ALLEGHENY POWER SYSTEM INC, POS AMC, 1996-03-01

ALLEGHENY POWER SYSTEM INC
POS AMC, 1996-03-01
ELECTRIC SERVICES

Previous: AETNA VARIABLE FUND, 485APOS, 1996-03-01

Next: AFLAC INC, DEF 14A, 1996-03-01

File No. 70-8411

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

POST-EFFECTIVE AMENDMENT NO. 11

APPLICATION OR DECLARATION

FORM U-1

UNDER

THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935

ALLEGHENY POWER SERVICE CORPORATION
800 CABIN HILL DRIVE
GREENSBURG, PA 15601

ALLEGHENY POWER SYSTEM, INC.
12 EAST 49TH STREET
NEW YORK, NY 10017

AYP CAPITAL, INC.
12 EAST 49TH STREET
NEW YORK, NY 10017

(Name of company or companies filing this statement and addresses of principal
executive offices)

Allegheny Power System, Inc.

(Name of top registered holding company parent of each applicant or declarant)

Thomas K. Henderson, Esq.
Allegheny Power Service Corporation
Tower Forty-Nine
12 East 49th Street
New York, NY 10017

(Name and address of agent for service)
<PAGE>

1. Applicants hereby amend Item 6. Exhibits and Financial Statements
by adding the following thereto:

(a) Exhibits

B-1 Fort Martin Construction and Operating Agreement
dated April 30, 1965.

B-2 Fort Martin Common Facilities Operating
Agreement dated November 14, 1968.

D-1 Application to the Pennsylvania Public Utility
Commission.

D-2 Application to the Virginia State Corporation
Commission.

D-3 Application to the West Virginia Public Service
Commission.

D-4 Order of Pennsylvania Public Utility Commission
(to be filed by amendment).

D-5 Order of the Virginia State Corporation
Commission (to be filed by amendment).

D-6 Order of the West Virginia Public Service
Commission (to be filed by amendment).

D-7 Application of the Federal Energy Regulatory
Commission

D-8 Order of the Federal Energy Regulatory
Commission (to be filed by amendment).
<PAGE>

SIGNATURE

Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, the undersigned company has duly caused this statement to be
signed on its behalf by the undersigned thereunto duly authorized.

ALLEGHENY POWER SYSTEM, INC.

By: THOMAS K. HENDERSON
Thomas K. Henderson
Counsel

AYP CAPITAL, INC.

By: THOMAS K. HENDERSON
Thomas K. Henderson
Counsel

ALLEGHENY POWER SERVICE CORPORATION

By: THOMAS K. HENDERSON
Thomas K. Henderson
Counsel

Dated: March 1, 1996

The Companies intend to use their best efforts toward the end
that the construction of the First Unit will be completed, and full-scale
operation commenced, on or before May 1, 1967.
The Companies shall, with reasonable expedition, enter into
contracts (which may be purchase order contracts) providing for (a) the
purchase of materials, equipment and services for, and construction of,
the First Unit and (b) insurance to insure all work under construction
<PAGE>
against risks usually insured against for such work. Each such contract
shall provide, among other things, that the performance of the contract
shall be for the account of, and the charges therefor shall be billed to,
and paid by the Companies in proportion to their respective Ownership
Shares and that the invoices for such billing (Contractor's Invoice or
Invoices) shall be submitted in the names of the Companies. Each of the
Companies shall execute and deliver on its own behalf the contracts
providing for the purchase of the following: Steam generator, turbine-
generator, main transformers, equipment erection, piping installation,
electrical installation, structural steel, substructure, superstructure,
piping and equipment insulation, condenser, fly ash collectors, large
pumps, and consulting engineering work. For their convenience the
Companies may authorize an individual or individuals to execute and
deliver on behalf of the Companies all other contracts to be entered into
pursuant to this Section.
Books of account and records containing details of the items of
cost applicable to the construction of the First Unit shall be kept under
the supervision of the Construction Committee and shall be open to
examination at any time by any Company or its representatives.

The Construction Committee shall cause the Companies to be
furnished with counterparts of such books of account and records as they
may request. The basic books of account and records shall be turned over
to and maintained by the Operating Company referred to in Section 3.
3. Operation and Maintenance.
The First Unit shall be operated and maintained in accordance
with good utility operating practice.
The Companies shall establish an Operating Committee for the
purpose of establishing policies for the operation and maintenance of the
<PAGE>
First Unit. The Companies shall be represented on the Operating
Committee in proportion to their Ownership Shares. The Operating
Committee shall meet at the call of any member.
The First Unit will be operated and maintained by one of the
Companies (the "Operating Company") in accordance with policies to be
established by the Operating Committee. Until otherwise agreed by all
the Companies, Monongahela shall be the Operating Company. The Operating
Company shall not be liable in respect of operation or maintenance except
for its gross negligence or willful misconduct. The Operating Company
shall keep books of account and records containing details of the items
of cost applicable to the operation and maintenance of the First Unit.
Such books of account and records shall be open to examination at any
time by any Company or its representatives. The Operating Company shall
furnish the Companies with counterparts of such books of account and
records as they may request.

4. Renewals, Replacements, Additions and Retirements.
Renewals and replacements necessary for the operation of the
First Unit shall be made as required by good utility operating practice.
Other renewals and replacements and any additions to the First Unit may
be made only by agreement of all the Companies. Retirements, sales and
other dispositions of First Unit property shall be effected only in a
manner consistent with the Companies' respective mortgage indentures, if
any. Renewals, replacements, additions, and retirements (and related
dispositions and sales) shall be effected by the Operating Company
subject to the policies established by the Operating Committee.
5. Title to Property.
Title to all property (including Common Facilities as defined in
the Deed) acquired or constructed in connection with the First Unit
(including without limitation property acquired for use or consumption in
connection with its construction, operation or maintenance) shall be in
<PAGE>
the Companies as tenants in common in proportion to their Ownership
Shares, subject in the case of Common Facilities to any sales pursuant to
subparagraph 5 of the Deed. Construction, acquisitions and purchases
shall be made in such manner that title shall vest in accordance with the
foregoing.
6. Power and Energy.
Subject to Section 9, each Company shall at all times have full
ownership of and available to it at the First Unit the portion of the
generating capability of the First Unit and the energy associated there-
with, corresponding to its Ownership Share.

Each Company shall keep the Operating Company informed as to the
amount of power it requires to be generated for it.
Subject to its capability and to necessary or unavoidable
outages, the First Unit shall be operated so as to produce an output
equal to the sum of the power requirements of the Companies therefrom.
7. Expenditures.
All expenditures in respect of the First Unit shall be accounted
for in accordance with the Uniform System of Accounts prescribed by the
Federal Power Commission for Public Utilities and Licensees (Class A and
B Electric Utilities) as in effect on the date of this Agreement.
All expenditures (including without limitation all expenditures
or administration, labor, payroll taxes, employee benefits, maintenance,
materials, research and development, supplies nd services), except those
in respect of Common Facilities as defined in the Deed for the con-
struction, operation and maintenance (excluding fuel) of the First Unit
and for renewals, replacements, additions and retirements in respect
thereof shall be shared by the Companies in proportion to their Ownership
Shares. All such expenditures in respect of Common Facilities shall be
<PAGE>
shared by the Companies in proportion to each Company's Ownership Share
(after reduction by a fraction equal to any fraction of such Company's
ownership interest in Common Facilities sold pursuant to the provisions
of the Deed). All expenditures in respect of the First Unit properly
chargeable to Account 501 (Fuel) of such Uniform System of Accounts for
any period shall be shared by the Companies pro rata according to the
total kilowatt hours of energy respectively taken by them from the First
Unit during such period.

Interest charges on borrowed funds, income taxes, and
property, business and occupation and like taxes, of each Company shall
be borne entirely by such Company; and such items, as well as
depreciation, amortization, and interest charged to construction, shall
not be deemed expenditures for purposes of this Section.
8. Joint Account.
The Companies shall maintain one or more joint accounts
(collectively, the "Joint Account") in a bank or banks agreed upon by
them, the title of each such account to include Duquesne (50%),
Monongahela (25%) and Potomac (25%). All expenditures referred to in the
second paragraph of Section 7 shall be paid out of the Joint Account.
From time to time the Construction Committee or the Operating
Company may request the Companies to advance to the Joint Account such
amount as is then needed for cash working capital. Within ten days
thereafter the Companies, pro rata according to their respective
Ownership Shares, shall deposit in the Joint Account the amount specified
in such request.
As promptly as practicable after the end of each month, the
Construction Committee or the Operating Company shall send to each of the
Companies a statement in reasonable detail of all expenditures for such
month and the amount of each Company's share thereof. Within ten days
after its receipt of such statement, each Company shall deposit its share
in the Joint Account.
<PAGE>
The Construction Committee or Operating Company shall cause to
be drawn against the Joint Account, and to be delivered, checks or drafts
in the names of the Companies in payment of expenditures. Funds shall be
disbursed from the Joint Account in accordance with sound accounting and
disbursement procedures. All persons authorized to handle or disburse
funds from the Joint Account shall be bonded in favor of Duquesne,
Monongahela and Potomac, as their respective interests may appear, for
not less than $500,000.
9. Default.
During any period that a Company is in default in whole or in
part in making the most recent deposit in the Joint Account then required
under this Agreement, (a) such Company shall be entitled to no energy
from the First Unit during such period (but shall be obligated to pay any
damages to the non-defaulting Companies resulting from the default) and
(b) the non-defaulting Companies shall be entitled to all of the energy
from the First Unit in proportion to their Ownership Shares. No such
default shall affect any Company's ownership interest or any Company's
obligations under Sections 7 and 8.
10. Arbitration.
The Companies hereby declare their intention and agree that any
controversy arising out of or resulting to this Agreement or the Deed, or
the breach of either thereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association and
that judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof.
11. Term of Agreement.
This Agreement shall continue in full force and effect for a
period of forty-two years from the date hereof and for such longer period
as the Companies shall by mutual agreement continue to operate the First
Unit. Termination of this Agreement shall not terminate the provisions
of Section 10.
<PAGE>
12. Amendment.
This Agreement may be amended from time to time or canceled at
any time, by an instrument or instruments in writing signed by all of the
Companies (or their successors or assigns).
13. Successors and Assigns.
This Agreement shall inure to the benefit of and bind the
successors and assigns of the parties hereto, but it may be assigned in
whole or in part only in connection with transfer to the assign of a
corresponding ownership interest in the First Unit.
IN WITNESS WHEREOF each of the parties has caused this Agreement
to be duly executed.

DUQUESNE LIGHT COMPANY

PHILIP A. FLEGER
Chairman of the Board
and President

MONONGAHELA POWER COMPANY

JOHN A. FREEMAN
Vice President

THE POTOMAC EDISON COMPANY

CHARLES D. LYON
President

FORT MARTIN COMMON FACILITIES OPERATING AGREEMENT, dated
November 14, 1968, between DUQUESNE LIGHT COMPANY, a Pennsylvania corpora-
tion ("Duquesne"), MONONGAHELA POWER COMPANY, an Ohio corporation
("Monongahela"), THE POTOMAC EDISON COMPANY, a Maryland corporation
("Potomac"), and WEST PENN POWER COMPANY, a Pennsylvania corporation
("West Penn"), together the "Companies".

2. Operation and Maintenance.
The agreements contained in Sections 3, 4, 5, 6, 7, 8, 10 and 11
of the First Unit Agreement, in so far as relating to Common Facilities,
shall also be agreements with and for the benefit of each Second Unit
Owner; and the agreements contained in Sections 3, 4, 5, 6, 7, 8, 10 and
11 of the Second Unit Agreement, in so far as relating to Common
<PAGE>
Facilities, shall also be agreements with and for the benefit of each
First Unit Owner.
Policies for the operation and maintenance of the Common
Facilities shall be agreed upon and established by the Operating
Committees referred to in said Agreements. Until otherwise agreed by all
the Companies, Monongahela shall be the Operating Company referred to in
said Agreements.
As contemplated in said Agreements, all expenditures for the
operation and maintenance of the Common Facilities and for renewals,
replacements, additions and retirements in respect thereof shall be shared
by the Companies in proportion to their aggregate ownership interests
therein, namely Duquesne 25%, Monongahela 22.5%, Potomac 27.5%, and West
Penn 25%, and title to all Common Facilities acquired or constructed
(including without limitation property acquired for use or consumption in
connection with construction, operation or maintenance) shall be in the
Companies as tenants in common in said proportion.

The First Unit Owners and the Second Unit Owners shall have such
rights in regard to the Common Facilities as will permit the independent
operation of the First Unit and of the Second Unit.

request of any other tenant in common in the Common Facilities, execute
and deliver such further instruments as may be necessary or appropriate to
confirm such waiver and release of partition rights.

4. Term of Agreement.
This Agreement shall continue in full force and effect as long as
both the First Unit Agreement and the Second Unit Agreement are in full
force and effect. Termination of this Agreement shall not terminate the
provisions of Section 2 hereof in so far as it refers to Sections 10 of
said Agreements.

5. Successors and Assigns.
This Agreement shall inure to the benefit of and bind the
successors and assigns of the parties hereto, but it may be assigned in
whole or in part only in connection with transfer to the assign of a
corresponding interest in the Common Facilities. Nothing herein shall be
taken as limiting any Company's right at any time to transfer all or part
of its ownership interest in the Common Facilities as long as such
interest is transferred subject to the benefits and burdens hereof.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be duly executed.

DUQUESNE LIGHT COMPANY

By JOHN H. ARTHUR
Chairman of the Board
and Chief Executive Officer

MONONGAHELA POWER COMPANY

By C. B. WITHERS
Vice President

THE POTOMAC EDISON COMPANY

By A. J. BOWEN
Vice President

WEST PENN POWER COMPANY

By H. M. SWARTZ
Vice President

BEFORE THE PENNSYLVANIA PUBLIC
UTILITY COMMISSION

Joint Petition of West Penn Power Company and )
AYP Capital, Inc. for Affiliate )
Interest Approval and Hybrid )
Exempt Wholesale Generator ) NO.
Approval )

JOINT PETITION OF WEST PENN POWER COMPANY AND AYP CAPITAL, INC.

