<PAGE>
Page 1 of 13
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1996
Commission File Number 1-267
ALLEGHENY POWER SYSTEM, INC.
(Exact name of registrant as specified in its charter)
Maryland 13-5531602
(State of Incorporation) (I.R.S. Employer Identification No.)
10435 Downsville Pike, Hagerstown, Maryland 21740-1766
Telephone Number - 301-790-3400
The registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
At November 12, 1996, 121,563,647 shares of the Common Stock ($1.25
par value) of the registrant were outstanding.
<PAGE>
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ALLEGHENY POWER SYSTEM, INC.
Form 10-Q for Quarter Ended September 30, 1996
Index
Page
No.
PART I--FINANCIAL INFORMATION:
Consolidated statement of income -
Three and nine months ended September 30, 1996 and 1995 3
Consolidated balance sheet - September 30, 1996
and December 31, 1995 4
Consolidated statement of cash flows -
Nine months ended September 30, 1996 and 1995 5
Notes to consolidated financial statements 6-7
Management's discussion and analysis of financial
condition and results of operations 8-13
PART II--OTHER INFORMATION 13
<PAGE>
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<TABLE>
<CAPTION>
ALLEGHENY POWER SYSTEM, INC.
Consolidated Statement of Income
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
(Thousands of Dollars)
<S> <C> <C> <C> <C>
ELECTRIC OPERATING REVENUES:
Residential $ 211,160 $ 230,371 $ 704,824 $ 689,385
Commercial 125,416 130,685 370,417 369,847
Industrial 182,874 189,151 563,201 574,589
Wholesale and other * 17,900 17,883 56,017 49,574
Bulk power transactions, net * 16,640 15,884 58,494 45,418
Total Operating Revenues 553,990 583,974 1,752,953 1,728,813
OPERATING EXPENSES:
Operation:
Fuel 126,109 136,563 388,857 384,844
Purchased power and exchanges, net* 39,525 34,066 134,198 130,019
Deferred power costs, net (2,223) 11,479 19,995 39,326
Other** 83,458 86,168 288,408 228,275
Maintenance 60,081 61,765 181,362 182,938
Depreciation 66,231 64,586 198,774 194,682
Taxes other than income taxes 46,543 47,351 141,338 138,841
Federal and state income taxes 34,348 39,261 101,620 115,301
Total Operating Expenses 454,072 481,239 1,454,552 1,414,226
Operating Income 99,918 102,735 298,401 314,587
OTHER INCOME AND DEDUCTIONS:
Allowance for other than borrowed funds
used during construction 604 691 1,262 3,103
Other income, net 1,688 2,045 2,175 4,894
Total Other Income and Deductions 2,292 2,736 3,437 7,997
Income Before Interest Charges and
Preferred Dividends 102,210 105,471 301,838 322,584
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest on long-term debt 40,928 42,133 123,691 124,861
Other interest 3,743 3,414 11,929 10,664
Allowance for borrowed funds used during
construction (1,025) (603) (2,180) (2,879)
Dividends on preferred stock of subsidiaries 2,337 2,291 6,967 12,880
Total Interest Charges and
Preferred Dividends 45,983 47,235 140,407 145,526
CONSOLIDATED NET INCOME $ 56,227 $ 58,236 $ 161,431 $ 177,058
COMMON STOCK SHARES OUTSTANDING (average) 121,283,162 120,054,582 120,998,676 119,680,649
EARNINGS PER AVERAGE SHARE $0.46 $0.49 $1.33 $1.48
</TABLE>
* Prior period amounts have been reclassified for comparative purposes to
reflect a change in 1996 in reporting certain bulk power transmission
transactions with nonaffiliated utilities. See Note 3 on page 6.
**Includes restructuring charges of $8.0 million ($.04 per share) for the
three-month period ended September 30, 1996 and restructuring charges and
asset write-off of $72.2 million ($.36 per share) for the nine-month period
ended September 30, 1996.
Includes restructuring charges of $13.4 million ($.07 per share) for the
three and nine-month periods ended September 30, 1995.
See Note 4 on pages 6 and 7 for additional information on the
restructuring charges.
See accompanying notes to consolidated financial statements.
<PAGE>
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<TABLE>
<CAPTION>
ALLEGHENY POWER SYSTEM, INC.
