<PAGE>
File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM U-1
APPLICATION OR DECLARATION
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, Esq.
Vice President
Allegheny Power
10435 Downsville Pike
Hagerstown, MD 21740
(Name and address of agent for service)
<PAGE>
Item No. 1. Description of Proposed Transaction
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
<PAGE>
customers at market prices and to associated companies at cost.<1>
<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.
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.
<PAGE>
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.
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, financing, and
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.
<PAGE>
AYP requests authority to engage in these activities through
the first to occur of:
1) December 31, 2001; 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).
<PAGE>
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.
Item 2: Fees, Commissions and Expenses
No fees, commissions or expenses, other than ordinary expenses
of AYP estimated not to exceed $1,000.00, and the services of APSC
<PAGE>
personnel, which are to be billed at cost, are to be paid in connection
with the proposed transaction.
Item 3: Applicable Statutory Provisions
Applicants have been advised that Sections 9(a) and 10 of the
Public Utility Holding Company Act of 1935 and Rule 40 thereunder may be
applicable to the proposed transactions described herein.
Item 4: Regulatory Approval
No other regulatory approval will be required for AYP or
NEWMARKETCO to engage in the proposed transaction.
Item 5: Procedure
It is requested, pursuant to Rule 23(c) of the Rules and
Regulations of the Commission, that the Commissions' Order permitting this
application or declaration to become effective be issued on or before
December 16, 1996. APS and AYP waive any recommended decision by hearing
officer or by any other responsible officer of the Commission and waive
the 30-day waiting period between the issuance of the Commission's Order
and the date it is to become effective since it is desired that the
Commission's Order, when issued, become effective forthwith. APS and AYP
consent to the office of Public Utility Regulation assisting in the
preparation of the Commission's decision and/or Order in this matter
unless the Office opposes the matter covered by this application or
declaration.
<PAGE>
Item 6: Exhibits and Financial Statements
(a) F - Opinion of Counsel
G-1 - Financial Data Schedule - APS Consolidated
G-2 - Financial Data Schedule - AYP, Inc. Consolidated
(to be filed by amendment.)
H - Form of Notice
(b) Financial Statements as of June 30, 1996.
1-A - APS and subsidiaries consolidated balance sheet,
per books.
1-B - APS and subsidiaries consolidated statements of
income, per books, and earned surplus.
1-C - AYP consolidated balance sheet, per books (to be
filed by amendment).
1-D - AYP consolidated statement of income, per books,
and earned surplus (to be filed by amendment).
Item 7: Information as to Environmental Effects
a) For reasons set forth in Item 1 above, the authorization
applied for herein does not require major federal action significantly
affecting the quality of the human environment for purposes of
Section 102(2)(C) of the National Environmental Policy Act (42 U.S.C.
4232(2)(C).
b) Not applicable.
<PAGE>
Signature
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies duly cause this statement
to be signed on their behalf by the undersigned thereunto duly authorized.
By: /s/ Kathy L. Mitchell
Kathy L. Mitchell
Attorney for Allegheny Power System,
Inc. and AYP Capital, Inc.
November 4, 1996
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-1-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 5,069,276
<OTHER-PROPERTY-AND-INVEST> 63,276
<TOTAL-CURRENT-ASSETS> 533,150
<TOTAL-DEFERRED-CHARGES> 692,208
<OTHER-ASSETS> 5,068
<TOTAL-ASSETS> 6,362,978
<COMMON> 151,600
<CAPITAL-SURPLUS-PAID-IN> 1,012,145
<RETAINED-EARNINGS> 987,034
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,150,779
0
170,086
<LONG-TERM-DEBT-NET> 2,263,449
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 107,513
<LONG-TERM-DEBT-CURRENT-PORT> 1,587
0
<CAPITAL-LEASE-OBLIGATIONS> 2,397
<LEASES-CURRENT> 887
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,661,967
<TOT-CAPITALIZATION-AND-LIAB> 6,362,978
<GROSS-OPERATING-REVENUE> 2,369,335
<INCOME-TAX-EXPENSE> 145,435
<OTHER-OPERATING-EXPENSES> 1,815,156
<TOTAL-OPERATING-EXPENSES> 1,960,591
<OPERATING-INCOME-LOSS> 408,744
<OTHER-INCOME-NET> 6,581
<INCOME-BEFORE-INTEREST-EXPEN> 415,325
<TOTAL-INTEREST-EXPENSE> 179,995
<NET-INCOME> 235,330
9,256
<EARNINGS-AVAILABLE-FOR-COMM> 226,074
<COMMON-STOCK-DIVIDENDS> 201,297
<TOTAL-INTEREST-ON-BONDS> 113,425
<CASH-FLOW-OPERATIONS> 0<F1>
<EPS-PRIMARY> 1.88
<EPS-DILUTED> 1.88
<FN>
<F1>Not calculated for Form U-1 purposes.
</FN>
</TABLE>
<PAGE>
EXHIBIT H
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
and to associated companies at cost. <1>
<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.
<PAGE>
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.
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, financing, and
acquisition and installation of a new type of heat pump to and for: (1)
non-associated industrial, commercial and residential customers located
<PAGE>
within the five states in which APS's operating subsidiaries provide
electric service and (2) persons and businesses located within
Washington, D.C..
AYP requests authority to engage in these activities through
the first to occur of:
1) December 31, 2001; 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, 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
<PAGE>
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.
CONTENTS
Statement
No.
Balance sheets at June 30, 1996:
Allegheny Power System, Inc. and Subsidiaries 1-A
Statements of income and retained earnings for twelve months
ended June 30, 1996:
Allegheny Power System, Inc. and Subsidiaries 1-B
These financial statements have been prepared for Form U-1
purposes and are unaudited.