NOW COMES, West Penn Power Company ("West Penn"), a Pennsylvania
corporation and a public utility under the Pennsylvania Public Utility Code,
pursuant to the affiliate interest provisions of Section 2102 thereof, 66 Pa.
C. S. Section 2102, and AYP Capital, Inc., ("AYP") an unregulated, wholly owned
subsidiary of Allegheny Power System, Inc. ("APS"), pursuant to the hybrid
exempt wholesale generator ("EWG") provisions of Section 32(c) of the Public
Utility Holding Company Act of 1935, as amended by the Energy Policy Act of
1992, 15 U.S.C. Section79z-5a(c) (hereinafter collectively "PUHCA"), and request
Commission approval of an affiliated interest transaction and hybrid EWG
status as described below:
BACKGROUND
1. West Penn is a public utility providing electric utility
service at retail to the public in parts of Pennsylvania. West Penn is a
wholly owned subsidiary of APS, a registered holding company under PUHCA.
2. AYP, also a wholly owned subsidiary of APS, was incorporated
in Delaware on August 18, 1994. AYP was created to allow APS to pursue, on an
unregulated basis, opportunities closely related to the core business of APS.
The Securities and Exchange Commission ("SEC"), pursuant to its authority
<PAGE>
under PUHCA, has authorized AYP to engage in various activities, including
investment in EWGs.
3. Monongahela Power Company ("Mon Power") and The Potomac Edison
Company ("Potomac Edison") are also wholly owned subsidiaries of APS and are
public utilities providing retail electric service to the public in parts of
Maryland, Ohio, West Virginia and Virginia.
4. As one of its activities in the area of EWG investment, AYP
has agreed to purchase the 50% undivided interest of Duquesne Light Company
("DQE") in Unit No. 1 of the Ft. Martin Generating Station ("the Station").
Unit No. 1 of the Station is owned jointly by DQE, Mon Power and Potomac
Edison. Unit No. 2 of the Station is owned jointly by West Penn, Mon Power
and Potomac Edison. By Order dated September 30, 1968, at Docket No. A-94829,
the Commission granted a certificate of public convenience and necessity
permitting the acquisition by West Penn of its interest in Unit No. 2.
5. Unit No. 1 of the Station is currently operated by Mon Power
for the benefit of its owners pursuant to an Operating Agreement dated April
30, 1965. Certain common facilities are operated under a Common Facilities
Operating Agreement dated November 14, 1968, which merely extended the terms
of the original Operating Agreement to cover the common facilities
(collectively "the Operating Agreement"). The Operating Agreement has
governed the operation of Unit No. 1 of Ft. Martin since its effective date.
A similar operating agreement, dated December 30, 1965, governs the operation
of Unit No. 2 by Mon Power. The accounting mechanisms embodied in the Unit
No. 2 Operating Agreement, which are identical to those embodied in the
Operating Agreement for Unit No. 1, have been repeatedly reviewed and accepted
in West Penn rate cases over the last twenty-seven years.
<PAGE>
AFFILIATE INTEREST APPROVAL
6. Under the Operating Agreement, Unit No. 1 of Ft. Martin is
operated and maintained by an operating company chosen by an operating
committee made up of the three owners of Unit No. 1: DQE, Mon Power, and
Potomac Edison. Mon Power is currently, and has always been, the operating
company. The Operating Agreement further details the allocation of costs for
operation and maintenance of Unit No. 1. The Operating Agreement may be
assigned, and DQE intends to assign its interest to AYP upon financial
closing.
7. When ownership of DQE's 50% interest in Ft. Martin Unit No. 1
is transferred, employees of Mon Power will perform services for the benefit
of AYP, just as they formerly did for DQE. These services will be performed,
and reimbursed for, in accordance with the terms of the Operating Agreement.
There will be no change in the Operating Agreement except the substitution of
AYP for DQE.
8. Pursuant to Section 2102(b) of the Public Utility Code, a
copy of the April 30, 1965 Operating Agreement and a copy of the November 14,
1968 Common Facilities Operating Agreement are attached hereto as Exhibit A.
9. The accounting for services provided under the Operating
Agreement shall not change from the method perviously utilized and reviewed by
this Commission when DQE owned 50% of Unit No. 1. The assignment of DQE's
interest in the Operating Agreement to AYP will not alter the costs to West
Penn's customers.
10. Approval by the Commission of AYP's stepping into the shoes
of DQE under the Operating Agreement is a condition precedent to the
consummation of DQE's sale of its interest in Ft. Martin Unit No. 1 to AYP.
<PAGE>
See Asset Purchase Agreement, Exhibit 1 to Petition of Duquesne Light Company
for Declaratory Order and Application for Certificate of Public Convenience,
No. P-00951001, filed December 21, 1995.
11. Because neither the operation nor the accounting for Unit No.
1 at the Station will change as a result of this assignment, and because the
Operating Agreement properly ensures that AYP's affiliates are fairly
reimbursed for services rendered at Unit No. 1 of Ft. Martin, approval of AYP
assuming DQE's rights and obligations under the Operating Agreement should be
granted pursuant to Section 2102 of the Public Utility Code.
HYBRID EWG STATUS
12. The Energy Policy Act of 1992 ("EPAct") amended PUHCA to
create a new category of electric generator known as the exempt wholesale
generator ("EWG"). In creating EWGs, Congress contemplated that electric
utilities might wish to take rate based generation facilities and reclassify
them as EWGs. Section 32(d) of PUHCA describes "hybrid EWGs" as facilities
which are partly owned or operated by an EWG, and partly owned and operated by
an affiliate regulated company. 15 U.S.C. Section 79z-5a(d). Certain
requirements must be met before a hybrid EWG will be approved. These
requirements are set forth in Section 32(c) of PUHCA, which provides in
relevant part:
(c) STATE CONSENT FOR EXISTING RATE-BASED FACILITIES-If
a rate or charge for, or in connection with, the construction
of a facility, or for electric energy produced by a facility
(other than any portion of a rate or charge which represents
recovery of the cost of a wholesale rate or charge) was in
effect under the laws of any State as of the date of enactment
of this section, in order for the facility to be considered
an eligible facility, every State commission having jurisdiction
over any such rate or charge must make a specific determination
that allowing such facility to be an eligible facility (1) will
benefit consumers, (2) is in the public interest, and (3) does
not violate State law;...
15 U.S.C. Section 79z-5a(c).
<PAGE>
13. Under the terms of the Asset Purchase Agreement, as a
condition precedent to closing, AYP must receive certification from the
Federal Energy Regulatory Commission ("FERC") of AYP's interest in Ft. Martin
Unit No. 1 as an EWG.
14. Under Section 32(c) of PUHCA, as the Commission having
authority over DQE's rates, a portion of which included DQE's interest in Ft.
Martin Unit No. 1, the Commission must make the necessary findings under
Section 32(c) before FERC will certify AYP's interest in Ft. Martin Unit No. 1
as an EWG.
15. AYP submits that its ownership of DQE's 50% interest in Unit
No. 1 of the Station satisfies the requirements of Section 32(c) of PUHCA and
requests that the Commission issue the necessary findings under Section 32(c).
16. The ownership by AYP, as an EWG, of DQE's 50% interest in Ft.
Martin Unit No. 1 will benefit consumers, since AYP intends to sell the output
at market rates as a competitor in the wholesale market. As Congress reasoned
in the enactment of EPAct, a competitive wholesale power market will
ultimately result in lower rates to consumers. By adding a new player to the
competitive wholesale market, AYP's acquisition of DQE's interest will help
foster increased wholesale competition. Since AYP's interest in Ft. Martin
Unit No. 1 will be a "merchant plant," that is, a plant with no captive
customers, only those parties who see an economic benefit will purchase from
AYP. Thus consumers will benefit from the economically attractive purchases
that wholesale customers may make from AYP's EWG.
17. As Congress noted in the enactment of EPAct, and as this
Commission has suggested, increased competition, at least in the electric
<PAGE>
wholesale market, is in the public interest. See generally, Investigation
into Electric Power Competition, Docket No. I-00940032.
18. If the Commission is satisfied that DQE's proposed sale of
its interest in Unit No. 1 of the Station is in the public interest, and
approves the transfer of DQE's interest and approves of the affiliate interest
represented by the Operating Agreement, permitting AYP to hold its interest in
Ft. Martin Unit No. 1 as an EWG will not violate state law. While the
Commission has not yet ruled on DQE's request to sell its interest in Unit No.
1 of the Station, AYP respectfully submits that the Commission may make the
requisite findings for hybrid EWG status, conditioned upon its ruling on DQE's
petition. As each of the requirements of section 32(c) are met, AYP
respectfully requests that the Commission issue the necessary findings under
section 32(c).
<PAGE>
CONCLUSION
WHEREFORE, West Penn Power Company respectfully requests that this
Commission approve the affiliate interest that will result from the transfer
of DQE's rights and obligations under the Operating Agreement to AYP; and
further, AYP Capital, Inc. respectfully requests that this Commission make the
requisite findings under section 32(c) of PUHCA to permit AYP's share of Ft.
Martin Unit No. 1 to operate as a hybrid EWG.

Respectfully submitted,

AYP Capital, Inc. West Penn Power Company

THERESA J. COLECCHIA JOHN L. MUNSCH
Theresa J. Colecchia John L. Munsch
AYP Capital, Inc. West Penn Power Company
800 Cabin Hill Dr. 800 Cabin Hill Dr.
Greensburg, PA 15601 Greensburg, PA 15601
(412) 838-6677 (412) 838-6210
Attorney for AYP Capital, Inc. Attorney for West Penn
Power Company

Dated: January 10, 1996
<PAGE>
BEFORE THE PENNSYLVANIA PUBLIC
UTILITY COMMISSION

Joint Petition of West Penn Power Company and )
AYP Capital, Inc. for Affiliate )
Interest Approval and Hybrid )
Exempt Wholesale Generator ) NO.
Approval )

Commonwealth of Pennsylvania
Westmoreland County

AFFIDAVIT

I, Carole Chamberlain, being first duly sworn, depose and state
that I am the Assistant Secretary of West Penn Power Company, that I am
authorized to make this affidavit for West Penn Power Company, that the facts
set forth in the foregoing Petition are true and correct to the best of my
knowledge, information and belief.

CAROLE R. CHAMBERLAIN

Subscribed and sworn before me
this 10th day of January, 1996

GLORIA J. CAVADA
<PAGE>

BEFORE THE PENNSYLVANIA PUBLIC
UTILITY COMMISSION

Joint Petition of West Penn Power Company and )
AYP Capital, Inc. for Affiliate )
Interest Approval and Hybrid )
Exempt Wholesale Generator ) NO.
Approval )

Commonwealth of Pennsylvania
Westmoreland County

AFFIDAVIT

I, Kenneth J. Blasko, being first duly sworn, depose and state
that I am the Assistant Vice President of AYP Capital, Inc., that I am
authorized to make this affidavit for AYP Capital, Inc., that the facts set
forth in the foregoing Petition are true and correct to the best of my
knowledge, information and belief.

KENNETH J. BLASKO

Subscribed and sworn before me
this 10th day of January, 1996

GLORIA J. CAVADA
<PAGE>
Exhibit A

FORT MARTIN CONSTRUCTION AND OPERATING AGREEMENT, dated April
30, 1965, among DUQUESNE LIGHT COMPANY, a Pennsylvania corporation
("Duquesne"), MONONGAHELA POWER COMPANY, a West Virginia corporation
("Monongahela"), and THE POTOMAC EDISON COMPANY, a Maryland corporation
("Potomac").
1. Station.
Duquesne, Monongahela and Potomac (the "Companies") hereby
provide for the construction and operation of the first unit of
approximately 500,000 kw name plate capacity (the "First Unit") of a
steam electric generating station in Monongalia County, West Virginia, to
be owned by the Companies as tenants in common with undivided ownership
interests of Duquesne one-half, Monongahela one-quarter and Potomac one-
quarter (their respective "Ownership Shares"), all as contemplated in the
Deed dated April 30, 1965 (the "Deed") from Monongahela to Duquesne and
Potomac. The provisions of this Agreement are intended, as contemplated
in the Deed, to establish as among the Companies more detailed provisions
and procedures for carrying out provisions of the Deed.
2. Construction.
Construction of the First Unit shall be carried out by the
Companies under the general supervision and direction of a Construction
Committee, which shall be the Allegheny Power System Fort Martin
Construction Committee. Duquesne will have a representative on such
committee.
The Companies intend to use their best efforts toward the end
that the construction of the First Unit will be completed, and full-scale
operation commenced, on or before May 1, 1967.
The Companies shall, with reasonable expedition, enter into
contracts (which may be purchase order contracts) providing for (a) the
purchase of materials, equipment and services for, and construction of,
the First Unit and (b) insurance to insure all work under construction
<PAGE>
against risks usually insured against for such work. Each such contract
shall provide, among other things, that the performance of the contract
shall be for the account of, and the charges therefor shall be billed to,
and paid by the Companies in proportion to their respective Ownership
Shares and that the invoices for such billing (Contractor's Invoice or
Invoices) shall be submitted in the names of the Companies. Each of the
Companies shall execute and deliver on its own behalf the contracts
providing for the purchase of the following: Steam generator, turbine-
generator, main transformers, equipment erection, piping installation,
electrical installation, structural steel, substructure, superstructure,
piping and equipment insulation, condenser, fly ash collectors, large
pumps, and consulting engineering work. For their convenience the
Companies may authorize an individual or individuals to execute and
deliver on behalf of the Companies all other contracts to be entered into
pursuant to this Section.
Books of account and records containing details of the items of
cost applicable to the construction of the First Unit shall be kept under
the supervision of the Construction Committee and shall be open to
examination at any time by any Company or its representatives.

The Construction Committee shall cause the Companies to be
furnished with counterparts of such books of account and records as they
may request. The basic books of account and records shall be turned over
to and maintained by the Operating Company referred to in Section 3.
3. Operation and Maintenance.
The First Unit shall be operated and maintained in accordance
with good utility operating practice.
The Companies shall establish an Operating Committee for the
purpose of establishing policies for the operation and maintenance of the
First Unit. The Companies shall be represented on the Operating
<PAGE>
Committee in proportion to their Ownership Shares. The Operating
Committee shall meet at the call of any member.
The First Unit will be operated and maintained by one of the
Companies (the "Operating Company") in accordance with policies to be
established by the Operating Committee. Until otherwise agreed by all
the Companies, Monongahela shall be the Operating Company. The Operating
Company shall not be liable in respect of operation or maintenance except
for its gross negligence or willful misconduct. The Operating Company
shall keep books of account and records containing details of the items
of cost applicable to the operation and maintenance of the First Unit.
Such books of account and records shall be open to examination at any
time by any Company or its representatives. The Operating Company shall
furnish the Companies with counterparts of such books of account and
records as they may request.

Each Company shall keep the Operating Company informed as to the
amount of power it requires to be generated for it.
Subject to its capability and to necessary or unavoidable
outages, the First Unit shall be operated so as to produce an output
equal to the sum of the power requirements of the Companies therefrom.
7. Expenditures.
All expenditures in respect of the First Unit shall be accounted
for in accordance with the Uniform System of Accounts prescribed by the
Federal Power Commission for Public Utilities and Licensees (Class A and
B Electric Utilities) as in effect on the date of this Agreement.
All expenditures (including without limitation all expenditures
or administration, labor, payroll taxes, employee benefits, maintenance,
materials, research and development, supplies nd services), except those
in respect of Common Facilities as defined in the Deed for the con-
struction, operation and maintenance (excluding fuel) of the First Unit
<PAGE>
and for renewals, replacements, additions and retirements in respect
thereof shall be shared by the Companies in proportion to their Ownership
Shares. All such expenditures in respect of Common Facilities shall be
shared by the Companies in proportion to each Company's Ownership Share
(after reduction by a fraction equal to any fraction of such Company's
ownership interest in Common Facilities sold pursuant to the provisions
of the Deed). All expenditures in respect of the First Unit properly
chargeable to Account 501 (Fuel) of such Uniform System of Accounts for
any period shall be shared by the Companies pro rata according to the
total kilowatt hours of energy respectively taken by them from the First
Unit during such period.

in the names of the Companies in payment of expenditures. Funds shall be
disbursed from the Joint Account in accordance with sound accounting and
disbursement procedures. All persons authorized to handle or disburse
funds from the Joint Account shall be bonded in favor of Duquesne,
Monongahela and Potomac, as their respective interests may appear, for
not less than $500,000.
9. Default.
During any period that a Company is in default in whole or in
part in making the most recent deposit in the Joint Account then required
under this Agreement, (a) such Company shall be entitled to no energy
from the First Unit during such period (but shall be obligated to pay any
damages to the non-defaulting Companies resulting from the default) and
(b) the non-defaulting Companies shall be entitled to all of the energy
from the First Unit in proportion to their Ownership Shares. No such
default shall affect any Company's ownership interest or any Company's
obligations under Sections 7 and 8.
10. Arbitration.
The Companies hereby declare their intention and agree that any
controversy arising out of or resulting to this Agreement or the Deed, or
the breach of either thereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association and
that judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof.
11. Term of Agreement.
This Agreement shall continue in full force and effect for a
period of forty-two years from the date hereof and for such longer period
as the Companies shall by mutual agreement continue to operate the First
Unit. Termination of this Agreement shall not terminate the provisions
of Section 10.
<PAGE>
12. Amendment.
This Agreement may be amended from time to time or canceled at
any time, by an instrument or instruments in writing signed by all of the
Companies (or their successors or assigns).
13. Successors and Assigns.
This Agreement shall inure to the benefit of and bind the
successors and assigns of the parties hereto, but it may be assigned in
whole or in part only in connection with transfer to the assign of a
corresponding ownership interest in the First Unit.
IN WITNESS WHEREOF each of the parties has caused this Agreement
to be duly executed.

DUQUESNE LIGHT COMPANY

PHILIP A. FLEGER
Chairman of the Board
and President

MONONGAHELA POWER COMPANY

JOHN A. FREEMAN
Vice President

THE POTOMAC EDISON COMPANY

CHARLES D. LYON
President
<PAGE>

2. Operation and Maintenance.
The agreements contained in Sections 3, 4, 5, 6, 7, 8, 10 and 11
of the First Unit Agreement, in so far as relating to Common Facilities,
shall also be agreements with and for the benefit of each Second Unit
<PAGE>
Owner; and the agreements contained in Sections 3, 4, 5, 6, 7, 8, 10 and
11 of the Second Unit Agreement, in so far as relating to Common
Facilities, shall also be agreements with and for the benefit of each
First Unit Owner.
Policies for the operation and maintenance of the Common
Facilities shall be agreed upon and established by the Operating
Committees referred to in said Agreements. Until otherwise agreed by all
the Companies, Monongahela shall be the Operating Company referred to in
said Agreements.
As contemplated in said Agreements, all expenditures for the
operation and maintenance of the Common Facilities and for renewals,
replacements, additions and retirements in respect thereof shall be shared
by the Companies in proportion to their aggregate ownership interests
therein, namely Duquesne 25%, Monongahela 22.5%, Potomac 27.5%, and West
Penn 25%, and title to all Common Facilities acquired or constructed
(including without limitation property acquired for use or consumption in
connection with construction, operation or maintenance) shall be in the
Companies as tenants in common in said proportion.
The First Unit Owners and the Second Unit Owners shall have such
rights in regard to the Common Facilities as will permit the independent
operation of the First Unit and of the Second Unit.