Consolidated Balance Sheet
September 30, December 31,
1996 1995
(Thousands of Dollars)
ASSETS:
<S> <C> <C>
Property, Plant, and Equipment:
At original cost, including $157,450,000
and $147,467,000 under construction $ 7,936,917 $ 7,812,670
Accumulated depreciation (2,871,045) (2,700,077)
5,065,872 5,112,593
Investments and Other Assets:
Subsidiaries consolidated--excess of cost
over book equity at acquisition 15,077 15,077
Benefit plan's investments 48,572 47,545
Other 5,145 2,981
68,794 65,603
Current assets:
Cash and temporary cash investments 18,341 3,867
Accounts receivable:
Electric service, net of $13,269,000 and
$13,047,000 uncollectible allowance 260,443 305,988
Other 10,707 15,924
Materials and supplies--at average cost:
Operating and construction 83,940 86,421
Fuel 57,062 71,898
Prepaid taxes 46,904 45,404
Deferred income taxes 40,411 28,655
Other 21,562 13,164
539,370 571,321
Deferred Charges:
Regulatory assets 597,123 602,360
Unamortized loss on reacquired debt 54,366 57,255
Other 45,660 38,183
697,149 697,798
Total Assets $ 6,371,185 $ 6,447,315
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common stock $ 151,955 $ 150,876
Other paid-in capital 1,020,140 995,701
Retained earnings 992,323 983,340
2,164,418 2,129,917
Preferred stock 170,086 170,086
Long-term debt and QUIDS 2,230,257 2,273,226
4,564,761 4,573,229
Current Liabilities:
Short-term debt 98,061 200,418
Long-term debt due within one year 20,900 43,575
Accounts payable 115,501 145,422
Taxes accrued:
Federal and state income 37,087 15,599
Other 39,774 54,116
Interest accrued 41,301 39,752
Deferred power costs 30,044 26,735
Restructuring liabilities 47,339 14,435
Other 78,869 56,477
508,876 596,529
Deferred Credits and Other Liabilities:
Unamortized investment credit 143,579 149,759
Deferred income taxes 989,627 985,804
Regulatory liabilities 94,795 97,970
Restructuring liabilities 2,075 -
Other 67,472 44,024
1,297,548 1,277,557
Total Capitalization and Liabilities $ 6,371,185 $ 6,447,315
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
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<TABLE>
<CAPTION>
ALLEGHENY POWER SYSTEM, INC.
Consolidated Statement of Cash Flows
Nine Months Ended
September 30
1996 1995
(Thousands of Dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATIONS:
Consolidated net income $ 161,431 $ 177,058
Depreciation 198,774 194,682
Deferred investment credit and income taxes, net (16,830) 14,538
Deferred power costs, net 19,995 39,326
Allowance for other than borrowed funds used
during construction (1,262) (3,103)
Restructuring liability 40,154 13,435
Asset write-off 10,762 -
Changes in certain current assets and
liabilities:
Accounts receivable, net 50,762 (20,631)
Materials and supplies 17,317 11,938
Other current assets/liabilities 19,588 4,916
Accounts payable (29,921) (62,399)
Taxes accrued 7,146 11,073
Interest accrued 1,549 3,007
Other, net 1,540 (5,355)
481,005 378,485
CASH FLOWS FROM INVESTING:
Construction expenditures (170,152) (225,400)
Nonutility investment (1,667) (197)
Allowance for other than borrowed funds used
during construction 1,262 3,103
(170,557) (222,494)
CASH FLOWS FROM FINANCING:
Sale of common stock 25,517 25,849
Retirement of preferred stock - (162,170)
Issuance of long-term debt - 482,857
Retirement of long-term debt (66,686) (361,473)
Short-term debt, net (102,357) 8,732
Cash dividends on common stock (152,448) (147,197)
(295,974) (153,402)
NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS 14,474 2,589
Cash and Temporary Cash Investments at January 1 3,867 2,765
Cash and Temporary Cash Investments at September 30 $ 18,341 $ 5,354
Supplemental cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $124,835 $127,289
Income taxes 97,631 85,573
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
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ALLEGHENY POWER SYSTEM, INC.