Reference is made to the Notes to Financial Statements in the
Allegheny Power System companies combined Annual Report on
Form 10-K for the year ended December 31, 1995 and to the
Form 10-Q's for the quarters ended March 31, 1996 and June 30, 1996.
The income statements do not reflect any additional income from
investments which may be made with the proceeds from the
transactions set forth in this application-declaration.
<PAGE>
<TABLE>
<CAPTION>
ALLEGHENY POWER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996
Assets Per Books
<S> <C>
Property, plant, and equipment:
At original cost $7,880,554
Accumulated depreciation (2,811,278)
5,069,276
Investments and other assets:
Subsidiaries consolidated--excess of cost
over book equity at acquisition 15,077
Benefit plan's investments 48,199
Other 5,068
68,344
Current assets:
Cash and temporary cash investments 6,699
Accounts receivable:
Electric service, net of $13,310,000 uncollectible allowance 268,815
Other 14,147
Materials and supplies--at average cost:
Operating and construction 84,914
Fuel 54,595
Prepaid taxes 47,116
Deferred income taxes 41,727
Other 15,137
533,150
Deferred charges:
Regulatory assets 599,155
Unamortized loss on reacquired debt 55,329
Other 37,724
692,208
Total Assets $6,362,978
Capitalization and Liabilities
Capitalization:
Common stock $151,600
Other paid-in capital 1,012,145
Retained earnings 987,034
2,150,779
Preferred stock 170,086
Long-term debt and QUIDS of subsidiaries 2,263,449
4,584,314
Current liabilities:
Short-term debt 107,513
Long-term debt due within one year 5,900
Accounts payable 103,672
Taxes accrued:
Federal and state income 27,200
Other 31,521
Interest accrued 41,828
Deferred power costs 44,648
Restructuring liabilities 33,365
Other 66,560
462,207
Deferred credits and other liabilities:
Unamortized investment credit 145,639
Deferred income taxes 987,003
Regulatory liabilities 95,604
Restructuring liabilities 15,600
Other 72,611
1,316,457
Total Capitalization and Liabilities $6,362,978
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement 1-B
ALLEGHENY POWER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME FOR TWELVE MONTHS ENDED JUNE 30, 1996
(Thousands)
Per Books*
<S> <C>
ELECTRIC OPERATING REVENUES $2,369,335
OPERATING EXPENSES:
Operation:
Fuel 523,000
Purchased power and exchanges 176,823
Deferred power costs, net 42,167
Other 369,638
Maintenance 256,731
Depreciation 258,763
Taxes other than income taxes 188,034
Federal and state income taxes 145,435
Total Operating Expenses 1,960,591
Operating Income 408,744
OTHER INCOME AND DEDUCTIONS:
Allowance for other than borrowed funds
used during construction 2,719
Other income, net 3,862
Total Other Income and Deductions 6,581
Income Before Interest Charges and
Preferred Dividends 415,325
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest on first mortgage bonds 113,425
Interest on other long-term obligations 53,809
Other interest 15,353
Allowance for borrowed funds used during
construction (2,592)
Dividends on preferred stock of subsidiaries 9,256
Total Interest Charges and
Preferred Dividends 189,251
Consolidated Net Income $226,074
*Includes a charge of $87.6 million for restructuring.
<PAGE>
Statement 1-B
(continued)
ALLEGHENY POWER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
FOR TWELVE MONTHS ENDED JUNE 30, 1996
(Thousands)
Per Books
Balance at July 1, 1995 $967,764
Add:
Consolidated net income 226,074
1,193,838
Deduct:
Dividends on common stock of Allegheny
Power System, Inc. (cash) 201,297
Expenses related to subsidiary companies' preferred
stock transactions 5,507
Total deductions 206,804
Balance at June 30, 1996 $987,034
</TABLE>
<PAGE>
EXHIBIT F
LEGAL DEPARTMENT 10435 Downsville Pike
Hagerstown, MD 21740-1766
(301) 790-3400
Writer's Direct line: 301-790-6285
FAX: 301-790-6460
November 4, 1996
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Referring to the Application or Declaration on Form U-1
contemporaneously filed by Allegheny Power System, Inc. ("APS") and AYP
Capital, Inc. ("AYP") under the Public Utility Holding Company Act of
1935 with respect to the proposed marketing and sale of a certain type
of heat pump, all as described in the Application or Declaration of
which this Opinion is a part, I have examined or caused to be examined
such documents and questions of law as I deemed necessary to enable me
to render this opinion.
I understand that the actions taken in connection with the
proposed transactions will be in accordance with the Application or
Declaration; that all amendments necessary to complete the above-
mentioned Application or Declaration will be filed with the Commission;
and that all other necessary corporate action by the Board of Directors
and officers of APS and AYP in connection with the described
transactions has been or will be taken prior thereto.
Based upon the foregoing, I am of the opinion that if the said
Application or Declaration is permitted to become effective and the
proposed transactions are consummated in accordance therewith: (i) all
state laws applicable to the proposed transaction will have been
complied with; and (ii) the consummation of the proposed transactions
will not violate the legal rights of the holders of any of the
securities issued by APS or AYP or by any associate or affiliate company
or any of them.
This opinion does not relate to State Blue Sky or securities
laws.
I consent to the use of this Opinion as part of the
Application or Declaration to which it is appended, which is to be filed
by APS and AYP.
Very truly yours,
/s/ Kathy L. Mitchell
Kathy L. Mitchell
Counsel for
Allegheny Power System, Inc. and
AYP Capital, Inc.