3. Waiver of Partition.
Each Company hereby confirms its agreement that it will not take
any action (including without limitation commencing or maintaining any
proceeding in any court) for the purpose of or which might result in
partition of the Common Facilities in whole or in part; and each Company
hereby confirms that it has waived and released all partition rights in
respect of the Common Facilities, whether now existing or hereinafter
accruing, whether under common law or statute or whether in kind or
otherwise, and confirms its agreement that in the event any such right
<PAGE>
shall hereinafter accrue, it shall from time to time, upon the written
request of any other tenant in common in the Common Facilities, execute
and deliver such further instruments as may be necessary or appropriate to
confirm such waiver and release of partition rights.
4. Term of Agreement.
This Agreement shall continue in full force and effect as long as
both the First Unit Agreement and the Second Unit Agreement are in full
force and effect. Termination of this Agreement shall not terminate the
provisions of Section 2 hereof in so far as it refers to Sections 10 of
said Agreements.
Upon the termination of either of said Agreements (but in no event
after 21 years from the date of death of the last to die of the present
living descendants of King George V of England) each party to the
Agreement terminated shall, at the request of the parties to the other
Agreement and after any necessary regulatory approvals have been obtained,
sell to them, in proportion to their ownership interests in the Common
Facilities, its ownership interest in the Common Facilities for a price in
cash equal to the then book depreciated cost thereof to the seller.

DUQUESNE LIGHT COMPANY

By JOHN H. ARTHUR
Chairman of the Board
and Chief Executive Officer

MONONGAHELA POWER COMPANY

By C. B. WITHERS
Vice President

THE POTOMAC EDISON COMPANY

By A. J. BROWN
Vice President

WEST PENN POWER COMPANY

By H. M. SWARTZ
Vice President

COMMONWEALTH OF VIRGINIA

STATE CORPORATION COMMISSION

APPLICATION OF
THE POTOMAC EDISON COMPANY

For authority to enter
into a contract with affiliates

Application

Pursuant to Chapter 4 of Title 56 of the Code of Virginia, The
Potomac Edison Company ("PE"), applies for Commission approval of
an operating agreement among affiliates related to Unit No. 1 at
the Fort Martin Generating Station and in support of said
application respectfully states as follows:
Background
1. PE is a Virginia public service corporation providing
electric service to approximately 76,000 customers
located in fourteen northwestern Virginia counties. The
Company is also a Maryland corporation and provides
electric service in portions of Maryland and West
Virginia.

2. PE is a wholly-owned subsidiary of Allegheny Power
System, Inc. ("APS") a registered holding company under
the Public Utility Holding Company Act of 1935, as
amended by the Energy Policy Act of 1992, 15 USC Secs.
79Z-5a(c) ("EPAct") (hereinafter collectively "PUHCA").
PE's post office address is The Potomac Edison Company
Building, 10435 Downsville Pike, Hagerstown, Maryland
<PAGE>
21740. PE's counsel is Philip J. Bray, Esq. whose post
office address is The Potomac Edison Company Building,
10435 Downsville Pike, Hagerstown, Maryland 21740.

3. AYP Capital Inc., ("AYP") is an unregulated, wholly-owned
subsidiary of APS. It was incorporated in Delaware on
August 18, 1994. It was created to allow APS to pursue,
on an unregulated basis, opportunities closely related to
the core business of APS. The Securities and Exchange
Commission ("SEC"), pursuant to its authority under
PUHCA, has authorized AYP to engage in various
activities, including investment in exempt wholesale
generators ("EWGs").

4. Monongahela Power Company ("Mon Power") and West Penn
Power Company ("West Penn") are also wholly-owned
subsidiaries of APS and are public utilities providing
retail electric service to customers in parts of Ohio,
West Virginia and Pennsylvania.

5. PE, AYP, Mon Power and West Penn are "affiliated
interests" as that term is defined by Section 56-76 of
the Code of Virginia.

6. The Fort Martin Power Station is a coal-fired steam
electric generating station located in Maidsville,
Monongahela County, West Virginia ("the Station"). It
consists of two units (Unit No. 1 and Unit No. 2) having
a combined operating capacity of 1,107 megawatts (Unit
No. 1 - 552mw, Unit No. 2 - 555mw). Undivided interests
in Unit No. 1 at Fort Martin are owned in common by
Duquesne Light Company ("DL"), Mon Power and PE in the
following percentages: DL-50%; Mon Power-25%; and PE-25%.
Undivided interests in Unit No. 2 at the Station are
owned in common by West Penn-50%; Mon Power-20%; PE-30%.
<PAGE>

7. As one of its activities in the area of EWG investments,
AYP has agreed to purchase the 50% undivided interest of
DL in Unit No. 1 at the Station.

8. Unit No. 1 at the Station is currently operated by Mon
Power for the benefit of its owners pursuant to an
Operating Agreement dated April 30, 1965. Certain common
facilities are operated under a Common Facilities
Operating Agreement dated November 14, 1968 which merely
extends the terms of the original Operating Agreement to
cover the common facilities (collectively "the Operating
Agreement"). The Operating Agreement has governed the
operation of Unit No. 1 of Fort Martin since its
effective date. A similar operating agreement, dated
December 30, 1965, governs the operation of Unit No. 2 by
Mon Power. The accounting mechanisms embodied in the
Operating Agreement have been repeatedly reviewed and
accepted in past PE rate cases over the last 27 years.
The Operating Agreement is attached hereto as Exhibit A.

Affiliate Interest Approval

9. Under the Operating Agreement, Unit No. 1 of the Station
is operated and maintained by an operating company chosen
by an operating committee made up of the three owners of
Unit No. 1, DL, Mon Power and PE. Mon Power is
currently, and has always been the operating company for
Unit No. 1. The Operating Agreement further details the
allocation of costs for operation and maintenance of Unit
<PAGE>
No. 1. The Operating Agreement may be assigned, and upon
AYP Capital's purchase of DL's 50% interest in Unit
No. 1, DL intends to assign its undivided interest in the
Operating Agreement to AYP at the financial closing.

10. When ownership of DL's 50% interest in Fort Martin Unit
No. 1 is transferred, employees of Mon Power will perform
services for the benefit of AYP, PE and West Penn just as
they formerly did for DL, PE and West Penn. These
services will be performed and reimbursed in accordance
with the terms of the Operating Agreement. There will be
no change in the Operating Agreement upon AYP's purchase
of DL's 50% undivided interest in the Station except
substitution of AYP for DL.

11. The accounting for services provided under the Operating
Agreement shall not change from the method previously
utilized and reviewed by this Commission when DL owned
50% of Unit No. 1. The assignment of DL's interest in
the Operating Agreement to AYP will not alter the cost to
PE's customers in Virginia.

12. The assignment by DL of its interest in the Operating
Agreement to AYP will have no impact on PE's present
rates in Virginia. AYP will operate and sell the output
from its 50% interest in Unit No. 1 at the Station at
market rates as a non-jurisdictional "merchant plant."
AYP will not sell power to its affiliates, PE, Mon Power
or West Penn without further order of this Commission.
<PAGE>
Just as the costs of DL's share of Unit No. 1 at the
Station were never charged or paid for by Virginia
customers, the same will be true for the power produced
from AYP's 50% ownership interest in Unit No. 1.

13. As Congress reasoned in the enactment of EPAct, a
competitive wholesale market will ultimately result in
lower rates to consumers. By adding a new player to the
competitive wholesale market, AYP's acquisition of DL's
interest will help foster increased competition. Since
there will be no captive customers for the power produced
from AYP's interest in Unit No. 1 at the Station, only
those parties who see economic benefits will purchase
from AYP. The assignment by DL of its interest in the
Operating Agreement to AYP will further federal policy by
stimulating wholesale competition and lowering rates
generally in the bulk power supply market.

14. Neither the operation nor the accounting for Unit No. 1
at the Station will change as a result of the assignment
of the Operating Agreement from DL to AYP. The Operating
Agreement insures that AYP properly pays its fair share
of costs at Unit No. 1 of the Station under a procedure
long reviewed by the Commission. The assignment by DL to
AYP of DL's interests in the Operating Agreement will
have no impact on the rates presently paid by Virginia
customers but will help promote a more competitive
wholesale market. Under the circumstances, the
Commission's approval of AYP's assuming DL's rights and
<PAGE>
obligations under the Operating Agreement and the
continuation of the agreement among AYP, PE, Mon Power,
and West Penn as parties is in the public interest.

Wherefore, for the reasons set forth herein, PE requests that
pursuant to Section 56-77 of the Code of Virginia, the Commission
approve PE remaining a party to the amended Operating Agreement
among affiliates which will result from the assignment and transfer
by DL of its rights and obligations under the Operating Agreement
to AYP.
Respectfully submitted,

The Potomac Edison Company

By: R. A. ROSCHLI
R. A. Roschli
Vice President

PHILIP J. BRAY
Philip J. Bray
The Potomac Edison Company Building
10435 Downsville Pike
Hagerstown, Maryland 21740
(301) 790-6283

Dated: January 19, 1996

VASCC\AYP\APPLICAT.FTM

BEFORE THE WEST VIRGINIA PUBLIC SERVICE COMMISSION
CHARLESTON, WEST VIRGINIA

Petition of Monongahela Power Company and *
The Potomac Edison Company for the Consent *
and Approval of the assignment of the interest *
of Duquesne Light Company in Unit No. 1 of *
the Fort Martin Power Station, the Fort Martin * Case No.
Construction and Operating Agreement dated *
April 30, 1965, and the Fort Martin Common *
Facilities Operating Agreement dated *
November 14, 1968 to AYP Capital, Inc. *

Petition for Consent and Approval

Now come Monongahela Power Company ("Monongahela") and The Potomac
Edison Company ("Potomac Edison"), collectively, the "Petitioners"
herein, and respectfully represent to the Commission as follows:

1. That Monongahela is a public utility corporation organized
and existing under the laws of the state of Ohio, is qualified to
transact business in the State of West Virginia, and has its principal
office and place of business at 1310 Fairmont Avenue, Fairmont, West
Virginia.

2. That Potomac Edison is a public utility corporation organized
and existing under the laws of the states of Maryland and Virginia, is
qualified to transact business in the State of West Virginia and has its
principal office and place of business at 10435 Downsville Pike,
Hagerstown, Maryland.
<PAGE>

3. That West Penn Power Company ("West Penn") is a corporation
organized and existing under the laws of the State of Pennsylvania, is
qualified to do business in the State of West Virginia and has its
principal office and place of business at 800 Cabin Hill Drive,
Greensburg, Pennsylvania.

4. That AYP Capital, Inc. is a corporation organized and
existing under the laws of the State of Delaware, is qualified to do
business in the State of West Virginia and has its principal office and
place of business at 800 Cabin Hill Drive, Greensburg, Pennsylvania.

5. That Monongahela, Potomac Edison, West Penn, and AYP are
wholly owned subsidiaries of Allegheny Power System, Inc. ("APS") a
registered holding company under the Public Utility Holding Company Act
of 1935 as amended by the Energy Policy Act of 1992 ("PUHCA").

6. That the Fort Martin Power Station ("Station") is a coal-
fired steam electric generating station located in Maidsville,
Monongalia County, West Virginia consisting of two units (Unit No. 1 and
Unit No. 2) having a combined operating capacity of 1,107 megawatts
(Unit No. 1 - 552 MW, Unit No. 2 - 555 MW).

7. That undivided interests in Unit No. 1 at the Station are
owned in common by Duquesne Light Company ("DQE"), Monongahela and
Potomac Edison in the following percentages: DQE - 50%, Monongahela -
25%, Potomac Edison - 25%, and undivided interests in Unit No. 2 at the
<PAGE>
Station are owned in common by West Penn - 50%, Monongahela - 20%, and
Potomac Edison - 30%.

8. That Unit No. 1 of the Station is operated and maintained by
Monongahela for the benefit of its owners pursuant to the Fort Martin
Construction and Operating Agreement dated April 30, 1965 attached
hereto and made a part hereof as Exhibit A and consented to and approved
by the Public Service Commission of the State of West Virginia
("Commission") by order entered April 27, 1965, attached hereto and made
a part hereof as Exhibit B.

9. That certain common facilities are operated and maintained by
Monongahela for the benefit of its owners under the Fort Martin
Construction and Operating Agreement pursuant to the Fort Martin Common
Facilities Operating Agreement, dated November 14, 1968, collectively
with the Fort Martin Construction and Operating Agreement, "Operating
Agreements", attached hereto and made a part hereof, as Exhibit C and
consented to and approved by the Commission by order entered October 3,
1968, attached hereto and made a part hereof, as Exhibit D.

10. That the Operating Agreements further detail the allocation
of costs for operation and maintenance of Unit No. 1.

11. That AYP was created to allow APS to pursue, on an
unregulated basis, opportunities closely related to the core business of
APS.
<PAGE>

12. That the Securities and Exchange Commission ("SEC"),
pursuant to its authority under PUHCA, has authorized AYP to engage in
investment in Exempt Wholesale Generators ("EWG").

13. That AYP has agreed to purchase the undivided 50% interest
of DQE in Unit No. 1 of the Station and will market the power produced
therefrom as an EWG.

14. That the Operating Agreements may be assigned, and DQE
intends to assign its interest therein to AYP upon financial closing.

15. That the Operating Agreements will remain unchanged except
for the substitution of AYP for DQE.

16. That once ownership of DQE's interest in Unit No. 1 of the
Station is transferred, employees of Monongahela will perform services
for the benefit of AYP and those services will be performed, and
reimbursed for, in accordance with the terms of the Operating
Agreements.

17. That the assignment of DQE's interest in the Operating
Agreements to AYP will not alter the costs to Petitioners' customers
because AYP will sell the output from its 50% interest in Unit No. 1 of
the Station at market rates as a non-jurisdictional "merchant plant" and
will not sell power to its affiliates, Potomac Edison, Monongahela or
West Penn without further order of this Commission.
<PAGE>
18. That just as the costs of DQE's share of Unit No. 1 at the
Station were never charged to or paid by Petitioners' ratepayers, the
same will be true for the power produced from AYP's 50% ownership
interest in Unit No. 1.

19. That the financial condition of Monongahela is disclosed by
the Statement of Financial Condition, Statement of Income, and Balance
Sheet, all as of September 30, 1995, which is attached hereto and made a
part hereof as Exhibit E and that the financial condition of Potomac
Edison is disclosed by the Statement of Financial Condition, Statement
of Income, and Balance Sheet, all as of September 30, 1995, which is
attached hereto and made a part hereof as Exhibit F.

20. That Monongahela and Potomac Edison hereby seek Commission
approval and consent pursuant to West Virginia Code Section24-2-12, for DQE to
assign its interest in Unit No. 1 of the Station and the Operating
Agreements to their affiliate company AYP.

21. That the proposed transaction will not grant an undue
advantage to either Petitioners or AYP, nor adversely affect the public
in West Virginia because neither the operation nor the accounting for
Unit No. 1 at the Station will change as a result of the assignment of
the Operating Agreements from DQE to AYP and the Operating Agreements
insure that AYP properly pays its fair share of costs at Unit No. 1 of
the Station under a procedure long reviewed by the Commission.
<PAGE>
22. That the terms and conditions of the transaction are fair
and reasonable.

23. That a competitive wholesale market will ultimately result
in lower rates to consumers and, by adding a new player to the
competitive wholesale market, AYP's acquisition of DQE's interest will
help foster increased competition.

24. That since there will be no captive customers for the power
produced from AYP's interest in Unit No. 1 at the Station, only those
parties who realize economic benefits will purchase from AYP.

25. That the assignment by DQE of its interest in the Operating
Agreements to AYP will further federal policy by stimulating wholesale
competition and lowering rates generally in the bulk power supply
market.

26. That it will be in the best interests of Monongahela and
Potomac Edison and the public served by them to be granted consent and
approval to have DQE assign its interest in Unit No. 1 of the Station
and the Operating Agreements to AYP.

27. That the petitioners are informed and believe that no other
electric public utility subject to the jurisdiction of this Commission
will be affected by said proposed transaction.
<PAGE>

28. That Monongahela and Potomac Edison further represent to
this Commission that no purpose will be served by the giving of formal
notice for the conducting of a hearing concerning the consent and
approval sought herein and that the public served by Monongahela and
Potomac Edison would be convenienced by the waiving of formal notice and
hearing in regard thereto.

