP
holding company system, the Commission permitted AEP to keep the
Windsor coal properties (HCAR No. 6333). In its order dated
February 1, 1946 (HCAR No. 6395), the Commission authorized Ohio
Power's acquisition of Central Ohio Coal Company. Finally, in
the early 1970's, in response to the upheaval in the coal markets
attributable to the changes in environmental regulations, the oil
embargo and federal mine safety regulations, in order to assure a
reliable supply of coal for generating units then under
construction, including Ohio Power's 2600-MW Gavin Plant, the AEP
System expanded its affiliate coal supply operations. The SEC
authorized Ohio Power, in its order dated December 2, 1971 (HCAR
No. 17383), to acquire SOCCo to develop company-owned coal
reserves.
The implementation of the AEP System's compliance plan to
satisfy the 1990 Amendment to the Clean Air Act, however, has
created conditions requiring the reduction of production at the
Companies' mines. The Clean Air Act has made the coal produced
by the Companies less attractive because of the coal's high
sulfur content.
As a result, the Companies' coal production has dropped off
as indicated earlier. For example, at COCCo, the remaining 2570
dragline is currently operating only 5 days per week as compared
to the 7 day per week operation historically maintained.
The most recent coal consumption forecast for Muskingum
Units 1-4 projects annual coal requirements to average an annual
rate of 950,000 tons per year for the remainder of 1995 through
1999. This is considerably below COCCo's current production
level of 1,100,000 tons per year and even further below one
dragline's maximum production capacity of approximately 1,500,000
tons per year. Additionally, the projected coal inventory may
exceed AEP's needs and require temporary idling of the mine
during low consumption and high inventory periods.
If the Companies produce coal solely for Ohio Power as
forecast, it will limit their ability to spread the fixed costs
and manpower over relatively larger tonnages which would reduce
costs to Ohio Power. Having the ability to sell coal to non-
associate customers on a cost-effective basis would allow the
Companies the increased flexibility to avoid costly mine idling
and reduce their overall cost on an ongoing basis.
Therefore, the Companies herein request authorization to
sell coal to non-associated entities. The Companies' intent is
to utilize existing equipment and current employees, in some
cases on an overtime basis wherever possible, to produce this
coal. Selling coal to non-associates would more efficiently
utilize the fixed assets and manpower, spreading the cost of
those assets and manpower across a greater volume of coal,
thereby lowering the average cost of coal to Ohio Power.
The Companies seek authorization to sell coal to non-
associates for an initial period up to December 31, 2000. The
Companies agree to obtain additional authorization to sell coal
to non-associates beyond this initial requested period.
Currently, the Companies have not attempted to negotiate any non-
associated sales and they are unable to reasonably estimate the
annual dollar volume of coal that might be sold to non-
associates.
The Companies will charge non-associate entities the
greatest amount practicable for coal produced from their mines
within the competitive market, but in no case less than the
incremental variable costs, including any and all fees,
associated with the production of such coal. The net F.O.B. mine
price of all sales to non-associates will exceed the incremental
variable costs. The Companies will not invest in additional coal
production equipment in order to make these sales. The revenues
from sales of coal to non-associates will be credited to the
costs of mining operations and will help reduce the price of coal
sold to Ohio Power.
The Companies do not expect to incur any additional fees or
costs associated with such sales; however, the Companies may
engage coal brokers and/or sales agents to assist in locating
customers outside its immediate area. In such instances these
brokers/agents will be engaged solely on a commission basis, so
that no "retainer fees" or expenses incurred by such persons to
promote coal sales will be paid by the Companies.
Attached hereto are various incremental cost studies for
coal production from the Companies. These studies show that the
estimated marginal costs of incremental production are very low,
creating a favorable opportunity to make non-associate sales at
advantageous prices.
These studies also demonstrate that based on current mining
plans and operating capabilities significant quantities of
incremental coal can be produced at well below current market
prices for similar quality coals.
At SOCCo, incremental tonnage can be produced by adding
additional shifts. As identified in the study, up to 375,000
tons of coal could be produced at an incremental cost of
approximately 46.2 cents/MMBtu. If only an 85 cents/MMBtu
($19.38/ton) non-associate coal sales price (net F.O.B. mine)
were obtained through the sale of these tons, SOCCo's fuel price
would be lowered by $3,300,000, or 3.1 cents/MMBtu for the Meigs
coal supplied to the Gavin Plant.