Notes to Consolidated Financial Statements
1. The Company's Notes to Consolidated Financial Statements in the
Allegheny Power System companies' combined Annual Report on
Form 10-K for the year ended December 31, 1995 should be read
with the accompanying financial statements and the following
notes. With the exception of the December 31, 1995
consolidated balance sheet in the aforementioned annual report
on Form 10-K, the accompanying consolidated financial
statements appearing on pages 3 through 5 and these notes to
consolidated financial statements are unaudited. In the
opinion of the Company, such consolidated financial statements
together with these notes contain all adjustments (which
consist only of normal recurring adjustments) necessary to
present fairly the Company's financial position as of September
30, 1996, the results of operations for the three and nine
months ended September 30, 1996 and 1995, and cash flows for
the nine months ended September 30, 1996 and 1995.
2. The Consolidated Statement of Income reflects the results of
past operations and is not intended as any representation as to
future results. For purposes of the Consolidated Balance Sheet
and Consolidated Statement of Cash Flows, temporary cash
investments with original maturities of three months or less,
generally in the form of commercial paper, certificates of
deposit, and repurchase agreements, are considered to be the
equivalent of cash.
3. Effective in 1996 the Company's subsidiaries changed their
method of reporting certain bulk power transmission
transactions with nonaffiliated utilities, and reclassified
prior year's bulk power revenues and operation expenses to
achieve a consistent presentation. In prior years, some use of
the subsidiaries' transmission system was recorded as purchased
power from selling utilities and as sales of power to buying
utilities. The benefit to the subsidiaries was the difference
between the two. Because of new Federal Energy Regulatory
Commission requirements, the subsidiaries predominantly do not
"buy" and "sell" such energy, but rather a transmission fee is
charged.
Under the new reporting method all such transactions are
recorded on a net revenue basis. The effect of the
reclassification was to reduce amounts reported for bulk power
transaction revenues and operation expenses by $88.1 million
and $246.3 million for the three and nine months ended
September 1995, respectively, with no change in operating
income or consolidated net income.
4. As reported in the 1995 third quarter 10-Q, the System is
undergoing a reorganization and reengineering process
(restructuring) to simplify its management structure and to
increase efficiency. In March 1996, the subsidiaries announced
additional restructuring plans which included consolidating
operating divisions, and centralizing and changing many
accounting, customer services, and other functions. As of
September 1996,
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the subsidiaries reduced their work force by about 750
employees. The reductions were accomplished through an
enhanced separation plan, attrition, and layoffs.
An additional reduction of about 250 employees during the next
two or three years will occur primarily through attrition,
early retirement packages, and, in the union workforce,
pursuant to appropriate contract terms.
Restructuring charges previously recorded were adjusted and
additional charges were recorded in the third quarter to
reflect current estimates. Restructuring charges reflect
estimated liabilities for severance, employee termination
costs, and other restructuring costs. Estimated additional
restructuring charges of about $25 to $30 million will be
recorded as the liabilities are incurred. A summary of
restructuring liabilities is provided below:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 1996 September 1996
(Millions of Dollars)
<S> <C> <C>
Restructuring liability (before tax):
Balance at beginning of period $ 49.0 $ 14.4
Accruals/adjustments 8.0 61.4
Benefit plans curtailment
liabilities/adjustments* 6.0 (5.2)
Less payments (13.6) (21.2)
Balance at end of period $ 49.4 $ 49.4
</TABLE>
*Primarily recorded in other deferred credits.
5. Other paid-in capital increased $24,439,000 in the nine months
ended September 30, 1996, representing the excess of amounts
received over par value, less related expenses, from the
issuance of 862,838 shares of common stock pursuant to the
Company's Dividend Reinvestment and Stock Purchase Plan and
Employee Stock Ownership and Savings Plan.
6. Common stock dividends per share declared during the periods
for which income statements are included are as follows:
<TABLE>
<CAPTION>
1996 1995
Number Amount Number Amount
of Shares Per Share of Shares Per Share
<S> <C> <C> <C> <C>
First Quarter 120,700,809 $.42 119,292,954 $.41
Second Quarter 120,989,831 $.42 119,677,751 $.41
Third Quarter 121,280,080 $.42 120,046,969 $.41
</TABLE>
<PAGE>
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ALLEGHENY POWER SYSTEM, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
COMPARISON OF THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1996
WITH THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
Review of Utility Operations
EARNINGS
Consolidated net income for the third quarter of 1996
was $56.2 million or $.46 per average share, compared with $58.2 million
or $.49 per average share for the corresponding 1995 period. For the
first nine months of 1996, consolidated net income was $161.4 million or
$1.33 per average share, compared with $177.1 million or $1.48 per average
share for the corresponding 1995 period.