Wherefore, Monongahela and Potomac Edison pray that the Commission
consent to and approve the assignment of the interest of DQE in Unit No.
1 of the Station and in the Operating Agreements unto AYP, that such
consent and approval be granted without formal notice and hearing, and
such other relief as the Commission deems necessary.

Dated this 30th day of January 1996.

Monongahela Power Company

By: MARVIN W. BOMAR
Marvin W. Bomar
Vice President

The Potomac Edison Company
By: RICHARD A. ROSCHLI
Richard A. Roschli
Vice President

EDWARD G. KENNEDY
Edward G. Kennedy
Attorney for Petitioners
1310 Fairmont Avenue
Fairmont, West Virginia 26554

EGK:bjm
<PAGE>

VERIFICATION

STATE OF WEST VIRGINIA,

COUNTY OF MARION , TO WIT:

Marvin W. Bomar, Vice President of Monongahela Power Company,
after being duly sworn, says that the facts and allegations set forth in
the foregoing "PETITION" are true, except insofar as they are stated to
be on information, he believes them to be true.

MARVIN W. BOMAR
MARVIN W. BOMAR
Vice President

Taken, sworn to and subscribed before me this 25th day of January,
1996.

SHIRLEY ANN MOORE
Notary Public

My commission expires August 24, 1998.

<PAGE>

VERIFICATION

STATE OF MARYLAND

COUNTY OF WASHINGTON , TO WIT:

Richard A. Roschli, Executive Vice President of The Potomac Edison
Company, after being duly sworn, says that the facts and allegations set
forth in the foregoing "PETITION" are true, except insofar as they are
stated to be on information, he believes them to be true.

RICHARD A. ROSCHLI
Richard A. Roschli
Vice President

Taken, sworn to and subscribed before me this 24th day of January,
1996.

PATRICIA S. MCKEE
Notary Public

My commission expires November 1, 1997.

<PAGE>

Exhibit A

Construction of the First Unit shall be carried out by the
Companies under the general supervision and direction of a Construction
Committee, which shall be the Allegheny Power System Fort Martin
Construction Committee. Duquesne will have a representative on such
committee.
<PAGE>
The Companies intend to use their best efforts toward the end that
the construction of the First Unit will be completed, and full-scale
operation commenced, on or before May 1, 1967.

The Companies shall, with reasonable expedition, enter into
contracts (which may be purchase order contracts) providing for (a) the
purchase of materials, equipment and services for, and construction of,
the First Unit and (b) insurance to insure all work under construction
against risks usually insured against for such work. Each such contract
shall provide, among other things, that the performance of the contract
shall be for the account of, and the charges therefor shall be billed
to, and paid by the Companies in proportion to their respective
Ownership Shares and that the invoices for such billing (Contractor's
Invoice or Invoices) shall be submitted in the names of the Companies.
Each of the Companies shall execute and deliver on its own behalf the
contracts providing for the purchase of the following: Steam generator,
turbine- generator, main transformers, equipment erection, piping
installation, electrical installation, structural steel, substructure,
superstructure, piping and equipment insulation, condenser, fly ash
collectors, large pumps, and consulting engineering work. For their
convenience the Companies may authorize an individual or individuals to
execute and deliver on behalf of the Companies all other contracts to be
entered into pursuant to this Section.

Books of account and records containing details of the items of
cost applicable to the construction of the First Unit shall be kept
under the supervision of the Construction Committee and shall be open to
examination at any time by any Company or its representatives.
<PAGE>
The Construction Committee shall cause the Companies to be
furnished with counterparts of such books of account and records as they
may request. The basic books of account and records shall be turned
over to and maintained by the Operating Company referred to in Section
3.

3. Operation and Maintenance.

The First Unit shall be operated and maintained in accordance with
good utility operating practice.

The Companies shall establish an Operating Committee for the
purpose of establishing policies for the operation and maintenance of
the First Unit. The Companies shall be represented on the Operating
Committee in proportion to their Ownership Shares. The Operating
Committee shall meet at the call of any member.

The First Unit will be operated and maintained by one of the
Companies (the "Operating Company") in accordance with policies to be
established by the Operating Committee. Until otherwise agreed by all
the Companies, Monongahela shall be the Operating Company. The
Operating Company shall not be liable in respect of operation or
maintenance except for its gross negligence or willful misconduct. The
Operating Company shall keep books of account and records containing
details of the items of cost applicable to the operation and maintenance
of the First Unit. Such books of account and records shall be open to
examination at any time by any Company or its representatives. The
Operating Company shall furnish the Companies with counterparts of such
books of account and records as they may request.
<PAGE>
4. Renewals, Replacements, Additions and Retirements.

Renewals and replacements necessary for the operation of the First
Unit shall be made as required by good utility operating practice.
Other renewals and replacements and any additions to the First Unit may
be made only by agreement of all the Companies. Retirements, sales and
other dispositions of First Unit property shall be effected only in a
manner consistent with the Companies' respective mortgage indentures, if
any. Renewals, replacements, additions, and retirements (and related
dispositions and sales) shall be effected by the Operating Company
subject to the policies established by the Operating Committee.

5. Title to Property.

Title to all property (including Common Facilities as defined in
the Deed) acquired or constructed in connection with the First Unit
(including without limitation property acquired for use or consumption
in connection with its construction, operation or maintenance) shall be
in the Companies as tenants in common in proportion to their Ownership
Shares, subject in the case of Common Facilities to any sales pursuant
to subparagraph 5 of the Deed. Construction, acquisitions and purchases
shall be made in such manner that title shall vest in accordance with
the foregoing.

6. Power and Energy.

Subject to Section 9, each Company shall at all times have full
ownership of and available to it at the First Unit the portion of the
generating capability of the First Unit and the energy associated there-
with, corresponding to its Ownership Share.
<PAGE>
Each Company shall keep the Operating Company informed as to the
amount of power it requires to be generated for it.

Subject to its capability and to necessary or unavoidable outages,
the First Unit shall be operated so as to produce an output equal to the
sum of the power requirements of the Companies therefrom.

7. Expenditures.

All expenditures in respect of the First Unit shall be accounted
for in accordance with the Uniform System of Accounts prescribed by the
Federal Power Commission for Public Utilities and Licensees (Class A and
B Electric Utilities) as in effect on the date of this Agreement.

All expenditures (including without limitation all expenditures or
administration, labor, payroll taxes, employee benefits, maintenance,
materials, research and development, supplies nd services), except those
in respect of Common Facilities as defined in the Deed for the con-
struction, operation and maintenance (excluding fuel) of the First Unit
and for renewals, replacements, additions and retirements in respect
thereof shall be shared by the Companies in proportion to their
Ownership Shares. All such expenditures in respect of Common Facilities
shall be shared by the Companies in proportion to each Company's
Ownership Share (after reduction by a fraction equal to any fraction of
such Company's ownership interest in Common Facilities sold pursuant to
the provisions of the Deed). All expenditures in respect of the First
Unit properly chargeable to Account 501 (Fuel) of such Uniform System of
Accounts for any period shall be shared by the Companies pro rata
according to the total kilowatt hours of energy respectively taken by
them from the First Unit during such period.
<PAGE>
Interest charges on borrowed funds, income taxes, and property,
business and occupation and like taxes, of each Company shall be borne
entirely by such Company; and such items, as well as depreciation,
amortization, and interest charged to construction, shall not be deemed
expenditures for purposes of this Section.

8. Joint Account.

The Companies shall maintain one or more joint accounts
(collectively, the "Joint Account") in a bank or banks agreed upon by
them, the title of each such account to include Duquesne (50%),
Monongahela (25%) and Potomac (25%). All expenditures referred to in
the second paragraph of Section 7 shall be paid out of the Joint
Account.

From time to time the Construction Committee or the Operating
Company may request the Companies to advance to the Joint Account such
amount as is then needed for cash working capital. Within ten days
thereafter the Companies, pro rata according to their respective
Ownership Shares, shall deposit in the Joint Account the amount
specified in such request.

As promptly as practicable after the end of each month, the
Construction Committee or the Operating Company shall send to each of
the Companies a statement in reasonable detail of all expenditures for
such month and the amount of each Company's share thereof. Within ten
days after its receipt of such statement, each Company shall deposit its
share in the Joint Account.

The Construction Committee or Operating Company shall cause to be
drawn against the Joint Account, and to be delivered, checks or drafts
<PAGE>
in the names of the Companies in payment of expenditures. Funds shall
be disbursed from the Joint Account in accordance with sound accounting
and disbursement procedures. All persons authorized to handle or
disburse funds from the Joint Account shall be bonded in favor of
Duquesne, Monongahela and Potomac, as their respective interests may
appear, for not less than $500,000.

9. Default.

During any period that a Company is in default in whole or in part
in making the most recent deposit in the Joint Account then required
under this Agreement, (a) such Company shall be entitled to no energy
from the First Unit during such period (but shall be obligated to pay
any damages to the non-defaulting Companies resulting from the default)
and (b) the non-defaulting Companies shall be entitled to all of the
energy from the First Unit in proportion to their Ownership Shares. No
such default shall affect any Company's ownership interest or any
Company's obligations under Sections 7 and 8.

10. Arbitration.

The Companies hereby declare their intention and agree that any
controversy arising out of or resulting to this Agreement or the Deed,
or the breach of either thereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association and
that judgment upon the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof.

11. Term of Agreement.

This Agreement shall continue in full force and effect for a
period of forty-two years from the date hereof and for such longer
<PAGE>
period as the Companies shall by mutual agreement continue to operate
the First Unit. Termination of this Agreement shall not terminate the
provisions of Section 10.

12. Amendment.

This Agreement may be amended from time to time or canceled at any
time, by an instrument or instruments in writing signed by all of the
Companies (or their successors or assigns).

13. Successors and Assigns.

This Agreement shall inure to the benefit of and bind the
successors and assigns of the parties hereto, but it may be assigned in
whole or in part only in connection with transfer to the assign of a
corresponding ownership interest in the First Unit.

IN WITNESS WHEREOF each of the parties has caused this Agreement
to be duly executed.

DUQUESNE LIGHT COMPANY

PHILIP A. FLEGER
Chairman of the Board
and President

MONONGAHELA POWER COMPANY

JOHN A. FREEMAN
Vice President

THE POTOMAC EDISON COMPANY

CHARLES D. LYON
President
<PAGE>

Exhibit B

Case No. 5839

MONONGAHELA POWER COMPANY,
a corporation, and

THE POTOMAC EDISON COMPANY,
a corporation,

Application for approval of contract and
issuance of certificate to build and operate
a steam generating station.

ORDER: Entered April, 27, 1965

This proceeding came on to be reheard this 27th day of April,
1965, upon the joint amended application by The Potomac Edison Company,
a corporation, and Monongahela Power Company, a corporation, duly
verified, including the exhibits with the application, for the
Commission's consent in advance to and approval of a proposed Agreement
and Deed in connection with first unit of a steam electric generating
station, providing for its construction and for its ownership by the
Petitioners and Duquesne Light Company, a Pennsylvania electric utility
corporation, and situate in Cass District, Monongalia County, West
Virginia, which station is to be known as the Fort Martin Plant.

It appearing to the Commission from the aforesaid verified
Petition and the exhibits attached to and filed therewith that The
Potomac Edison Company is a corporation organized under the laws of the
State of Maryland and is authorized to do business in the State of West
Virginia as a foreign corporation under the laws thereof; that it is a
public utility within the State of Maryland and engaged in the business
of serving electricity, as such, to the public in a part of that State,
but it is not engaged in business in the State of West Virginia other
than as owner and operator of a one-unit power generating station for
the manufacturing of electric power located adjacent to Monongahela's
Albright Power Station at Albright, Preston County, West Virginia,
together with the electric transmission facilities from the aforesaid
plant into the State of Maryland; that Potomac Light and Power Company,
a corporation under the laws of the State of West Virginia, having its
principal office and mailing address at Martinsburg, West Virginia, is a
subsidiary of The Potomac Edison Company and is a public utility within
the State of West Virginia and is engaged in the business of serving
electricity as such to the public in a part of that State; that
Monongahela Power Company is a corporation organized under the laws of
the State of West Virginia and is a public utility engaged in the
business of serving electricity to the public in most of the central and
<PAGE>
northern parts of this State; that Monongahela Power Company and The
Potomac Edison Company propose to enter into an Agreement with the
Duquesne Light Company, a Pennsylvania electric utility corporation,
whereunder said companies will provide for the construction of the first
unit of a steam electric generating station, which will have
approximately 500,000 KW nameplate capacity, on a tract of land of
approximately 63,226 acres located in Cass District, Monongalia County,
West Virginia; and that Monongahela Power Company proposes to sell and
convey by Deed to the Duquesne Light Company an undivided one-half (1/2)
interest therein and to The Potomac Edison Company an undivided one-
quarter (1/4) interest therein, said undivided interests of Duquesne and
Potomac and a one-quarter (1/4) undivided interest of Monongahela to be
held as tenants in common, subject to certain exceptions and
reservations, and covenants and conditions running with the land, but
together with certain necessary rights of way or easements with respect
to other lands of Monongahela, copies of which Deed and Agreement are
filed with the foregoing application as Exhibits A and B respectively;
that the cost of such construction will be borne by the companies in
proportion to their ownership interests in the first unit of the said
Fort Martin plant; that such ownership and operation, pursuant to the
terms of said Agreement, will have the affect of continuing to insure
Petitioners' service to the public by having an economical supply of
electricity available for such public service; that no other West
Virginia utility subject to the jurisdiction of this Commission will be
affected by the proposed operation of the first unit of said Fort Martin
plant pursuant to the terms of said Agreement; that the terms and
conditions of the aforesaid Deed and Agreement, marked Exhibits A and B,
respectively, are reasonable and that such terms and conditions do not
adversely affect the public within the State of West Virginia.

Upon consideration whereof the Commission is of opinion and finds
that formal notice of said application is not necessary and that no
formal hearing of the matters involved herein is required, good cause
for dispensing therewith having been shown; and that Monongahela Power
Company and The Potomac Edison Company, subject to the conditions
hereinafter set forth, should be granted the authority for which they
pray.

It is therefore ordered that the aforesaid amended application and
exhibits therewith be, and they hereby are, filed, and that the
Commission's consent in advance to and approval of the arrangements and
agreements contained in the Deed and Agreement, Exhibits A and B,
respectively, to said amended application as submitted by the
Petitioners in connection with the first unit of the Fort Martin plant
be, and they hereby are, granted, provided, however, that in granting
such consent in advance and approval, the Commission does not pass upon
nor approve the terms and conditions of the proposed Agreement or Deed.
<PAGE>
It is further ordered that The Potomac Edison Company be, and it
hereby is, granted a certificate of convenience and necessity to own and
operate a one-quarter (1/4) undivided interest in the aforesaid first unit
of the Fort Martin Power Generating Station.

It is further ordered that the authority herein granted shall be
in lieu of the authority granted in this proceeding by order entered on
December 16, 1963.
<PAGE>

Exhibit C

FORT MARTIN COMMON FACILITIES OPERATING AGREEMENT, dated November
14, 1968, between DUQUESNE LIGHT COMPANY, a Pennsylvania corporation
("Duquesne"), MONONGAHELA POWER COMPANY, an Ohio corporation
("Monongahela"), THE POTOMAC EDISON COMPANY, a Maryland corporation
("Potomac"), and WEST PENN POWER COMPANY, a Pennsylvania corporation
("West Penn"), together the "Companies".