At Windsor, incremental tonnage can be produced by adding
additional shifts. As identified in the study, up to 225,000
tons of coal could be produced at an incremental cost of
approximately 56.4 cents/MMBtu. If only an 85 cents/MMBtu
($20.83/ton) non-associate coal sales price (net F.O.B. mine)
were obtained through the sale of these tons, Windsor's fuel
price would be lowered by $1,600,000, or 5.9 cents/MMBtu at
Cardinal.
At COCCo, incremental tonnage can be produced by adding
Saturday shifts for the primary surface mining equipment. As
identified in the study, up to 227,000 tons of coal could be
produced at an incremental cost of approximately 47.1
cents/MMBtu. If only a 65 cents/MMBtu ($15.05/ton) non-associate
coal sales price (net F.O.B. mine) were obtained through the sale
of these tons, COCCo's fuel price would be lowered by $940,000,
or 3.6 cents/MMBtu.
The Companies propose, subject to the terms and conditions
prescribed by Rule 24 promulgated under the 1935 Act, to file
certificates within 90 days after the end of each calendar year,
beginning with a report for the 1995 calendar year, setting forth
the following information: (1) total revenues, including
separately identifying revenues attributed to associates and non-
associates; and (2) total costs, including separately identifying
costs charged to work performed for associates and non-
associates. Appendix A is a form of the proposed report.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
No fees, commissions or expenses, other than the
Commission's filing fee of $2,000 and expenses estimated not to
exceed $10,000 to be billed at cost by American Electric Power
Service Corporation, are to be paid by the Companies or any
associate company in connection with the proposed transaction.
ITEM 3. APPLICABLE STATUTORY PROVISIONS
The Companies consider Sections 9 and 10 of the 1935 Act may
be applicable to the proposed transactions described herein.
ITEM 4. REGULATORY APPROVAL
No commission other than the Securities and Exchange
Commission has jurisdiction over the proposed transaction.
ITEM 5. PROCEDURE
It is requested, pursuant to Rule 23(c) of the Rules and
Regulations of the Commission, that the Commission's order
granting and permitting to become effective this Application or
Declaration be issued on or before July 1, 1995. The Companies
waive any recommended decision by a hearing officer or by any
other responsible officer of the Commission and waive the 10-day
waiting period between the issuance of the Commission's order and
the date it is to become effective, since it is desired that the
Commission's order, when issued, become effective forthwith. The
Companies consent to the Office of Public Utility Regulation
assisting in the preparation of the Commission's decision and/or
order in this matter, unless the Office opposes the matter
covered by this Application or Declaration.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
The following exhibits and financial statements are filed as
part of this statement:
(a) Exhibits:
Exhibit F -- Opinion of Counsel (to be filed by
amendment).
Exhibit G -- Proposed form of Notice
(b) Various incremental cost studies for coal production
from the Companies are filed herewith. Balance Sheets
as of March 31, 1995 and Statements of Income and
Retained Earnings for the twelve months ended March 31,
1995, of the Companies and Ohio Power Company, and its
subsidiaries consolidated, together with journal
entries reflecting the proposed transaction (to be
filed by amendment).
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
It is believed that the granting and permitting to become
effective of this Application or Declaration will not constitute
a major federal action significantly affecting the quality of the
human environment. No other federal agency has prepared or is
preparing an environmental impact statement with respect to the
proposed transaction.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused
this statement to be signed on its behalf by their duly
authorized officer.