The three month period ended September 1996 includes a
restructuring charge of $8.0 million ($4.8 million, net of taxes or $.04
per average share) and the nine month period ended September 1996 includes
a restructuring charge and asset write-off of $72.2 million ($43.5
million, net of taxes or $.36 per average share). The three and nine
month periods ended September 1995 include a restructuring charge of $13.4
million ($8.1 million, net of taxes or $.07 per average share).
Restructuring activities reported in the first six months continued in the
third quarter (see Note 4 to the Consolidated Financial Statements).
The decrease in earnings for the third quarter,
excluding restructuring charges, was primarily due to a decrease in
kilowatt-hour (kWh) sales to residential customers because of relatively
cool weather this summer compared with the extremely hot weather in the
summer of 1995. The increase in year-to-date earnings, excluding
restructuring charges and asset write-off, was primarily due to an
increase in residential and commercial kWh sales due to increases in both
the number of customers and usage.
SALES AND REVENUES
Retail kilowatt-hour (kWh) sales to residential and
commercial customers in the third quarter decreased 7% and 3%,
respectively, and to industrial customers remained about the same. Retail
kWh sales in the first nine months to residential, commercial, and
industrial customers increased 4%, 3%, and 1%, respectively. Decreased
weather-related sales in the third quarter largely due to cooling degree
days that were more than 20% below normal and 45% below the corresponding
1995 period more than offset growth in the number of customers which
resulted in the decrease in residential and commercial sales. The
increase in kWh sales to residential and commercial customers in the first
nine months was due to increases in both the number of customers and
usage. Heating degree days in the relatively cold January through April
1996 period were 10% above the corresponding 1995 period. The increase in
kWh sales to industrial customers in the first nine months of 1996
<PAGE>
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resulted primarily from increased sales to wood and paper products
customers. Revenues from sales to industrial customers decreased in both
the third quarter and nine months ended September 1996 due primarily to a
decrease in the fuel and energy cost component. The change in revenues
from retail customers resulted from the following:
<TABLE>
<CAPTION>
Change from Prior Periods
Quarter Nine Months
(Millions of Dollars)
<S> <C> <C>
Increased (decreased) kWh sales $(15.0) $ 30.3
Fuel and energy cost adjustment clauses* (17.0) (26.9)
Other 1.2 1.2
$(30.8) $ 4.6
</TABLE>
*Changes in revenues from fuel and energy cost adjustment
clauses have little effect on consolidated net income.
The increase in wholesale and other revenues for the
nine months ended September 1996 reflects increased revenues from
wholesale customers due to a rate increase for Potomac Edison customers
effective in June 1995, increased weather-related sales, and load
additions to the wholesale customers' systems.
<PAGE>
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KWh deliveries to and revenues from bulk power
transactions are comprised of the following items:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995* 1996 1995*
<S> <C> <C> <C> <C>
KWh deliveries (in billions):
From transmission services 4.3 4.0 13.2 10.4
From sale of subsidiaries'
generation .1 .2 .8 .5
4.4 4.2 14.0 10.9
Revenues (in millions):
From transmission services $12.7 $11.1 $41.0 $33.3
From sale of subsidiaries'
generation 3.9 4.8 17.5 12.1
$16.6 $15.9 $58.5 $45.4
</TABLE>
Increased transmission services and sales of
subsidiaries' generation resulted primarily from increased activity from
power marketers. About 95% of the benefits from bulk power transactions
are passed on to retail customers and have little effect on consolidated
net income.
OPERATING EXPENSES
Fuel expenses for the third quarter and first nine
months of 1996 decreased 8% and increased 1%, respectively. The change in
fuel expenses for both periods was due primarily to changes in kWh
generated. Fuel expenses are primarily subject to deferred power cost
accounting procedures with the result that changes in fuel expenses have
little effect on consolidated net income.