1. Common Facilities.
Duquesne, Monongahela and Potomac, in their capacities as tenants
in common of the First Unit at the Fort Martin Generating Station in
Monongalia County, West Virginia (the "First Unit Owners"), have
undivided ownership interests as tenants in common in certain Common
Facilities at such Station of 25%, 12.5% and 12.5%, respectively.
Monongahela, Potomac and West Penn, in their capacities as tenants in
common of the Second Unit at such Station (the "Second Unit Owners"),
have undivided ownership interest as tenants in common in such Common
Facilities of 10%, 15% and 25%, respectively. Such Common Facilities
are referred to in the Fort Martin Construction and Operating Agreement,
dated April 30, 1965 (the "First Unit Agreement"), among the First Unit
Owners, and in the Fort Martin Unit No. 2 Construction and Operating
Agreement, dated December 30, 1965 (the "Second Unit Agreement"), among
the Second Unit Owners, and, together with all renewals, replacements
and additions in respect thereof, are hereinafter called the "Common
Facilities".
<PAGE>
2. Operation and Maintenance.
The agreements contained in Sections 3, 4, 5, 6, 7, 8, 10 and 11
of the First Unit Agreement, in so far as relating to Common Facilities,
shall also be agreements with and for the benefit of each Second Unit
Owner; and the agreements contained in Sections 3, 4, 5, 6, 7, 8, 10 and
11 of the Second Unit Agreement, in so far as relating to Common
Facilities, shall also be agreements with and for the benefit of each
First Unit Owner.
Policies for the operation and maintenance of the Common
Facilities shall be agreed upon and established by the Operating
Committees referred to in said Agreements. Until otherwise agreed by
all the Companies, Monongahela shall be the Operating Company referred
to in said Agreements.
As contemplated in said Agreements, all expenditures for the
operation and maintenance of the Common Facilities and for renewals,
replacements, additions and retirements in respect thereof shall be
shared by the Companies in proportion to their aggregate ownership
interests therein, namely Duquesne 25%, Monongahela 22.5%, Potomac
27.5%, and West Penn 25%, and title to all Common Facilities acquired or
constructed (including without limitation property acquired for use or
consumption in connection with construction, operation or maintenance)
shall be in the Companies as tenants in common in said proportion.
The First Unit Owners and the Second Unit Owners shall have such
rights in regard to the Common Facilities as will permit the independent
operation of the First Unit and of the Second Unit.
<PAGE>
3. Waiver of Partition.
Each Company hereby confirms its agreement that it will not take
any action (including without limitation commencing or maintaining any
proceeding in any court) for the purpose of or which might result in
partition of the Common Facilities in whole or in part; and each Company
hereby confirms that it has waived and released all partition rights in
respect of the Common Facilities, whether now existing or hereinafter
accruing, whether under common law or statute or whether in kind or
otherwise, and confirms its agreement that in the event any such right
shall hereinafter accrue, it shall from time to time, upon the written
request of any other tenant in common in the Common Facilities, execute
and deliver such further instruments as may be necessary or appropriate
to confirm such waiver and release of partition rights.
4. Term of Agreement.
This Agreement shall continue in full force and effect as long as
both the First Unit Agreement and the Second Unit Agreement are in full
force and effect. Termination of this Agreement shall not terminate the
provisions of Section 2 hereof in so far as it refers to Sections 10 of
said Agreements.

Upon the termination of either of said Agreements (but in no event
after 21 years from the date of death of the last to die of the present
living descendants of King George V of England) each party to the
Agreement terminated shall, at the request of the parties to the other
Agreement and after any necessary regulatory approvals have been
obtained, sell to them, in proportion to their ownership interests in
the Common Facilities, its ownership interest in the Common Facilities
for a price in cash equal to the then book depreciated cost thereof to
the seller.
<PAGE>
5. Successors and Assigns.
This Agreement shall inure to the benefit of and bind the
successors and assigns of the parties hereto, but it may be assigned in
whole or in part only in connection with transfer to the assign of a
corresponding interest in the Common Facilities. Nothing herein shall
be taken as limiting any Company's right at any time to transfer all or
part of its ownership interest in the Common Facilities as long as such
interest is transferred subject to the benefits and burdens hereof.

IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be duly executed.

DUQUESNE LIGHT COMPANY

By JOHN H. ARTHUR
Chairman of the Board
and Chief Executive Officer

MONONGAHELA POWER COMPANY

By C. B. WITHERS
Vice President

THE POTOMAC EDISON COMPANY

By A. J. BOWEN
Vice President

WEST PENN POWER COMPANY

By H. M. SWARTZ
Vice President

<PAGE>

Exhibit D

CASE NO. 6676

MONONGAHELA POWER COMPANY, a corporation,

Application for consent and approval of
agreements providing for the sale and
operation of common facilities of the
Fort Martin Generating Station,
Monongalia County, West Virginia.

ORDER: Entered October 3, 1968

This proceeding came on to be heard this 3rd day of October, 1968,
upon the duly verified application of Monongahela Power Company for
consent and approval of the division of ownership in the Fort Martin
Generating Station located on the Monongahela River in Monongalia County,
West Virginia, in proportion to its respective ownership of the kilowatts
of generating capacity at that station; said ownership being divided among
Monongahela Power Company (hereinafter sometimes called "Monongahela").
The Potomac Edison Company (hereinafter sometimes called "Potomac"),
Duquesne Light Company (hereinafter sometimes called "Duquesne"), and West
Penn Power Company (hereinafter sometimes called "West Penn").

It appears from the application that the Fort Martin Generating
Station, consisting of Unit 1 and Unit 2, is located on the Monongahela
River in Monongalia County, West Virginia, and is expected to be completed
in October, 1968. At present the respective undivided ownership interests
in Unit 1 of said Station are Monongahela 25%, Potomac, a corporation
organized and existing under and pursuant to the laws of the State of
Maryland, 25% and Duquesne, a corporation organized and existing under and
pursuant to the laws of the Commonwealth of Pennsylvania, 50%. Potomac
and Duquesne are both qualified to do business in the State of West
Virginia, but not as public utilities.

The respective undivided ownership interests in Unit 2 of said
Station are Monongahela 20%, Potomac 30%, and West Penn, a corporation
organized and existing under and pursuant to the laws of the Commonwealth
of Pennsylvania, 50%. West Penn is qualified to do business in the State
of West Virginia but not as a public utility.

In the Fort Martin Generating Station there are certain facilities
for common use by both Unit 1 and Unit 2, which common facilities are now
owned by Unit 1 owners with undivided interests of Monongahela 25%, Poto-
mac 25%, and Duquesne 50%. Applicant seeks to have the ownership divided
among all of the aforesaid companies in proportion to the kilowatts of
generating capacity that they own at the station, i.e., Monongalhela
22.5%, Potomac 27.5%, Duquesne 25%, and West Penn 25%. To this end, said
owners of the Fort Martin Generating Station propose to enter into a "Fort
Martin Common Facilities Sale Agreement", and a "Fort Martin Common
Facilities Operating Agreement", copies of which agreements were attached
<PAGE>
to and made a part of the application herein and identified as Exhibits A
and B.

It is alleged that operation under the proposed agreements will
result in more effective, efficient, and economical operation of said
station and will further assure the furnishing of adequate and reliable
service to members of the public served by said owners of the foregoing
Fort Martin Generating Station. It is further alleged that no other
public utility subject to the jurisdiction of this Commission will be
affected by said proposed transfer of ownership and said proposed
operation of common facilities pursuant to said agreements.

Upon consideration whereof the Commission is of opinion and finds:

1) That no useful purpose would be served by requiring a hearing,
good cause having been shown for dispensing with the same.

2) That the approval of and consent to the proposed agreements as
set forth in said amendment application and exhibits should be granted.

It is, therefore, ordered that the Commission's consent to and
approval of the aforementioned proposed agreements be, and the same hereby
are, granted; provided that the Commission shall have a right at all
reasonable times to examine all of the books of account and records
pertaining to the details of the items of cost applicable to the
construction of each of the units of said power station, operating costs,
and all other matters pertaining to the construction and operation of said
power station.
<PAGE>
Exhibit E

MONONGAHELA POWER COMPANY

STATEMENT OF FINANCIAL CONDITION

September 30, 1995

(a) Amount and classes of stock authorized:

(1) 8,000,000 shares Common Stock - par value $50
(2) 1,500,000 shares Cumulative Preferred Stock - par value $100

(b) Amount and classes of stock issued and outstanding as of September 30,
1995:

5,891,000 shares Common Stock
740,000 shares Cumulative Preferred Stock, as follows:

4.40% Series - 90,000 shares
4.80% Series B - 40,000 shares
4.50% Series C - 60,000 shares
$6.28 Series D - 50,000 shares
$7.73 Series L - 500,000 shares

All series of preferred stock entitle the holders thereof to
preference over holders of common stock in the distribution of
dividends and assets. In the event of any voluntary liquidation,
dissolution or winding up of the affairs of the applicant, the
holders of preferred stock shall be entitled to be paid an amount
per share equal to the then current redemption price thereof, and
the amount so payable in the event of any involuntary liquidation,
dissolution or winding up of the affairs of the applicant shall be
the par value ($100) of such shares. The preferred stock has no
voting power, except that if four or more quarterly dividends are in
default, the holders of the preferred stock, voting as a class, are
entitled to elect the smallest number of directors necessary to
constitute a majority of the full Board. The preferred stock of any
series may be redeemed, in whole or in part, at any time by vote of
the Board at the applicable redemption price therefor.

(d) Brief description of each mortgage upon any property of the
corporation, giving date of execution, name of trustee, amount of
indebtedness authorized to be secured thereby, amount of indebtedness
actually secured and brief description of the mortgaged property or
collateral:

There is presently in effect a mortgage indenture dated August 1,
1945, and indentures supplemental thereto, executed by the applicant
upon all its property under which Citibank, N. A., 111 Wall Street,
New York, New York, is the trustee. Said mortgage indenture secures
bonds issued thereunder by the applicant for the purpose of
borrowing money for its corporate purposes and authorizes the
issuance of an initial series of bonds for the aggregate principal
amount of $22,000,000. Thereafter from time to time, upon a showing
that the consolidated net earnings of the applicant and its
subsidiaries available for interest for 12 out of the 15 preceding
months, after provision for depreciation, have been in the aggregate
equal to not less than twice the amount of annual interest charges
on the principal amount of all bonds and prior lien bonds then
outstanding or applied for, additional bonds of any series may be
issued in an aggregate principal amount equal to 60% of the net
bondable value of property additions plus the amount of any cash
deposited with the Trustee, and also in substitution for any
refundable bonds. The amount of indebtedness accrued and principal
outstanding is $373,000,000. There is no interest due and unpaid.
<PAGE>
(e) Number and amount of bonds authorized and issued under each mortgage,
describing each class separately, giving date of issue, par value,
rate of interest, date of maturity and how secured:

Monongahela Power Company has bonds issued and outstanding under the
above-mentioned Indenture consisting of series, all of which are
First Mortgage Bonds, as follows:

Amount
Series Issued Par Value Outstanding

5-1/2% Series Due 1996 1966 $1,000 $ 18,000,000
6-1/2% Series Due 1997 1967 1,000 15,000,000
8-5/8% Series Due 2021 1991 1,000 50,000,000
8-1/2% Series Due 2022 1992 1,000 65,000,000
7-3/8% Series Due 2002 1992 1,000 25,000,000
8-3/8% Series Due 2022 1992 1,000 40,000,000
7-1/4% Series Due 2007 1992 1,000 25,000,000
5-5/8% Series Due 2000 1993 1,000 65,000,000
7-5/8% Series Due 2025 1995 1,000 70,000,000
$373,000,000

(f) Other indebtedness of all kinds, giving name by classes and
describing security, if any:

Amount
Indebtedness Outstanding
(1) Quarterly income debt securities $ 40,000,000
(2) Secured notes for pollution control facilities 74,050,000
(3) Unsecured notes for pollution control facilities 7,560,000
(4) Instalment purchase obligations for pollution
control facilities 19,000,000
$140,710,000

<PAGE>
(g) Amount of interest paid during twelve months ended September 30,
1995, and rate thereof; if different rates were paid, the amount
paid at each rate:

Twelve Months Ended
September 30, 1995

(1) First Mortgage Bonds
5-1/2% Series Due 1996 $ 990,000
6-1/2% Series Due 1997 975,000
8-7/8% Series Due 2019 5,556,736
8-5/8% Series Due 2021 4,312,500
8-1/2% Series Due 2022 5,525,000
7-3/8% Series Due 2002 1,843,750
8-3/8% Series Due 2022 3,350,000
7-1/4% Series Due 2007 1,812,500
5-5/8% Series Due 2000 3,656,250
28,021,736
(2) Quarterly Income Debt Securities
$40,000,000 at 8% 97,778
97,778
(3) Secured Notes
$17,500,000 at 6.375% 1,115,625
25,000,000 at 7.75% 1,786,804
5,000,000 at 6.875% 343,750
7,050,000 at 5.95% 419,475
10,675,000 at 6.25% 667,188
8,825,000 at 6.75% 622,163
4,955,005

(4) Unsecured Notes
$3,560,000 at 6.30% 224,280
4,000,000 at 6.40% 256,000
480,280

(5) Instalment Purchase Obligations
$19,100,000 at 6.875% 1,313,125

Total interest on long-term debt $34,867,924

(h) Amount of dividends paid upon each class of stock during previous
five years:
<TABLE>
<CAPTION>
12 Months 12 Months 12 Months 12 Months 12 Months
Class of Stock 9/30/95 12/31/94 12/31/93 12/31/92 12/31/91

Cumulative Preferred:
<C> <C> <C> <C> <C> <C>
4.40% Series $ 396,000 $ 396,000 $ 396,000 $ 396,000 $ 396,000
4.80% Series B 192,000 192,000 192,000 192,000 192,000
4.50% Series C 270,000 270,000 270,000 270,000 270,000
$6.28 Series D 314,000 314,000 314,000 314,000 314,000
$7.36 Series E 354,000 368,000 368,000 368,000 368,000
$9.64 Series F - - - 387,500 482,000
$8.80 Series G 423,500 440,000 440,000 440,000 440,000
$7.92 Series H 381,000 396,000 396,000 396,000 396,000
$7.92 Series I 762,000 792,000 792,000 792,000 792,000
$8.60 Series J 1,240,500 1,290,000 1,290,000 1,290,000 1,290,000
$7.73 Series L 3,865,000 1,835,875 - - -

$ 8,198,000 $ 6,293,875 $ 4,458,000 $ 4,845,500 $ 4,940,000

Common Stock:
Dividends $46,597,810 $47,481,460 $49,837,860 $46,532,410 $45,309,900

Rate per share (avg.) $7.91 $8.06 $8.46 $7.90 $8.90
</TABLE>
<PAGE>
(i) Financial Statements - September 30, 1995

(1) Income Statement
(2) Balance Sheet
<PAGE>

MONONGAHELA POWER COMPANY

Statement of Income
for Twelve Months Ended September 30, 1995

(Thousands of Dollars)

ELECTRIC OPERATING REVENUES $710,394

OPERATING EXPENSES:
Operation:
Fuel 137,320
Interchange and purchased power, net 171,385
Deferred power costs, net 16,632
Other 83,112
Maintenance 72,090
Depreciation 57,456
Taxes other than income taxes 38,162
Federal and state income taxes 37,879
Total Operating Expenses 614,036
Operating Income 96,358

OTHER INCOME AND DEDUCTIONS:
Allowance for other than borrowed funds
used during construction 454
Other income, net 9,763
Total Other Income and Deductions 10,217
Income Before Interest Charges 106,575

INTEREST CHARGES:
Interest on long-term debt 36,764
Other interest 2,708
Allowance for borrowed funds used during
construction (843)
Total Interest Charges 38,629

NET INCOME $ 67,946
<PAGE>

MONONGAHELA POWER COMPANY
Balance Sheet - September 30, 1995
(Thousands of Dollars)

ASSETS

PROPERTY, PLANT AND EQUIPMENT:
At original cost, including $33,757,000
under construction $1,808,695
Accumulated depreciation (737,061)
1,071,634
INVESTMENTS AND OTHER ASSETS:
Allegheny Generating Company - common stock at equity 58,456
Other 443
58,899
CURRENT ASSETS:
Cash and temporary cash investments 130
Accounts receivable:
Electric service, net of $2,025,000 uncollectible allowance 65,557
Affiliated and other 10,277
Materials and supplies - at average cost:
Operating and construction 24,444
Fuel 18,525
Prepaid taxes 17,392
Other 11,107
147,432

DEFERRED CHARGES:
Regulatory assets 188,388
Unamortized loss on reacquired debt 16,403
Other 10,283
215,074

TOTAL ASSETS $1,493,039

CAPITALIZATION AND LIABILITIES

CAPITALIZATION:
Common stock $ 294,550
Other paid-in capital 2,441
Retained earnings 204,930
501,921
Preferred stock - not subject to mandatory redemption 74,000
Long-term debt 489,908
1,065,829
CURRENT LIABILITIES:
Short-term debt 26,835
Long-term debt due within one year 18,500
Accounts payable 17,106
Accounts payable to affiliates 8,740
Taxes accrued:
Federal and state income 11,436
Other 17,849
Deferred power costs 11,579
Interest accrued 12,829
Other 21,673
146,547
DEFERRED CREDITS AND OTHER LIABILITIES:
Unamortized investment credit 23,126
Deferred income taxes 226,990
Regulatory liabilities 19,217
Other 11,330
280,663
TOTAL CAPITALIZATION AND LIABILITIES $1,493,039
<PAGE>

Exhibit F

THE POTOMAC EDISON COMPANY

STATEMENT OF FINANCIAL CONDITION
September 30, 1995

(a) Amount and classes of stock authorized:

(1) 23,000,000 shares Common Stock - no par value
(2) 5,388,046 shares Cumulative Preferred Stock - par value $100

(b) Amount and classes of stock issued and outstanding as of September
30, 1995:

(1) 22,385,000 shares Common Stock
163,784 shares Cumulative Preferred Stock, as follows:

3.60% Series - 63,784 shares
$ 5.88 Series C - 100,000 shares

All shares of equal rank

(d) Brief description of each mortgage upon any property of the corporation,
giving date of execution, name of trustee, amount of indebtedness
authorized to be secured thereby, amount of indebtedness actually secured
and brief description of the mortgaged property or collateral:

There is presently in effect a mortgage indenture dated
October 1, 1944, and indentures supplemental thereto, executed
by the applicant upon all its property under which Chemical
Bank is Trustee and Thomas J. Foley is Individual Trustee.
Said mortgage indenture secures bonds issued thereunder by the
applicant for the purpose of borrowing money for its corporate
purposes and authorizes the issuance of an initial series of
bonds for the aggregate principal amount of $16,981,000.00.
Thereafter from time to time, upon a showing that the
consolidated net earnings of the applicant and its
subsidiaries available for interest for 12 out of the 15
preceding months, after provision for depreciation, have been
in the aggregate equal to not less than twice the amount of
annual interest charges on the principal amount of all bonds
and prior lien bonds then outstanding or applied for,
additional bonds of any series may be issued in an aggregate
principal amount equal to 60% of the net bondable value of
property additions plus the amount of any cash deposited with
the Trustee, and also in substitution for any refundable
bonds. The amount of indebtedness accrued and principal
outstanding is $513,000,000.00. There is no interest due and
unpaid.