CENTRAL OHIO COAL COMPANY
SOUTHERN OHIO COAL COMPANY
WINDSOR COAL COMPANY
By: /s/ G. P. Maloney
Vice President
May 19, 1995
APPENDIX A
SALES OF COAL
GROSS MARGIN ON WORK
FOR YEAR ENDED DECEMBER 31, 19XX
Associated Non-Associated Total
Revenues $XX $XX $XX
Cost of Sales
Labor XX XX XX
Material XX XX XX
Overheads XX XX XX
XX XX XX
Gross Margin $XX $XX $XX
--- --- ---
REDUCTION IN AFFILIATE FUEL COSTS THROUGH
INCREMENTAL NON-AFFILIATED COAL SALES
Central Ohio Coal Company
<TABLE>
<CAPTION>
TONS $ cents/
(Millions) (Millions) $/TON MMBTU
<S> <C> <C> <C> <C>
1995 Budget 1.123 46.53 41.43 179.0
Incremental Production 0.227 2.48 10.93 47.2
New Totals 1.350 49.01
Non-Affiliate Sales (0.227) (3.42) 15.07 65
Net of Non-Affiliate Sales 1.123 45.59 40.60 175.4
Change -- (0.94) (0.83) ( 3.6)
</TABLE>
REDUCTION IN AFFILIATE FUEL COSTS THROUGH
INCREMENTAL NON-AFFILIATED COAL SALES
Southern Ohio Coal Company (Meigs Division)
<TABLE>
<CAPTION>
TONS $ cents/
(Millions) (Millions) $/TON MMBTU
<S> <C> <C> <C> <C>
1996 Budget 4.706 187.99 39.95 175.2
Incremental Production 0.375 3.95 10.53 46.2
New Totals 5.081 191.94 37.78
Non-Affiliate Sales (0.375) ( 7.27) 19.39 85.0
Net of Non-Affiliate Sales 4.706 184.67 39.24 172.1
Change -- ( 3.32) (0.71) ( 3.1)
</TABLE>
REDUCTION IN AFFILIATE FUEL COSTS THROUGH
INCREMENTAL NON-AFFILIATED COAL SALES
Windsor Coal Company
<TABLE>
<CAPTION>
TONS $ cents/
(Millions) (Millions) $/TON MMBTU
<S> <C> <C> <C> <C>
1996 Budget 1.084 38.51 35.53 145.0
Incremental Production 0.225 3.11 13.82 56.4
New Totals 1.309 41.62
Non-Affiliate Sales (0.225) (4.69) 20.84 85.0
Net of Non-Affiliate Sales 1.084 36.93 34.07 139.1
Change -- (1.58) (1.46) ( 5.9)
</TABLE>
Exhibit G
UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Release No. /May , 1995
:
In the Matter of :
:
CENTRAL OHIO COAL COMPANY :
301 Cleveland Avenue, S.W. :
Canton, OH 44702 :
:
SOUTHERN OHIO COAL COMPANY :
301 Cleveland Avenue, S.W. :
Canton, OH 44702 :
:
WINDSOR COAL COMPANY :
301 Cleveland Avenue, S.W. :
Canton, OH 44702 :
:
(70- ) :
________________________________________:
NOTICE OF PROPOSAL TO SELL COAL TO NON-ASSOCIATE COMPANIES
Central Ohio Coal Company ("COCCo"), Southern Ohio Coal ("SOCCo") and
Windsor Coal Company ("Windsor") (collectively, the "Companies"),
subsidiaries of Ohio Power Company ("Ohio Power"), an electric utility
subsidiary of American Electric Power Company, Inc. ("American"), a
registered holding company, have filed with this Commission an Application
or Declaration pursuant to Sections 9 and 10 of the Public Utility Holding
Company Act of 1935 ("Act").
The Companies propose to sell coal produced to non-associate companies
at a price in excess of the incremental cost to produce such coal. Having
the ability to sell coal to non-associate customers on a cost-effective
basis would allow the Companies the increased flexibility to avoid costly
mine idling and reduce their overall cost on an ongoing basis. The
Companies' intent is to utilize existing equipment and current employees to
produce this coal. If coal is sold to non-associates, it will more
efficiently utilize the fixed assets and manpower, spreading the cost of
those assets and manpower across a greater volume of coal and thereby lower
the average cost of coal to Ohio Power.
The Companies seek authorization to sell coal to non-associates for an
initial period up to December 31, 2000. The Companies will charge non-
associate entities the greatest amount practicable for coal produced from
their mines within the competitive market, but in no case less than the
incremental variable costs, including any and all fees, associated with the
production of such coal. The revenues from sales of coal to non-associates
will be credited to the costs of mining operations and will help reduce the
price of coal sold to Ohio Power.
The Application or Declaration and any amendments thereto are
available for public inspection through the Commission's Office of Public
Reference. Interested persons wishing to comment or request a hearing
should submit their views in writing by June 20, 1995 to the Secretary,
Securities and Exchange Commission, Washington, D.C. 20549, and serve a
copy on the applicants at the addresses specified above. Proof of service
(by affidavit or, in case of any attorney at law, by certificate) should be
filed with the request. Any request for a hearing shall identify specifi-
cally the issues of fact or law that are disputed. A person who so
requests will be notified of any hearing, if ordered, and will receive a
copy of any notice or order issued in this matter. After said date, the
Application or Declaration, as filed or as it may be amended, may be
permitted to become effective.
For the Commission, by the Office of Public Utility Regulation, pursuant to
delegated authority.
Jonathan G. Katz
Secretary
