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File No. 70-8951
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
POST-EFFECTIVE AMENDMENT NO. 2
TO
APPLICATION OR DECLARATION
ON
FORM U-1
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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, Esquire
Vice President
Allegheny Power
10435 Downsville Pike
Hagerstown, MD 21740
(Name and address of agent for service)
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Applicant hereby amends ITEM 1 and EXHIBIT H as follow:
1. Applicant hereby amends ITEM 1. Description of the Proposed
Transaction by replacing it with the following:
Background
AYP Capital, Inc. ("AYP") is a Delaware corporation and a
non-utility subsidiary company of Allegheny Power System, Inc. ("APS"), a
registered holding company under the Public Utility Holding Company Act
of 1935 (the "1935 Act"). By Order dated July 14, 1994 (HCAR No. 26085)
APS was authorized to organize and finance AYP to invest in 1) companies
engaged in new technologies related to the core utility business of APS,
and 2) companies acquiring and owning exempt wholesale generators
("EWGs"). By Order dated February 3, 1995 (HCAR No. 26229), AYP was
authorized to engage in the development, acquisition, construction,
ownership and operation of EWGs and in development activities with
respect to (i) qualifying cogeneration facilities and small power
production facilities ("SPPs"); (ii) non-qualifying cogeneration
facilities, non-qualifying SPPs, and independent power production
facilities ("IPPs") located within the service territories of APS public
utility subsidiary companies; (iii) EWGs; (iv) companies involved in new
technologies related to the core business of APS; and (v) foreign utility
companies ("FUCOS"). AYP was also authorized to consult for non-
affiliate companies. APS was authorized to increase its investment in AYP
from $500,000 to $3 million.
By Order dated October 27, 1995 (HCAR No. 26401) the
Commission authorized:
1) AYP or a special-purpose subsidiary ("NEWCO") to provide
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certain enumerated energy management services ("EMS") and demand-side
management services ("DSM") to non-associated customers at market prices
and to associated companies at cost.[1]
2) AYP to engage in activities relating to the development,
acquisition, ownership, construction and operation of FUCOS; and to
invest in FUCOs through various types of investment vehicles, including
limited partnerships or other types of funds, the sole objective of which
is to make investments in one or more FUCOs.
3) APS and AYP to acquire the securities of NEWCOS that own
FUCOs or EWGs ("Project NEWCOs");
4) AYP or a NEWCO to factor the accounts receivable of
associate companies and of non-associate companies whose primary revenues
are derived from the sale of electric power; and
5) AYP or a NEWCO, as agent for APS system companies, to
manage the real estate portfolio of APS and its associate companies, to
market excess or unwanted real estate and to facilitate the exploitation
of resources contained on or in real estate.
By the SEC's October 27, 1995 Order, APS was authorized to
invest in AYP and AYP was authorized to invest in NEWCOS up to an
aggregate of $100 million through December 31, 1999 through loans to
[1] The EMS services authorized included: (i) identification of energy cost
reduction and efficiency opportunities; (ii) design of facility and process
modifications to realize such efficiencies; (iii) management of or the direct
construction and installation of energy conservation and equipment; (iv)
training of client personnel in operation of equipment; (v) maintenance of
energy systems; (vi) design, management, construction and installation of
energy management systems and structures; (vii) performance contracts; (viii)
identifying energy conservation or efficiency programs; (ix) system
commissioning; (x) reporting system results; and (xi) other similar or related
energy management activities. The DSM services authorized included: (i)
design of energy conservation programs; (ii) implementation of energy
conservation programs; (iii) performance contracts for DSM work; (iv)
monitoring and evaluating DSM programs; and (v) other similar or related
DSM activities.
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finance activities related to EMS and DSM services, accounts receivable,
real estate, FUCOs and EWGs ("Approved Activities"). AYP, the NEWCOs,
and the Project NEWCOs were authorized to obtain loans from banks or
issue other recourse obligations which could be guaranteed by APS or AYP.