(e) Number and amount of bonds authorized and issued under each mortgage,
describing each class separately, giving date of issue, par value, rate of
interest, date of maturity and how secured:

Potomac has bonds issued and outstanding under the above-mentioned
Indenture consisting of series, all of which are First Mortgage Bonds, as
follows:
Amount
Series Outstanding

1966 - 5 7/8% due 1996 18,000,000
1991 - 8 7/8% due 2021 50,000,000
1991 - 8% due 2006 50,000,000
1992 - 8% due 2022 55,000,000
1993 - 7 3/4% due 2023 45,000,000
1993 - 5 7/8% due 2000 75,000,000
1994 - 8% due 2024 75,000,000
1995 - 7 3/4% due 2025 65,000,000
1995 - 7 5/8% due 2025 80,000,000
$ 513,000,000
<PAGE>

(f) Other indebtedness of all kinds, giving same by classes and describing
security, if any:

(1) $ 5,500,000 long-term unsecured pollution control notes;
(2) $91,700,000 long-term secured pollution control notes and solid
waste disposal notes;
(3) $45,456,500 long-term unsecured junior subordinated debentures.

(g) Amount of interest paid during previous fiscal year upon each species of
indebtedness and rate thereof and, if different rates were paid, amount
paid at each rate:

(1) $38,871,170 interest with respect to bonds
(2) $346,500 on long-term unsecured pollution control notes
(3) $5,649,538 on long-term secured pollution control notes and solid
waste disposal notes
(4) See attached Schedule A for commercial paper notes and bank loans.

(h) Amount of dividends paid upon each class of stock during previous five
years and rate thereof:
<TABLE>
<CAPTION>
CLASS 1994 1993 1992 1991 1990
OF STOCK AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT

Cumulative Preferred:
<C> <C> <C> <C> <C> <C>
3.60% Series $ 229,623 $ 229,623 $ 229,623 $ 229,623 $ 229,623
4.70% Series B - 14,262 22,999 26,066 29,215
$ 5.88 Series C 588,000 588,000 588,000 588,000 588,000
$ 7.00 Series D 350,000 350,000 350,000 350,000 350,000
$ 9.40 Series E - - 495,500 470,000 470,000
$ 8.32 Series F 416,000 416,000 416,000 416,000 416,000
$ 8.00 Series G 800,000 800,000 800,000 800,000 800,000
$ 9.64 Series H - - 1,524,000 1,446,000 1,446,000
$ 7.16 Series J 1,954,680 2,040,600 2,133,991 2,148,000 2,148,000
Common Stock 62,454,150 60,385,750 53,731,550 49,588,200 47,927,250

(i) A statement of income for the twelve months ended September 30, 1995 and
balance sheet as of September 30, 1995 are attached as Schedules B and C,
respectively.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit F
SCHEDULE A
Page 1 of 3

AVERAGE PRINCIPAL & RATE ANALYSIS 12/31/94 PAGE 1
---------------------------------

DATE: 01/01/94 TO 01/01/95

OUTSTANDING

PORTFOLIOS:
PE
SECURITIES:
ALL

BANK LOAN
=========
<C> <C> <C> <C> <C> <C> <C> <C>
03/01/94 003878 7,450,000.00 20,694.44 1 20,694.44 724.31 3.5000
03/02/94 003884 9,300,000.00 25,833.33 1 25,833.33 911.92 3.5300
03/03/94 003886 9,350,000.00 25,972.22 1 25,972.22 909.03 3.5000
03/04/94 003888 8,550,000.00 23,750.00 3 71,250.00 2,458.13 3.4500
03/07/94 003890 7,850,000.00 21,805.56 1 21,805.56 752.29 3.4500
03/08/94 003892 9,100,000.00 25,277.78 1 25,277.78 851.86 3.3700
03/09/94 003882 6,750,000.00 18,750.00 1 18,750.00 628.13 3.3500
03/10/94 003902 3,500,000.00 9,722.22 1 9,722.22 323.75 3.3300
03/11/94 003899 1,400,000.00 3,888.89 3 11,666.67 385.00 3.3000
03/14/94 003898 1,100,000.00 3,055.56 1 3,055.56 110.61 3.6200
03/15/94 003896 13,150,000.00 36,527.78 1 36,527.78 1,271.17 3.4800
03/16/94 003917 10,700,000.00 29,722.22 1 29,722.22 1,010.56 3.4000
03/17/94 003915 8,600,000.00 23,888.89 1 23,888.89 812.22 3.4000
03/18/94 003913 7,850,000.00 21,805.56 3 65,416.67 2,158.75 3.3000
03/21/94 003906 8,600,000.00 23,888.89 1 23,888.89 831.33 3.4800
03/22/94 003908 5,950,000.00 16,527.78 1 16,527.78 595.00 3.6000
03/24/94 003925 2,150,000.00 5,972.22 1 5,972.22 215.00 3.6000
03/25/94 003922 750,000.00 2,083.33 3 6,250.00 221.09 3.5375
03/28/94 003921 8,250,000.00 22,916.67 1 22,916.67 839.32 3.6625
03/29/94 003928 6,700,000.00 18,611.11 1 18,611.11 670.00 3.6000
03/30/94 003935 5,450,000.00 15,138.89 1 15,138.89 548.03 3.6200
03/31/94 003933 12,950,000.00 35,972.22 4 143,888.89 5,539.72 3.8500
04/04/94 003941 13,650,000.00 37,916.67 1 37,916.67 1,412.40 3.7250
04/05/94 003946 12,200,000.00 33,888.89 1 33,888.89 1,262.36 3.7250
04/06/94 003949 10,000,000.00 27,777.78 1 27,777.78 1,008.33 3.6300
04/07/94 003952 7,600,000.00 21,111.11 1 21,111.11 760.00 3.6000
04/08/94 003954 5,100,000.00 14,166.67 3 42,500.00 1,503.44 3.5375
04/11/94 003960 4,500,000.00 12,500.00 1 12,500.00 450.00 3.6000
04/12/94 003970 2,600,000.00 7,222.22 1 7,222.22 261.44 3.6200
04/18/94 003968 18,300,000.00 50,833.33 1 50,833.33 1,957.08 3.8500
04/25/94 003987 14,100,000.00 39,166.67 1 39,166.67 1,535.33 3.9200
04/26/94 003983 13,550,000.00 37,638.89 1 37,638.89 1,449.10 3.8500
04/27/94 003990 11,200,000.00 31,111.11 1 31,111.11 1,166.67 3.7500
04/29/94 004003 13,300,000.00 36,944.44 3 110,833.33 4,156.25 3.7500
05/02/94 004008 15,450,000.00 42,916.67 1 42,916.67 1,652.29 3.8500
05/05/94 004023 13,800,000.00 38,333.33 1 38,333.33 1,475.83 3.8500
05/06/94 004019 13,550,000.00 37,638.89 3 112,916.67 4,798.96 4.2500
05/09/94 004017 13,150,000.00 36,527.78 1 36,527.78 1,515.90 4.1500
05/10/94 004026 11,050,000.00 30,694.44 1 30,694.44 1,212.43 3.9500
05/11/94 004028 8,900,000.00 24,722.22 1 24,722.22 939.44 3.8000
05/12/94 004035 7,250,000.00 20,138.89 1 20,138.89 775.35 3.8500
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit F
SCHEDULE A
Page 2 of 3

AVERAGE PRINCIPAL & RATE ANALYSIS 12/31/94 PAGE 2
---------------------------------

DATE: 01/01/94 TO 01/01/95

OUTSTANDING

PORTFOLIOS:
PE
SECURITIES:
ALL

DATE TRANSACTION PRINCIPAL AVERAGE # DAYS AVG ANNUAL INTEREST AVG ANNUAL
ISSUED NUMBER AMOUNT PER DAY OUTSTANDING PRINCIPAL FOR PERIOD INTEREST
RATE
- ---------------------------------- ---------------- ------------ ---------------- ----------------
- -------------
<C> <C> <C> <C> <C> <C> <C> <C>
05/13/94 004033 6,400,000.00 17,777.78 3 53,333.33 2,053.33 3.8500
05/16/94 004039 13,000,000.00 36,111.11 1 36,111.11 1,480.56 4.1000
05/17/94 004044 5,150,000.00 14,305.56 1 14,305.56 615.14 4.3000
05/24/94 004053 8,300,000.00 23,055.56 1 23,055.56 1,002.92 4.3500
05/25/94 004056 7,600,000.00 21,111.11 1 21,111.11 905.14 4.2875
05/26/94 004066 6,100,000.00 16,944.44 1 16,944.44 726.49 4.2875
06/02/94 004080 15,950,000.00 44,305.56 1 44,305.56 1,927.29 4.3500
06/03/94 004077 17,650,000.00 49,027.78 3 147,083.33 6,306.20 4.2875
06/06/94 004074 17,800,000.00 49,444.44 1 49,444.44 2,150.83 4.3500
06/07/94 004090 15,150,000.00 42,083.33 1 42,083.33 1,804.32 4.2875
06/08/94 004087 12,850,000.00 35,694.44 1 35,694.44 1,508.09 4.2250
06/09/94 004084 11,200,000.00 31,111.11 1 31,111.11 1,333.89 4.2875
06/13/94 004102 9,650,000.00 26,805.56 1 26,805.56 1,166.04 4.3500
06/14/94 004100 8,000,000.00 22,222.22 1 22,222.22 962.22 4.3300
06/15/94 004096 20,000,000.00 55,555.56 8 444,444.44 19,022.22 4.2800
06/17/94 004110 3,650,000.00 10,138.89 3 30,416.67 1,304.11 4.2875
06/17/94 004109 5,000,000.00 13,888.89 3 41,666.67 1,779.17 4.2700
06/21/94 004133 9,650,000.00 26,805.56 1 26,805.56 1,149.29 4.2875
06/22/94 004130 9,000,000.00 25,000.00 1 25,000.00 1,071.88 4.2875

---------------- ---------------- -------
TOTAL US 2,533,472.23 100,328.95 3.9601

</TABLE>
<TABLE>
<CAPTION>
Exhibit F
SCHEDULE A
Page 3 of 3

AVERAGE PRINCIPAL & RATE ANALYSIS 12/31/94 PAGE 3
---------------------------------

DATE: 01/01/94 TO 01/01/95

OUTSTANDING

PORTFOLIOS:
PE
SECURITIES:
ALL

COMMERCIAL PAPER
================
<C> <C> <C> <C> <C> <C> <C> <C>
03/23/94 003910 4,399,566.11 12,221.02 1 12,221.02 433.89 3.5504
04/15/94 003964 17,494,822.92 48,596.73 3 145,790.19 5,177.08 3.5510
04/19/94 003972 20,097,850.42 55,827.36 1 55,827.36 2,149.58 3.8504
04/20/94 003974 18,947,999.72 52,633.33 1 52,633.33 2,000.28 3.8004
04/21/94 003976 15,798,345.39 43,884.29 1 43,884.29 1,654.61 3.7704
04/22/94 003978 14,945,328.12 41,514.80 3 124,544.40 4,671.88 3.7512
04/28/94 003994 18,798,041.67 52,216.78 1 52,216.78 1,958.33 3.7504
05/03/94 004010 15,098,343.19 41,939.84 1 41,939.84 1,656.81 3.9504
05/04/94 004013 15,498,333.75 43,050.93 1 43,050.93 1,666.25 3.8704
05/18/94 004041 4,699,436.00 13,053.99 1 13,053.99 564.00 4.3205
05/19/94 004046 2,399,716.67 6,665.88 1 6,665.88 283.33 4.2505
05/20/94 004047 6,697,666.17 18,604.63 3 55,813.88 2,333.83 4.1815
05/23/94 004049 6,699,195.07 18,608.88 1 18,608.88 804.93 4.3255
05/27/94 004061 12,294,301.00 34,150.84 4 136,603.34 5,699.00 4.1719
05/31/94 004063 6,099,262.92 16,942.40 1 16,942.40 737.08 4.3505
06/01/94 004068 16,797,958.33 46,661.00 1 46,661.00 2,041.67 4.3755
06/10/94 004082 9,996,516.67 27,768.10 3 83,304.31 3,483.33 4.1815
06/15/94 004093 10,848,696.49 30,135.27 1 30,135.27 1,303.51 4.3255
06/16/94 004104 8,948,918.54 24,858.11 1 24,858.11 1,081.46 4.3505
06/20/94 004113 10,948,692.08 30,413.03 1 30,413.03 1,307.92 4.3005

---------------- ---------------- -------
TOTAL US
1,035,168.23 41,008.77 3.9616

================ ================ =======
GRAND TOTAL US
3,568,640.46 141,337.72 3.9605
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit F
SCHEDULE B

THE POTOMAC EDISON COMPANY

STATEMENT OF INCOME FOR
PERIOD ENDED 09/30/95

($000's)

DESCRIPTION ACTUAL
MONTH YTD 12 MONTHS
Electric Oper. Revenues:
<S> <C> <C> <C>
Residential 19,704 231,921 303,311
Commercial 11,708 107,673 141,916
Industrial 16,658 148,720 200,394
Non-Affiliated Utilities 11,804 94,222 116,802
Other, Excluding Affil. 2,480 20,370 25,342
Affiliated Companies 204 1,897 2,595
Total Operating Revenues 62,558 604,803 790,360

Operating Expenses:
Power Cost:
Fuel 10,987 102,113 137,263
Purch. Power & Exch., Net 19,568 179,679 225,752
Deferred Power Costs, Net 1,276 12,137 15,589
Other 5,024 40,164 52,219
Transmission & Distribution 2,760 28,060 37,906
Customer Acctnts. & Serv. 1,472 13,047 17,275
Administrative & General 3,454 30,663 40,272
Restructuring Charges 3,956 3,956 3,956
Total Oper. & Maint. 48,497 409,819 530,232
Depreciation and Other 5,776 51,707 67,097
Taxes Other than Income 3,927 36,075 47,198
Federal & State Income (4) 23,992 31,695
Total Oper. Expenses 58,196 521,593 676,222
Operating Income 4,362 83,210 114,138

Other Income & Deduct:
AOFDC (721) 664 1,684
Asset Writ-Off, Net 0 0 (66)
Other Income, Net 1,020 9,385 12,681
Total Other Inc. & Deduct 299 10,049 14,299

Income Before Int. Charges 4,661 93,259 128,437

Interest Charges:
Interest 1st Mort. Bonds 3,244 31,274 41,648
Interest Other L/T Oblig. 818 5,664 7,262
Other Interest 169 1,506 1,963
ABFDC 478 (440) (979)
Total Interest Charges 4,709 38,004 49,894
Income Before Acctg. Chang. (48) 55,255 78,543
Accounting Change, Net 0 0 0
Net Income (48) 55,255 78,543
Dividends on Preferred Stock 68 2,250 3,325
Balance for Common Stock (116) 53,005 75,218

Included Above:
Maintenance 5,122 43,397 57,641
Statistics:
Charter Coverage 2.59
Indenture Coverage 4.12
Return on Avg. Com. Equity 11.30
GWH Sales:
Residential 267 3,205 4,177
Commercial 180 1,641 2,158
Industrial 448 4,064 5,447
Non-Affiliated Utilities 437 3,281 3,998
Other 47 456 592
Affiliated Companies 4 41 58
Total GWH Sales 1,383 12,688 16,430
KWH - Use per Resid. Cust. 834 10,080 13,169
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit F
SCHEDULE C

