<PAGE>
File No. 70-8411
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
POST-EFFECTIVE AMENDMENT NO. 15
TO
APPLICATION OR DECLARATION
ON
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.
10435 DOWNSVILLE PIKE
HAGERSTOWN, MD 21740
AYP CAPITAL, INC.
10435 DOWNSVILLE PIKE
HAGERSTOWN, MD 21740
(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
10435 Downsville Pike
Hagerstown, MD 21740
(Name and address of agent for service)
<PAGE>
1. Applicants hereby amend ITEM 1. Description of Proposed
Transaction by striking the language previously filed in
Post-Effective Amendments 10 and 13 substituting therefor
the following:
By order dated October 27, 1995 (HCAR 26401), the Commission
authorized AYP Capital, Inc. ("AYP Capital") or a special purpose subsidiary
of AYP Capital ("NEWCOs") to engage in the following activities: (i) to
provide energy management services and demand side management services to
nonassociates at market prices and to associate companies at cost; (ii) to
engage in activities related to the development, acquisition, ownership,
construction and operation of foreign utility companies ("FUCOs") and to
invest in FUCOs through various types of investment vehicles; (iii) to acquire
the securities of NEWCOs that own FUCOs or exempt wholesale generators
("Project NEWCOs"); (iv) to factor the accounts receivable of associate
companies and of nonassociate companies whose primary revenues are derived
from the sale of electric power; and (v) as agent for the APS system
companies, to manage the real estate portfolio of Allegheny Power System, Inc.
("APS") and its associate companies. In the October 27, 1995 order, APS was
authorized to invest in AYP Capital through loans or guarantees, and AYP
Capital was authorized to invest in NEWCOs and in Project NEWCOs through loans
or guarantees, up to an aggregate of $100 million through December 31, 1999
for approved activities. In addition, subject to the $100 million investment
authority, AYP Capital, the NEWCOs and the Project NEWCOs were authorized to
obtain loans from banks or issue recourse obligations guaranteed by AYP
Capital or APS. Project NEWCOs were also authorized to issue partnership
interests or trust certificates through December 31, 1999, to third parties to
finance EWGs and FUCOs in an amount not to exceed $200 million.
<PAGE>
APS and AYP Capital now seek to raise the aggregate financing
limit on loans and guarantees from $100 million to $300 million for all
approved activities in File No. 70-8411. Three hundred million dollars
represents 30.6% of the system's consolidated retained earnings as of June 30,
1996. AYP Capital recently agreed to purchase the 50% undivided interest of
Duquesne Light Company in Fort Martin Generating Station Unit No. 1. The
purchase price and associated costs of the Unit is approximately $181 million.
Financing of this purchase may involve loans or guarantees of the sort
previously approved by this Commission in its October 27, 1995 Order, but
which are not otherwise exempt under Rule 52. APS and AYP Capital desire
flexibility in structuring the financing of this acquisition, and consequently
now seek to raise the previously imposed cap on loans and guarantees by $200
million. If the financing for the acquisition does not utilize all of the
additional financing authority, Applicants may use it for the activities
relative to EMS and DSM services, accounts receivable, real estate, FUCOs and
EWGs, or any of the other previously approved activities.
AYP Capital may use the proceeds of the aforementioned financings
to acquire interests in one or more EWGs or FUCOs (or intermediate
subsidiaries organized to facilitate such acquisitions), and may issue
guarantees in respect of the obligations of such entities; provided that the
sum of the net proceeds of such financings used for these purposes and the
guarantees at any time outstanding does not, when added to aggregate
<PAGE>
investment in all such entities, exceed 50% of APS' consolidated retained
earnings.
Currently, the Fort Martin Generating Station is operated by
Monongahela Power Company ("Monongahela"), an associate company of AYP Capital
and a wholly-owned public utility subsidiary of APS. Monongahela operates the
Fort Martin station 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. The Operating Agreement has been approved by all state
commissions having jurisdiction over the parties, as well as by the FERC.
AYP Energy, Inc. ("AYP Energy," formerly known as FTM Energy,
Inc.), a Delaware corporation and wholly-owned subsidiary of AYP Capital, Inc.
was formed to hold an undivided 50% interest in Unit No. 1 of the Fort Martin
Power Station, an "eligible facility" for which AYP Energy has received EWG
status from FERC. See Exhibit D-7 and Exhibit D-7(a) previously filed for the
FERC applications which contain a description of the transaction.
Under the Operating Agreement, Fort Martin Unit No. 1 is operated
and maintained by an operating company chosen by an operating committee made
up of the three owners of Unit No. 1: Duquesne Light Company, Monongahela, and
The Potomac Edison Company. Monongahela is currently the operating company.
The Operating Agreement details the allocation of costs for the operation and
maintenance of Unit No. 1. The Operating Agreement may be assigned, and
<PAGE>
Duquesne Light Company intends to assign it to AYP Energy upon financial
closing. Once ownership of Duquesne Light Company's interest in Fort Martin
Unit No. 1 is transferred, Monongahela will perform services for the benefit
of AYP Energy. These services will be performed, and reimbursed, in
accordance with the terms of the previously approved Operating Agreement. The
public utility commissions in the states which have affiliated interest
statutes have approved the transfer of Duquesne Light Company's interest under
the Operating Agreement to AYP Energy. AYP Energy requests approval to step
into the shoes of Duquesne Light Company under the Operating Agreement and to
continue to use Monongahela to operate and maintain Fort Martin Unit No. 1 in
accordance with the terms of the previously approved Operating Agreement.