Such third-party borrowings by AYP, the NEWCOs and the Project NEWCOs
that are guaranteed by APS or AYP are subject to the $100 million
investment authority. Through December 31, 1999, APS and AYP were
authorized to guarantee or act as surety on bonds, indebtedness and
performance and other obligations issued or undertaken by AYP, the NEWCOs
or the Project NEWCOs subject to the $100 million investment authority.
On October 9, 1996, the SEC issued an Order (HCAR No. 26590)
that, inter alia, allows APS and AYP to increase the limit on loans and
guarantees from $100 million to $300 million for all Approved Activities.
Requested Authority
In this application, APS and AYP request Commission authority
to allow AYP and one or more special purpose subsidiaries
("NEWMARKETCOs") to engage in marketing, selling, acquisition and
installation of a new type of heat pump to and for: (1) non-associated
industrial, commercial and residential customers located within the five
states in which APS's operating subsidiaries provide electric service and
(2) persons and businesses located within Washington, D.C..
AYP will devote no more than Five Hundred Thousand Dollars
($500,000) to the above-described activities. Funding for these
activities would come from the $300 million authorized in HCAR 26590.
AYP requests authority to engage in these activities through
the first to occur of:
1) December 31, 1999; or
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2) the adoption by the Commission of proposed Rule 58 if
it exempts the proposed transactions from the need for approvals; or
3) the adoption of such other rule, regulation or order as
shall exempt the proposed transaction from Section 9(a) of the Act.
The Heat Pump
Applicants request authority to market, distribute, and
undertake other related activities in connection with a new type of heat
pump. AYP or the NEWMARKETCO will contract with a representative of the
heat pump's manufacturer for exclusive distribution rights. The heat
pump is currently installed mainly in the southern United States. The
product is unique and desirable in that it has no outdoor unit. All of
the equipment is self-contained in one cabinet and only requires
installation of wiring and ductwork. This unit is assembled in a
relatively small cabinet, making it the ideal product for multi-family
projects and manufactured homes.
AYP or the NEWMARKETCO proposes to serve as a distributor and
provide a sales force in an exclusive territory that will include
Maryland, Ohio, Pennsylvania, Virginia, West Virginia, and Washington DC.
Earnings are projected to be approximately 25% of total revenues.
Current analysis estimates profits at approximately $150,000 in the first
year of the project, and rising steadily to approximately $600,000 in
Year 4. It is estimated that two full-time employees will be necessary
to handle shipping logistics, billing, reporting, and general
administration (one full-time office associate and two staff members
sharing responsibility).
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Personnel
Under the terms of a Commission-approved Service Agreement,
Allegheny Power Service Corporation ("APSC"), a mutual service company
formed under the 1935 Act, will assist AYP or NEWMARKETCO with marketing,
customer billing, accounting or other energy-related services. It is
anticipated that any services provided by APSC can be done with current
staff and that the number of APSC personnel involved will not be of such
magnitude that utility services would in any way be impaired. All
services provided by APSC to AYP or NEWMARKETCO will be billed at cost in
accordance with Section 13(b) of the Act and Rules 87, 90 and 91
thereunder.
Sales of Heat Pumps are Incidental
to APS' Core Business
APS and AYP believe the proposed project is reasonably
incidental and/or economically necessary and/or appropriate to APS's core
utility business of distributing electricity at retail, and will benefit
APS and its customers. These heat pumps will help to conserve
electricity by replacing less efficient and/or older electric furnaces or
heat pumps. Sales of this product will promote more efficient energy
consumption and promote the safe and efficient distribution of
electricity at retail. It is also expected that sales of this equipment
will increase customer satisfaction and good will toward Allegheny Power.
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2. Applicant hereby amends EXHIBIT H - FORM OF NOTICE - by
replacing it with the following:
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- : )
Allegheny Power System, Inc. and AYP Capital, Inc.
Notice Requesting Approval to Market and
Sell Certain Type of Heat Pump
ALLEGHENY POWER SYSTEM, INC.
10435 Downsville Pike
Hagerstown, MD 21740
AYP CAPITAL, INC.