THE POTOMAC EDISON COMPANY
Balance Sheet
($000's)

DESCRIPTION SEPT. 1995

PROPERTY, PLANT & EQUIPMENT:
<S> <C>
At Original Cost 2,029,803
Accum. Depreciation (717,610)
Total 1,312,193

Investments & Other Assets:
Allegheny Generating Co. 60,621
Allegheny Pittsburgh Coal 565
Other Assets 364
Total 61,550
Current Assets:
Cash & Temp. Cash Invest. 4,101
Accounts Receivable:
Electric Service 78,808
Other 2,289
Allow. Uncollect. Accts. (1,419)
Accts. Rcv. - Affil. 928
Notes Rcv. due one year -
Materials and Supplies:
Operating and Constr. 29,722
Fuel 17,929
Deferred Power Costs 1,350
Other 17,137
Total 146,845

Deferred Charges:
Deferred Power Costs -
Regulatory Assets 97,381
Other 31,980
Total 129,361

TOTAL ASSETS 1,649,949

CAPITALIZATION:
Common Stock 447,700
Other Paid-In Capital 2,690
Retained Earnings 210,179
Subtotal 660,569
Preferred Stock:
Not subject to mand. redemption
Subject to mand. redemption 16,378
Long-Term Debt -
Total 628,761
1,305,708

CURRENT LIABILITIES:
Short-Term Debt 5,500
LT Debt/Pref. due one year 18,700
Accts. Payable - Affil. 9,886
Accts. Payable - Other 23,722
Deferred Income Taxes 2,337
Taxes Accrued:
Fed. & State Income 9,081
Other 16,696
Deferred Power Costs 795
Interest Accrued 14,870
Payrolls Accrued 4,306
Dividends Accrued 204
Restructuring Liability 3,956
Other 17,540
Total 127,593

DEFERRED CR. AND OTHER LIABILITY:
Unamort. Investment Cr. 26,372
Deferred Income Taxes 157,650
Deferred Power Costs 718
Regulatory Liabilities 16,143
Other 15,765
Total 216,648

TOTAL CAPITALIZATION AND LIABILITY 1,649,949
</TABLE>

UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION

FTM Energy Inc. ) Docket No. EG96- -000

APPLICATION OF
FTM ENERGY INC. FOR DETERMINATION OF
EXEMPT WHOLESALE GENERATOR STATUS

FTM Energy Inc. ("Applicant"), pursuant to section 32 of the
Public Utility Holding Company Act of 1935, as amended by the
Energy Policy Act of 1992 ("PUHCA"), and Part 365 of the
Commission's regulations thereunder, 18 C.F.R. Sections 365.1-
365.7 (1995), hereby files this original Application for a
determination of exempt wholesale generator ("EWG") status, as
well as a copy of the notice of the Application suitable for
publication in the Federal Register on a 3-1/2" diskette in ASCII
format (marked "notice of filing"). Also enclosed herewith, in
accordance with the Commission's rules of practice and procedure,
are fourteen copies of the Application, each including a hard
copy of the draft notice of filing.
Applicant hereby states its recognition of the requirement
set forth at 18 C.F.R. Section 365.7 to notify the Commission
within 60 days of "any material change in facts that may effect"
Applicant's eligibility for EWG status under PUHCA section 32 and
to either apply for a new determination or to file a written
explanation of why the material change in facts does not affect
<PAGE>

Applicant's status (or to inform the Commission that Applicant no
longer seeks to maintain EWG status). In support of this
Application, Applicant hereby states:

SERVICE

Applicant has served a copy of this Application on the
Securities and Exchange Commission and the Pennsylvania Public
Utility Commission and has provided copies to the state utility
commissions of Maryland, Ohio, Virginia and West Virginia.

IDENTIFICATION OF THE
APPLICANT AND THE ELIGIBLE
FACILITY

Applicant is a corporation organized under the laws of the
state of Delaware. Applicant is a wholly owned subsidiary of AYP
Capital, Inc. ("AYP"), which itself is a wholly owned subsidiary
of Allegheny Power System, Inc. ("APS"), a registered electric
utility holding company. Applicant's business address is c/o
Allegheny Power Service Corporation, 800 Cabin Hill Drive,
Greensburg, PA 15601 Attn: Theresa J. Colecchia.

Applicant will own directly the eligible facility as
described herein. At the present time, Applicant has no plans to
engage in any activities other than to exclusively own the
eligible facility and to sell the electrical output of the
facility exclusively at wholesale to willing buyers within the
continental United States. In addition, Applicant intends to
engage in other previously authorized activities deemed
incidental or necessary to the involvement of an EWG in wholesale
<PAGE>
electric generation, including (a) selling power from sources not
owned by the Applicant, (b) entering into contracts for firm and
interruptible electrical transmission capacity, solely to the
extent necessary to effect sales at wholesale of electric energy
generated by the Applicant or others, (c) the reassignment
(resale) of excess transmission capacity solely to the extent
that such excess transmission capacity originally was obtained
for the purpose of effecting a specific wholesale sale of
electric energy, (d) contracting for deliveries of fuel to a
third-party generating facility only in such amounts as are
necessary for the third-party owner or operator of such facility
to generate the electric power and energy that in turn will be
delivered by such third-party to the Applicant for sale by the
Applicant at wholesale and (e) brokering transactions that are
limited to the essential business elements that are necessary for
the Applicant to effect a sale of electric energy at wholesale in
competitive power markets, as described and authorized in CNG
Power Services Corporation, 71 FERC 61,026 (1995), 71 FERC
Paragraph 61,378 (June 21, 1995), and Southern Energy Marketing,
Inc., 71 FERC Paragraph 61,376 (June 21, 1995).
The eligible facility is an undivided 50% interest in Unit
No. 1 ("Ft. Martin Unit 1"), an operating steam-electric
generating unit, including an undivided 25% interest in the
associated facilities common to such unit and a second unit
located at the Ft. Martin Power Station. The eligible facility
also includes an associated undivided 50% interest in Ft. Martin
Unit 1's main transformers. Ft. Martin Unit 1 is located in West
<PAGE>
Virginia on the Monongahela River between Morgantown, West
Virginia and Point Marion, Pennsylvania. The undivided 50%
interest in Ft. Martin Unit 1 that comprises the eligible
facility is currently owned by Duquesne Light Company
("Duquesne"), a Pennsylvania public utility not associated or
affiliated with APS (or the Applicant); however, Duquesne has
entered into an Asset Purchase Agreement (dated November 28,
1995) with AYP, pursuant to which Duquesne will sell on or before
December 31, 1996 all of its 50% undivided ownership interest in
Ft. Martin Unit 1. AYP will assign the Asset Purchase Agreement
to FTM Energy Inc. The remainder of Ft. Martin Unit 1, of which
the eligible facility is a portion, is owned by Monongahela Power
Company ("MPC") and The Potomac Edison Company ("PEC"), two of
the three wholly owned electric operating subsidiaries of APS.

COMPLIANCE WITH SECTION 365.3(a)
In addition to the general information provided above, to
ensure compliance with subpart (a) of Section 365.3, Applicant
states:
1. A sworn statement by a representative legally authorized
to bind Applicant attesting to all facts and representations
presented in this Application to demonstrate Applicant's
eligibility for EWG status is attached hereto.
2. Applicant represents that upon acquisition of the
eligible facility, Applicant will be exclusively in the business
of owning all of the eligible facility and selling electric
energy at wholesale. Applicant does not seek any exception for
foreign sales of power at retail.
<PAGE>
3. The eligible facility, when acquired by FTM Energy Inc.
from Duquesne, will be, as described above and discussed below, a
portion of an already operating unit, the remainder of which is
currently owned by MPC and PEC and operated by MPC. Thus, the
entire facility is a "hybrid" facility as defined by PUHCA
subsection 32(d). All components of the eligible facility will
be conveyed pursuant to the November 28, 1995 Asset Purchase
Agreement. Applicant assumes that, just as an eligible facility
may include "a facility the construction of which has not been
commenced or completed" (PUHCA subsection 32(a)(2)), it may
include facilities that will be sold pursuant to an executed
contract of sale. The associated common facilities include
standard generating station equipment and structures, such as
cooling systems, coal handling facilities, oil tanks, controls,
machine and service shops, accessory electrical equipment, stores
and miscellaneous power plant equipment. The only related
"transmission interconnection components" is Duquesne's undivided
50% interest in Ft. Martin Unit 1's main transformers. These
transformers are currently operated on behalf of the joint owners
(Duquesne, MPC and PEC) by MPC, which will continue to operate
the transformers after the sale to FTM Energy Inc. of Duquesne's
interest. The operating agreement was accepted for filing by the
Commission and made effective in Allegheny Power Service
Corporation, Docket No. ER94-390-000, by letter order dated
December 19, 1994.
4. Upon completion of the transactions contemplated by the
Asset Purchase Agreement, there will be no lease arrangements
<PAGE>
involving the eligible facility (including the interest in the
common facilities or the main transformers included in the
eligible facility), or any other portion of Ft. Martin Unit 1, or
involving its main transformers or associated common facilities.
5. Applicant is an associate company, as defined by PUHCA
subsection 2(a)(10), of MPC, PEC and West Penn Power Company
("WPPC"), the latter being the third electric utility company
wholly owned by APS. The retail rates of MPC, PEC and WPPC are
regulated by the states of Ohio, West Virginia and Maryland, and
by the Commonwealths of Virginia and Pennsylvania.

COMPLIANCE WITH SECTION 365.3(b)

1. Duquesne's 50% undivided interest in Ft. Martin Unit 1
is included, and was included on October 24, 1992, in Duquesne's
retail rate base. Accordingly, with respect to the portion of
Ft. Martin Unit 1 that is the eligible facility[1], there was in
effect as of October 24, 1992 under the laws of Pennsylvania "a
[retail] rate or charge for . . . electric energy produced by"
the eligible facility. Therefore, Section 365.3(b) appears to
require (although the applicable retail rate is for a non-
affiliated public utility) FTM Energy Inc. to provide the
Commission with "a specific determination" from the Commonwealth
of Pennsylvania "that allowing the facility to be an eligible

[1]PUCHA subsection 32(a)(2) provides that for purposes of
defining an eligible facility, the term "shall not include any
facility for which consent is required under subsection (c) if
such consent has not been obtained" and further that "the term
'facility' may include a portion of a facility subject to the
limitations of subsection (d) . . . ."
<PAGE>

facility: (1) Will benefit consumers, (2) Is in the public
interest, and (3) Does not violate State law." AYP and WPPC have
filed a joint petition with the Pennsylvania Public Utility
Commission ("PPUC") for an order making the appropriate
determinations, and Applicant is authorized to represent that
such order is expected to be forthcoming in the near future.
Applicant will provide the Commission with a copy of the order
when it is issued by the PPUC. In the interim, Applicant
requests the Commission to make a determination that FTM Energy
Inc. is an EWG based upon Applicant's representation that an
order of the PPUC making the appropriate determinations will be
entered and will be supplied to this Commission as promptly as
possible.
2. Additionally, the remaining portion of Ft. Martin Unit
1, i.e., the non-eligible facility portion, was as of October 24,
1992 and continues to be owned by MPC and PEC and operated by
MPC. Either (a) because MPC and PEC are electric utility
companies that are associated with the Applicant, or (b) because
MPC and PEC, which are affiliated electric utility subsidiaries
of APS, had rates or charges in effect as of October 24, 1992 for
electric energy produced by the non-eligible facility portion of
Ft. Martin Unit 1, Section 365.3 may also require a similar
"specific determination" from each of the states of Maryland,
Ohio and West Virginia, and the Commonwealth of Virginia (which
have retail rate jurisdiction over MPC and PEC).
However, while the statutory language of PUHCA subsection
32(c) is not absolutely clear, Applicant believes that the
phrases "a rate or charge" and "any such rate or charge" as used
<PAGE>
in subsection 32(c) pertain solely to a rate or charge for the
portion of a hybrid facility that is to become the "eligible
facility." If Applicant's belief is deemed correct, Applicant
would not be required to obtain subsection 32(c) determinations
from the states of Maryland, Ohio or West Virginia, or from the
Commonwealth of Virginia. Therefore, Applicant does not herein
represent that it will obtain subsection 32(c) determinations
from those states. (Such states, however, have been made fully
aware of the transactions described herein, will be provided with
copies of this Application, and will be kept fully advised of all
relevant events in a prompt manner.)
On December 4, 1995 AYP submitted, pursuant to 18 C.F.R.
Section 388.104 (1995), a request from the Commission's General
Counsel for an opinion confirming Applicant's interpretation of
PUHCA subsection 32(c). The General Counsel has not yet acted
upon AYP's request. As Applicant indicated therein, it was
anticipated that the time constraints associated with obtaining
all required regulatory approvals before the closing of the sale
to FTM Energy Inc. of Duquesne's interest in Ft. Martin Unit 1
might necessitate the filing of this Application before the
General Counsel could respond to AYP's request for an opinion.
As AYP stated, in such event, the request for an opinion will
have served the useful purpose of focusing attention on an issue
of statutory interpretation that might be difficult to analyze
within the "absolute 60-day deadline" for Commission action on
EWG applications.
<PAGE>
Applicant fully appreciates that the EWG determination
process is intended to be ministerial. At the same time,
however, the Commission contemplates that from time to time, EWG
applications will present unusual issues that require statutory
interpretation and more than mere ministerial analysis.
Accordingly, for the convenience of the Commission, FTM Energy
Inc. in the following analysis hereby repeats the substance of
the legal analysis contained in AYP's December 4, 1995 request
for a General Counsel's opinion. (Applicant has excluded the
attachments to the letter, including quotations from relevant
legislative history.)

Analysis

1. PUHCA subsections 32(c) and (d)

The "eligible facility" upon which Applicant's certification
is based is a portion of a total facility, the other portion of
which is already owned or operated by MPC and PEC. It is clear
from PUHCA section 32 that such a result is entirely compatible
with the overriding objective of Title VII of the Energy Policy
Act of 1992 ("EPACT") (Pub. L. No. 102-486, 100 Stat. 2776
(1992)) to promote the development of a new market comprised of
wholesale power producers, which would generate electric energy
from new non-rate based facilities or from existing facilities no
longer included in an electric utility's rate base. Further it
<PAGE>
is clear that EPACT permits non-franchised affiliates of electric
utilities to participate in the new market.
It is also equally clear that the drafters of Title VII of
EPACT, while ultimately intending to permit utilities to
establish "exempt" affiliates that participate in the new
wholesale power producing market, wanted to ensure that utility
participation was not enabled by the transfer of valuable
generating assets from an existing franchised electric utility to
an exempt affiliate unless the transfer was authorized by the
utility's state commission. (Indeed, Title VII of EPACT
expresses a concern with affiliated power sales as well as
affiliated asset transfers.[2]) In order to achieve this
balance, in the very late stages of the legislative process, the
drafters added to EPACT the provision that became PUHCA
subsection 32(d). (As discussed below, prior versions of H.R.
776, the bill that became EPACT, did not contain this provision.)
Subsection 32(d)(1) of this provision, while not described as a
definition, in effect defines a "hybrid" facility. (Subsection
32(d) is captioned "Hybrids.") As therein defined, a hybrid
facility is any facility, one portion of which is to be an
"eligible facility" as defined in PUHCA subsection 32(a)(2) and
"any other portion" of which "is owned or operated by an electric
utility company that is an affiliate or associate company" of the
EWG.
Consistent with this definition, the facility discussed in
this Application could be considered a hybrid because Applicant

[2]See PUCHA subsection 32(k), titled "Protection Against Abusive
Affiliate Transactions" and FPA section 214, titled "Sales by
Exempt Wholesale Generators."
<PAGE>

will own one portion and two affiliated utilities will own the
remainder (and one will jointly operate the facility). If the
overall facility is a hybrid, it seems to follow, from a literal
reading, that Applicant becomes trapped by the operation of
subsection 32(d)(2), which states that an EWG may own or operate
a portion of a hybrid "if such portion has become an eligible
facility as a result of the operation of subsection (c)," even
though subsection (c) contemplates (Applicant believes) the need
for state consent when the EWG is to be formed by a different
method, i.e., by the transfer of a facility from the rate base of
an affiliated utility. In other words, although the hybrid
facility described herein will not be created through any
transfer between affiliates, it would appear that Applicant
nevertheless could be required to comply with subsection (c).