AYP Energy is also seeking Commission approval to enter into a
Service Contract with Allegheny Power Service Corporation, a wholly-owned
subsidiary of Allegheny Power System, Inc., a registered holding company.
Initially, APS does not anticipate that AYP Energy will have any
paid employees. Instead, personnel employed by Allegheny Power Service
Corporation ("APSC"), a wholly-owned subsidiary of APS, will provide a wide
range of services on an as-needed basis to AYP Energy pursuant to a service
agreement to be entered into between AYP Energy and APSC ("Service
Agreement"). The form of Service Agreement was previously filed as Exhibit
B-3.
Pursuant to the Service Agreement, APSC will provide technical
support and general and administrative services for AYP Energy, such as
engineering, management and/or operating activities associated with analyzing
<PAGE>
the feasibility of bulk power supply opportunities, managing AYP Energy's
interest in Ft. Martin Unit No. 1, and power marketing in addition to
information services, legal, personnel, financial, accounting services and
other support activities. APSC will account for, allocate and charge its
costs of providing these services on a full cost reimbursement basis utilizing
a work order system, modified as appropriate, in accordance with the Uniform
System of Accounts for Mutual and Subsidiary Service Companies. The work
order system maintained by APSC requires differing levels of approvals by APSC
personnel depending upon the dollar amount and type of request.
The reimbursed cost of services identified through the work order
system shall include all direct charges and a prorated share of APSC's other
costs, including overhead, determined through methods of allocation previously
filed with the Commission by APSC as part of Form U-13-60. As filed, this
document includes methods for allocating direct charges, such as salaries,
employee welfare expenses, and training expenses, as well as indirect charges,
including the costs of maintaining the corporate existence of APSC, rents,
dues and memberships and all other expenses attributable to, or necessary to
the operation of, a department. Whenever the charges to individual companies
for services rendered are based upon estimates of APSC's costs, at the end of
each year such service charges are adjusted to actual cost, as required by
Rule 90(a)(2) under the Public Utility Holding Company Act of 1935.
All of the time APSC employees spend working for AYP Energy will
be billed to and paid by AYP Energy on a monthly basis, based upon time
records. Time sheets reflect the daily time of each APSC employee, and
completed time reports are approved by each employee's supervisor.
<PAGE>
AYP Energy will maintain separate financial records and detailed
supporting records, including profit/loss statements. These records will be
available to any proper federal regulatory agency or state regulatory agency
for review. The accounting staff of APSC, pursuant to the service agreement
with AYP Energy, will be responsible for record keeping and maintaining audit
procedures which are in compliance with generally accepted accounting
principles.
AYP Energy will not use more than 2% of the total employees of all
of the other system domestic public utility companies at any one time for
rendering services to any affiliated EWGs.
Compliance with Rule 54
Rule 54 provides that in determining whether to approve certain
transactions other than those involving exempt wholesale generators ("EWGs")
or foreign utility companies ("FUCOs"), as defined in the 1935 Act, the
Commission will not consider the effect of the capitalization of earnings of
any subsidiary which an EWG or FUCO if Rule 53(a), (b) and (c) are satisfied.
The requirements of Rule 53(a), (b) and (c) are satisfied.
Rule 53(a)(1). FERC has granted AYP Energy, Inc.'s application to
declare its 50% interest in Unit No. 1 at the Fort Martin Power Station a
hybrid EWG. As of June 30, 1996, APS, through its subsidiary, AYP Capital,
Inc. had invested
$ 0 in AYP Energy, Inc. This investment represents less than 1% of
<PAGE>
$981,440,000, the average of the consolidated retained earnings of APS
reported on Form 10-K or Form 10-Q, as applicable, for the four consecutive
quarters ended June 30, 1996.
Rule 53(a)(2). AYP Energy, Inc. will maintain books and records
and make available the books and records required by Rule 53(a)(2).
Rule 53(a)(3). No more than 2% of the employees of the Electric
Utility Companies will, at any one time, directly or indirectly, render
services to AYP Energy, Inc.
Rule 53(a)(4). APS will submit a copy of Item 9 and Exhibits G
and H of APS' Form U5S to each of the public service commissions having
jurisdiction over the retail rates of the Electric Utility Companies.
Rule 53(b). (i) Neither APS nor any subsidiary of APS is the
subject of any pending bankruptcy or similar proceeding; (ii) APS' average
consolidated retained earnings for the four most recent quarterly periods
$981,440,000 represented an increase of approximately $23,995,000 in the
average consolidated retained earnings from the previous four quarterly
periods $957,444,000; and (iii) for the year ended December 31, 1995, there
was no losses attributable to APS' investments in AYP Capital other than
$572,000 in preliminary development and start-up costs.
Rule 53(c). Rule 53(c) is inapplicable because the requirements
of Rule 53(a) and (b) have been satisfied.
<PAGE>
2. Applicants hereby amend Item 3. Applicable Statutory
Provisions by striking the language previously filed and
substituting therefor:
Applicants are informed by counsel that the proposed transactions
may be subject to Section 13(b) of the Public Utility Holding Company Act of
1935 and Rules 87, 90 and 91 thereunder. Issuance of notes in connection with
this transaction are exempt under Rule 52.
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:
THERESA J. COLECCHIA
Theresa J. Colecchia
Counsel
AYP CAPITAL, INC.
By:
THERESA J. COLECCHIA
Theresa J. Colecchia
Counsel
ALLEGHENY POWER SERVICE CORPORATION
By:
THERESA J. COLECCHIA
Theresa J. Colecchia
Counsel
Dated: September 24, 1996
U:\DUMP\AYP\POSTEF15