10435 Downsville Pike
Hagerstown, MD 21740
Background
AYP Capital, Inc. ("AYP") is a Delaware corporation and a
non-utility subsidiary company of Allegheny Power System, Inc. ("APS"), a
registered holding company under the Public Utility Holding Company Act
of 1935 (the "1935 Act"). By Order dated July 14, 1994 (HCAR No. 26085)
APS was authorized to organize and finance AYP to invest in 1) companies
engaged in new technologies related to the core utility business of APS,
and 2) companies acquiring and owning exempt wholesale generators
("EWGs"). By Order dated February 3, 1995 (HCAR No. 26229), AYP was
authorized to engage in the development, acquisition, construction,
ownership and operation of EWGs and in development activities with
respect to (i) qualifying cogeneration facilities and small power
production facilities ("SPPs"); (ii) non-qualifying cogeneration
facilities, non-qualifying SPPs, and independent power production
facilities ("IPPs") located within the service territories of APS public
utility subsidiary companies; (iii) EWGs; (iv) companies involved in new
technologies related to the core business of APS; and (v) foreign utility
companies ("FUCOS"). AYP was also authorized to consult for non-
affiliate companies. APS was authorized to increase its investment in AYP
from $500,000 to $3 million.
By Order dated October 27, 1995 (HCAR No. 26401) the
Commission authorized:
1) AYP or a special-purpose subsidiary ("NEWCO") to provide
certain enumerated energy management services ("EMS") and demand-side
management services ("DSM") to non-associated customers at market prices
<PAGE>
and to associated companies at cost.[2]
2) AYP to engage in activities relating to the development,
acquisition, ownership, construction and operation of FUCOS; and to
invest in FUCOs through various types of investment vehicles, including
limited partnerships or other types of funds, the sole objective of which
is to make investments in one or more FUCOs.
3) APS and AYP to acquire the securities of NEWCOS that own
FUCOs or EWGs ("Project NEWCOs");
4) AYP or a NEWCO to factor the accounts receivable of
associate companies and of non-associate companies whose primary revenues
are derived from the sale of electric power; and
5) AYP or a NEWCO, as agent for APS system companies, to
manage the real estate portfolio of APS and its associate companies, to
market excess or unwanted real estate and to facilitate the exploitation
of resources contained on or in real estate.
By the SEC's October 27, 1995 Order, APS was authorized to
invest in AYP and AYP was authorized to invest in NEWCOS up to an
aggregate of $100 million through December 31, 1999 through loans to
finance activities related to EMS and DSM services, accounts receivable,
real estate, FUCOs and EWGs ("Approved Activities"). AYP, the NEWCOs,
and the Project NEWCOs were authorized to obtain loans from banks or
issue other recourse obligations which could be guaranteed by APS or AYP.
Such third-party borrowings by AYP, the NEWCOs and the Project NEWCOs
that are guaranteed by APS or AYP are subject to the $100 million
investment authority. Through December 31, 1999, APS and AYP were
authorized to guarantee or act as surety on bonds, indebtedness and
performance and other obligations issued or undertaken by AYP, the NEWCOs
or the Project NEWCOs subject to the $100 million investment authority.
On October 9, 1996, the SEC issued an Order (HCAR No. 26590)
that, inter alia, allows APS and AYP to increase the limit on loans and
guarantees from $100 million to $300 million for all Approved Activities.
[2] The EMS services authorized included: (i) identification of energy cost
reduction and efficiency opportunities; (ii) design of facility and process
modifications to realize such efficiences; (iii) management of or the direct
construction and installation of energy conservation and equipment; (iv)
training of client personnel in operation of equipment; (v) maintenance of
energy systems; (vi) design, management, construction and installation of
energy management systems and structures; (vii) performance contracts; (viii)
identifying energy conservation or efficiency programs; (ix) system
commissioning; (x) reporting system results; and (xi) other similar or
related energy management activities. The DSM services authorized included:
(i) design of energy conservation programs; (ii) implementation of energy
conservation programs; (iii) performance contracts for DSM work; (iv)
monitoring and evaluating DSM programs; and (v) other similar or related DSM
activities.