Subsection (c) states:

(c) State Consent for Existing Rate-Based Facilities.
If a rate or charge for, or in connection with, the
construction of a facility, or for electric energy
produced by a facility (other than any portion of a
rate or charge which represents recovery of the cost of
a wholesale rate or charge) was in effect under the
laws of any State as of the date of enactment of this
section, in order for the facility to be considered an
eligible facility, every State commission having
jurisdiction over any such rate or charge must make a
specific determination that allowing such facility to
be an eligible facility (1) will benefit consumers, (2)
is in the public interest, and (3) does not violate
State law: Provided, That in the case of such a rate
or charge which is a rate or charge of an affiliate of
a registered holding company:

(A) such determination with respect to the
facility in question shall be required from every
State commission having jurisdiction over the
<PAGE>
retail rates and charges of the affiliates of such
registered holding company; and

(B) the approval of the [Securities and Exchange]
Commission under this Act shall not be required
for the transfer of the facility to an exempt
wholesale generator.

If this subsection applies,[3] Applicant apparently would be
required to provide the Commission with a copy of the
determination of the PPUC, the state commission with jurisdiction
over Duquesne's rates or charges, that allowing Duquesne's
undivided interest to be an eligible facility will benefit
consumers, is in the public interest and does not violate state
law. Further, if this subsection applies, because Applicant and
the affiliated utilities are subsidiaries of a registered holding
company, the proviso arguably would require Applicant or its
affiliates to obtain state commission determinations in the
states of Maryland, Ohio, Virginia and West Virginia. However,
the affiliated utilities' ratepayers, the interests clearly
intended to be protected from any potential adverse consequences
of an asset transfer between affiliates, will be unaffected by:
(1) the sale at arm's length by Duquesne to an unaffiliated
company, or (2) the certification of Applicant.[4]

[3]See also 18 C.F.R. Section 365.3(b) (1995).

[4]Additionally, the existing operating agreement between
Duquesne and the affiliated utilities, which already has been
approved by the commissions of all states in which such companies
provide service, will be unaffected by the sale of Duquesne's
interest. This operating agreement and a related transmission
facilities operating agreement also were filed with the
Commission. Thus, the operating agreement does not pose any
issue of potential affiliate abuse and is, in any event, already
effectively regulated by the relevant state commissions.
<PAGE>

In short, in this set of circumstances, there is no need for
the affiliated utilities to obtain any state consents or
approvals, since their system resources remain unchanged.
Moreover, as discussed above, pursuant to pre-EPACT state utility
law, Duquesne already will have obtained authorization from its
state commission to remove its undivided interest in the facility
from its rate base.
However, subsection 32(c), including particularly the
proviso pertaining to registered holding companies, appears
applicable only because of the inexactness with which subsections
32(c) and (d) are connected. As indicated above and discussed
more fully below, the two subsections were drafted at different
times in the legislative process. Indeed, the addition of
subsection 32(d) may be fairly described as a "last minute"
compromise intended to facilitate utility participation in the
EWG marketplace.[5] Probably because section 32(d) was drafted
with more focused attention on the issue concerning the use of an
affiliated or associated utility's resources to form an EWG, it
speaks directly to the situation in which "any portion of the
facility [that will become an eligible facility] is owned or

[5]The precursor of subsection 32(c) appears in S. 2166, the
Senate version of the bill that became EPACT, as early as January
1992, whereas the "hybrid" concept of subsection 32(d) does not
appear before the Conferees began to resolve differences in the
House and Senate bills. The first bill in which the provision
becoming subsection 32(d) appears, to Applicant's knowledge, is
dated September 28, 1992, just days before EPACT's enactment.
<PAGE>

operated by an electric utility company that is an affiliate or
associate company of such exempt wholesale generator."[6]
Subsection 32(c), however, was written much earlier in the
legislative process and is not nearly so focused on the affiliate
transfer issue. Therefore, it seemingly requires state consent
if there was a rate or charge for, or in connection with, the
construction of "a facility . . . in order for the facility to be
considered an eligible facility" - - even if the only rate or
charge of an affiliated utility is in connection with a different
portion of "the facility" than the portion which is to become the
"eligible facility," and even if the only rate or charge
applicable to the portion of the facility that will become the
eligible facility is a rate or charge of a utility unaffiliated
with the person seeking EWG certification.
Given, however, the overall context of section 32, and the
close relationship between subsections 32(c) and (d), subsection
32(c) should only require Applicant to include evidence of the
approval of the state commission that regulates Duquesne's rates
or charges. Such approval is the sole one necessary to protect
ratepayers who may be adversely affected if resources previously
used to provide service to them are sold for inadequate
compensation or must be replaced with more expensive resources at
a later date. While not free of all doubt, it appears that the
phrases "a rate or charge" and "such a rate or charge" as used in
the section pertain only to the rate or charge in connection with

[6]See also subsection 32(a) ("the term 'facility' may include a
portion of a facility subject to the limitations of subsection
(d)").
<PAGE>

the portion of a hybrid facility that is to become the eligible
facility. In this instance, such a rate or charge would be
Duquesne's rate or charge in effect upon the date of enactment of
EPACT. However, because Duquesne is not an affiliate of a
registered holding company, the registered holding company
proviso appears inapplicable.
2. Legislative History
The legislative history of PUHCA subsections 32(c) and (d)
is sparse. For example, the Joint Explanatory Statement of the
Committee of Conference (the "House Conference Report")
accompanying H.R. 776, the bill that became the EPACT, only
mentions "new section 32 of PUHCA" in a passing reference to the
effect that it allows EWGs outside the United States to engage in
both wholesale and retail generation and explains that the
definition of an EWG permits an EWG to sell wholesale power that
it has not generated and permits it to own facilities and goods
reasonably necessary for the operation of its business. House
Conference Report (No. 102-1018), 102nd Cong., 2nd Sess. (1992),
at 388, reprinted in 1992 U.S.C.C.A.N. 2472, 2479. No Senate
Report was submitted with EPACT.
Although sparse, the legislative history implicitly supports
the view that PUHCA subsections 32(c) and (d) were intended
primarily, if not exclusively, to provide safeguards in instances
where an EWG would be created using assets transferred from the
rate base of an electric utility affiliated with the EWG.[7]

[7]The President's Signing Statement (November 2, 1992) states
that the granting of exemptions for wholesale generators is
conditioned "on the consent of every State commission having
jurisdiction over the relevant utility company." 1992
U.S.C.C.A.N. 2534-1, 2534-2 (emphasis added).
<PAGE>

Prior to the House Conference Report, ordered to be printed
October 5, 1992, it was generally contemplated in the House that
generating facilities included in a utility's rate base could not
be used to establish an EWG.[8] A March 30, 1992 draft of H.R.
776 included an absolute prohibition against using any facility
(in whole or in part) as an eligible facility if any part had
been included "in the rate base of a State regulated electric
utility." H.R. Report No. 102-474, 102nd. Cong., 2d Sess.,
pt. 1, at 71 (1992). (In this draft, the term "exempt wholesale
generator" or EWG had not yet replaced the less apt term
"independent power producer.") Very importantly, however, this
prohibition applied "notwithstanding any subsequent sale or lease
of such facility by such State regulated electric utility." Id.
Had this provision been enacted in this form, no assets ever
included in the rate base of any "State regulated electric
utility" could ever comprise in whole or in part an eligible
facility.
The deletion of this notwithstanding clause in the final
version of H.R. 776, and the substitution of a prohibition
against "hybrid" facilities, defined in PUHCA subsection 32(d) as
facilities any portion of which is "owned or operated by an
electric utility company that is an affiliate" of an EWG,

[8]Early Senate legislation (S. 2166) permitted a facility that
was in a utility's retail rate base to be an eligible facility
with the consent of the utility's state commission.
<PAGE>

strongly implies that Congress ultimately, at the conclusion of
the legislative process, was concerned with EWGs created through
the transfer ("sale or lease") of rate-based facilities between
affiliated parties. Indeed, concurrently with the House Report
accompanying the above quoted version of H.R. 776, Representative
Dennis E. Eckart, in expressing "additional views" on such draft,
urged "my colleagues to work in conference to alter this language
to allow [EWG] transactions, provided state commissions retain
jurisdiction "over all transactions by IPPs [now EWGs] to
utilities with which they are affiliated." 1992 U.S.C.C.A.N.
2054.
Accordingly, while the subsequently deleted prohibition
against the use of rate-based facilities appeared absolute, it
also appeared to be predicated on a single scenario: the
transfer between affiliates of generation assets already in a
utility's rate base as the mechanism for investing an affiliated
EWG. Elsewhere, the House Report (Energy and Commerce Committee)
No. 102-474(I), dated March 30, 1992, refers to "a ban on
converting existing utility facilities into IPPs" (1992
U.S.C.C.A.N. at 1963) (emphasis added), which implies that the
ban was to apply when a utility, through an affiliate, would
convert a part of its system supply to a market-oriented, non-
utility enterprise. This rationale stops short of banning a
hybrid EWG created after a state-authorized sale of generating
facilities by one utility to an unaffiliated entity (whether or
not such entity is affiliated with another utility unaffiliated
with the selling utility). The same report later includes the
<PAGE>
statement that "[g]enerating facilities which already are
included in a utility's rate base are not eligible to become
IPPs." Id. at 2015 (emphasis added). The use of the phrase
"already are included" once again contemplates the
conversion-between-affiliates scenario and not a transfer of rate
base facilities between unaffiliated parties where such parties
have negotiated the sale (or lease) at arm's length and the
selling utility is already required to obtain approval of its
proposed disposition under pre-EPACT state utility law.

3. Applicable precedent
Research indicates that the Commission has not yet been
asked to address the issue posed in this Application.[9] The
correct conclusion, however, appears to be foreshadowed by the
Commission's decisions in Adirondack Hydro Development
Corporation, 66 FERC Paragraph 61,059 (1994) ("Adirondack"), and
Northern Electric Power Company, L.P., 66 FERC Paragraph 61,060
(1994). In those cases, the named parties were partner-
applicants for EWG status with respect to their respective
participation in the ownership and operation of a
to-be-constructed hydroelectric generating facility that would be
used exclusively for the generation and wholesale sale of
electric energy. Adirondack Hydro Development Corporation
("Adirondack") stated that the eligible facility would be

[9]Order Nos. 550 and 550-A, in which the Commission promulgated
the currently codified regulations for implementation of the
Commission's EPACT responsibilities to grant EWG certification
requests, does not address this matter in detail. See passing
references at III FERC Stats, & Regs., Paragraph 30,964 (1993) at
30, 767-768, 30,776.
<PAGE>

constructed on the site of a demolished hydroelectric facility.
Further, Adirondack stated that the site of the eligible facility
was previously used by Niagara Mohawk Power Corporation ("Niagara
Mohawk") "in connection with the generation of electric energy
for which a rate or charge was in effect under the laws of the
state of New York on October 24, 1992 (the date of enactment of
the Energy Policy Act of 1992)." Adirondack at 61,090.
Based upon its conservative assumption that PUHCA subsection
32(c) was applicable, Adirondack provided to the Commission a
copy of a determination by the New York Public Service Commission
("NYPSC") that allowing the site "to be an eligible facility will
benefit consumers, is in the public interest, and does not
violate state law." Id.[10] The Commission, however, while
noting Adirondack's submission of the NYPSC determination, merely
found that "Adirondack is an EWG as defined in subsection
32(a)(1) of PUHCA."

[10]Adirondack's application, filed December 30, 1993 in Docket
No. EG 94-11-000, states without analysis that because Niagara
Mohawk used the site in connection with the generation of
electric energy for which a rate or charge was in effect under
the laws of the State of New York on October 24, 1992, the NYPSC
"must determine that allowing the [site] to be [a part of] an
eligible facility: (1) will benefit consumers; (2) is in the
public interest; and (3) does not violate state law."
Application at 7-8. In fact, the NYPSC, prior to the enactment
of the EPACT, had approved the leasing arrangement between
Niagara Mohawk and Adirondack in accordance with the requirements
of New York public service law. Accordingly, the NYPSC merely
entered a new order as it had been requested to do by
Adirondack's partner, reasoning that "the factors considered in
the Section 70 approval order [issued in 1991] in response to
Niagara Mohawk's petition generally encompass the consumer
benefit and public interest standards established by EPAct, and
Section 70 clearly authorizes such transfers under state law."
<PAGE>

Because the Commission did not discuss the requirements of
subsection 32(c) or enter any finding with respect to such
subsection, one reasonable inference is that no state
determination was deemed necessary (despite Adirondack's
voluntary submission of the NYPSC's determination) since no
portion of the site had been an "existing rate-based" facility
owned or operated by Adirondack, the entity seeking EWG
certification, or by any entity affiliated with Adirondack. In
other words, it appears at least probable the Commission
concluded that the subsection 32(c) requirement was inapplicable
because the site had only been in the rate base of a public
utility not affiliated or associated with the EWG. Moreover,
even in the absence of the submission of the NYPSC determination,
the Commission might reasonably have assumed that Niagara Mohawk,
as a precondition of leasing the site to Adirondack, would have
obtained all required regulatory authorizations, independent of
the EWG certification process, in order to lease the site, and
that additional findings under PUHCA subsection 32(c) would have
been redundant (as in fact they were).[11]

4. Conclusion
Applicant concludes that subsection 32(c) requires, at most,
consent of the PPUC in order for Applicant to establish an EWG
using Duquesne's undivided interest in Ft. Martin Unit 1 upon
conveyance of such interest to the Applicant.

[11]See n.10, supra.
<PAGE>

WHEREFORE, for the reasons stated above and upon the grounds
and representations set forth, Applicant requests the Commission
to determine that Applicant is an EWG under section 32 of PUHCA.
Respectfully submitted,

FTM ENERGY INC.

ROBERT S. WATERS
By: ROBERT S. WATERS

Theresa J. Colecchia, Esq. Robert S. Waters, Esq.
Legal Services Department Jones, Day, Reavis & Pogue
800 Cabin Hill Drive 1450 G Street, N.W.
Greensburg, Pennsylvania 15601 Washington, D.C. 20005-2088
(412) 838-6677 (202) 879-3687

William F. Henze II, Esq.
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
(212) 326-3603
<PAGE>

SWORN STATEMENT

Pursuant to 18 C.F.R. Section 365.3(1), THERESA J.
COLECCHIA, duly sworn, states that [he] [she] is legally
authorized to bind FTM Energy Inc. and attests that [he] [she]
has read the foregoing Application, that [he] [she] knows the
contents thereof, that the same, including all facts and
representations presented therein, are true to the best of [his]
[her] knowledge, belief and understanding.

THERESA J. COLECCHIA
THERESA J. COLECCHIA

SUBSCRIBED AND SWORN to before me this 5th day of February,
1996.

GLORIA J. CAVADA
[Name of Notary]

My Commission expires: October 16, 1997
<PAGE>

NOTICE OF FILING

UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION

FTM Energy Inc. ) Docket No. EG96- -000

NOTICE OF APPLICATION FOR COMMISSION DETERMINATION
OF EXEMPT WHOLESALE GENERATOR STATUS

(February , 1996)

On February , 1996, FTM Energy Inc. ("Applicant") filed
with the Federal Energy Regulatory Commission an application for
determination of exempt wholesale generator status pursuant to
Part 365 of the Commission's regulations.

The eligible facility consists primarily of a 50 percent
undivided interest in Unit No. 1 of the Fort Martin Power
Station, an operating steam-electric generating unit, and an
associated portion of Ft. Martin Unit 1's main transformers. Ft.
Martin Unit 1 is located in West Virginia on the Monongahela
River between Morgantown, West Virginia and Point Marion,
Pennsylvania. The portion of Ft. Martin Unit 1 that is the
eligible facility is currently owned by Duquesne Light Company
("Duquesne"), a Pennsylvania public utility not affiliated with
APS; however, Duquesne has entered into an Asset Purchase
Agreement (dated November 28, 1995) with AYP, pursuant to which
Duquesne will sell on or before December 31, 1996 its undivided
ownership interest in Ft. Martin Unit 1 (including its interest
in the transformers) to AYP, which will assign the Asset Purchase
Agreement to FTM Energy Inc. The remainder of the facility of
which the eligible facility is a portion is owned by Monongahela
Power Company ("MPC") and The Potomac Edison Company ("PEC"), two
of the three wholly owned electric operating subsidiaries of APS.

Any person desiring to be heard concerning the application
for exempt wholesale generator status should file a motion to
intervene or comments with the Federal Energy Regulatory
Commission, 888 First Street, N.E., Washington, DC 20426, in
<PAGE>
accordance with Sections 385.11 and 385.214 of the Commission's
Rules of Practice and Procedure. The Commission will limit its
consideration of comments to those that concern the adequacy or
accuracy of the application. All such motions or comments should
be filed on or before , 1996, and must be served on
the applicant. Any person wishing to become a party must file a
motion to intervene. Copies of this filing are on file with the
Commission and are available for public inspection.

Lois D. Cashell
Secretary