<PAGE>
Requested Authority
In this application, APS and AYP request Commission authority
to allow AYP and one or more special purpose subsidiaries
("NEWMARKETCOs") to engage in marketing, selling, acquisition and
installation of a new type of heat pump to and for: (1) non-associated
industrial, commercial and residential customers located within the five
states in which APS's operating subsidiaries provide electric service and
(2) persons and businesses located within Washington, D.C.
AYP will devote no more than Five Hundred Thousand Dollars
($500,000) to the above-described activities. Funding for these
activities would come from the $300 million authorized in HCAR 26590.
AYP requests authority to engage in these activities through
the first to occur of:
1) December 31, 1999; or
2) the adoption by the Commission of proposed Rule 58 if
it exempts the proposed transactions from the need for approvals; or
3) the adoption of such other rule, regulation or order as
shall exempt the proposed transaction from Section 9(a) of the Act.
The Heat Pump
Applicants request authority to market, distribute, and undertake
other related activities in connection with a new type of heat pump. AYP
or the NEWMARKETCO will contract with a representative of the heat pump's
manufacturer for exclusive distribution rights. The heat pump is
currently installed mainly in the southern United States. The product is
unique and desirable in that it has no outdoor unit. All of the
equipment is self-contained in one cabinet and only requires installation
of wiring and ductwork. This unit is assembled in a relatively small
cabinet, making it the ideal product for multi-family projects and
manufactured homes.
AYP or the NEWMARKETCO proposes to serve as a distributor and
provide a sales force in an exclusive territory that will include
Maryland, Ohio, Pennsylvania, Virginia, West Virginia, and Washington DC.
Earnings are projected to be approximately 25% of total revenues.
Current analysis estimates profits at approximately $150,000 in the first
year of the project, and rising steadily to approximately $600,000 in
Year 4. It is estimated that two full-time employees will be necessary
to handle shipping logistics, billing, reporting, and general
administration (one full-time office associate and two staff members
sharing responsibility).
Personnel
Under the terms of a Commission-approved Service Agreement,
Allegheny Power Service Corporation ("APSC"), a mutual service company
formed under the 1935 Act, will assist AYP or NEWMARKETCO with marketing,
<PAGE>
customer billing, accounting or other energy-related services. It is
anticipated that any services provided by APSC can be done with current
staff and that the number of APSC personnel involved will not be of such
magnitude that utility services would in any way be impaired. All
services provided by APSC to AYP or NEWMARKETCO will be billed at cost in
accordance with Section 13(b) of the Act and Rules 87, 90 and 91
thereunder.
Sales of Heat Pumps are Incidental
to APS' Core Business
APS and AYP believe the proposed project is reasonably
incidental and/or economically necessary and/or appropriate to APS's core
utility business of distributing electricity at retail, and will benefit
APS and its customers. These heat pumps will help to conserve
electricity by replacing less efficient and/or older electric furnaces or
heat pumps. Sales of this product will promote more efficient energy
consumption and promote the safe and efficient distribution of
electricity at retail. It is also expected that sales of this equipment
will increase customer satisfaction and good will toward Allegheny Power.
Except as described herein, no associate company or affiliate
of the Applicants or any affiliate of any such associate company has any
material interest, directly or indirectly, in the proposed transactions.
The application and any amendments thereto are available for
public inspection through the Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing should submit
their views in writing by , 1996, to the Secretary,
Securities and Exchange Commission, Washington, DC 20549, and serve a
copy on the Applicant at the address specified above. Proof of service
(by affidavit or, in case of an attorney at law, by certificate) should
be filed with the request. Any request for a hearing shall identify
specifically the issues of fact or law that are disputed. A person who
so requests will be notified of any hearing, if ordered, and will receive
a copy of any notice or order issued in this matter. After said date,
the application, as filed or as it may be amended, may be granted.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
<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: /s/ Kathy L. Mitchell
Kathy L. Mitchell
Counsel
Dated: December 16, 1996