"Purchased power and exchanges" represents power
purchases from and exchanges with other utilities and purchases from
qualified facilities under the Public Utility Regulatory Policies Act of
1978 (PURPA), and is comprised of the following items:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995* 1996 1995*
(Millions of Dollars)
<S> <C> <C> <C> <C>
Purchased power:
From PURPA generation $31.7 $29.7 $ 97.2 $ 98.4
Other 7.7 7.3 33.6 33.1
Total power purchased 39.4 37.0 130.8 131.5
Power exchanges .1 (2.9) 3.4 (1.5)
$39.5 $34.1 $134.2 $130.0
</TABLE>
*Prior period amounts have been reclassified for comparative purposes to
reflect a change in the method of reporting certain bulk power
transmission transactions with nonaffiliated utilities. See Note 3 to
the Consolidated Financial Statements for further information.
<PAGE>
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The cost of purchased power and exchanges, including
power from PURPA generation, is mostly recovered from customers currently
through the regular fuel and energy cost recovery procedures followed by
the subsidiaries' regulatory commissions and is primarily subject to
deferred power cost procedures with the result that changes in such costs
have little effect on consolidated net income. During 1996, West Penn has
recovered $12 million of deferred power costs for the Shannopin PURPA
project buyout as discussed on page 12.
The increase in other operation expense for the three
and nine months ended September 1996, excluding restructuring charges
discussed in Note 4 to the Consolidated Financial Statements and a $10.8
million write-off of accumulated land-related costs on a previously
proposed transmission line, was primarily due to increased charge-offs for
uncollectible accounts.
Maintenance expenses represent costs incurred to
maintain the power stations, the transmission and distribution (T&D)
system, and general plant, and reflect routine maintenance of equipment
and rights-of-way as well as planned major repairs and unplanned
expenditures, primarily from forced outages at the power stations and
periodic storm damage on the T&D system. In September 1996, the Company
experienced storm damage costs of approximately $1.7 million related to
tropical storm "Fran". Variations in maintenance expense result primarily
from unplanned events and planned major projects, which vary in timing and
magnitude depending upon the length of time equipment has been in service
without a major overhaul and the amount of work found necessary when the
equipment is dismantled.
The net changes in federal and state income taxes for
the third quarter and first nine month periods resulted primarily from
variances in income before income taxes.
The combined decrease of $2.5 million in allowance for
funds used during construction for the nine months ended September 1996,
reflects a decrease in capital expenditures.
The decrease in other income, net for the first nine
month period was due primarily to a write-off of a deferred return on West
Virginia expenditures related to the Clean Air Act Amendments of 1990 and
increased interest income in the second quarter of 1995 earned on funds
available as a result of the timing of the debt and preferred stock
refinancings.
Dividends on preferred stock of subsidiaries decreased
$5.9 million in the first nine months of 1996 due primarily to the
redemption of preferred stock issues refinanced with Quarterly Income Debt
Securities (QUIDS) during 1995. The increase in interest on long-term
debt associated with the QUIDS was offset by decreased interest on first
mortgage bonds due primarily to refinancings to lower rate securities
during the second quarter of 1995.
Financial Condition and Requirements
The Company's discussion on Financial Condition and
Requirements and Changes in the Electric Utility Industry in the Allegheny
Power System companies' combined Annual Report on Form 10-K for the year
ended December 31, 1995, should be read with the following information.
<PAGE>
- 12 -
In the normal course of business, the subsidiaries are
subject to various contingencies and uncertainties relating to their
operations and construction programs, including cost recovery in the
regulatory process, laws, regulations and uncertainties related to
environmental matters, and legal actions.
In May 1996, the Pennsylvania Public Utility Commission
(PUC) approved West Penn's petition seeking permission to recover from
customers through the Energy Cost Rate (ECR) the $31 million buyout cost
of the Shannopin PURPA project. West Penn will recover the cost over
three years including recovery of $24 million in the current ECR year
ending March 31, 1997. This increase in customer rates will be offset by
a $27 million refund of overcollections from the past ECR year. The
buyout will save West Penn's customers approximately $665 million over the
next 30 years by eliminating the need to buy the overpriced power.
In July 1996, the Company presented an offer to buy the
Hagerstown, Maryland municipal electric distribution system. The offer
included a $23 million cash payment, plus other incentives. The offer
came as a result of discussions with a municipal Study Committee which had
recommended a public referendum on the November 1996 ballot to let voters
decide the issue. In late September, following a vote by the City Council
not to allow citizens to decide on the sale in a referendum, the Company
withdrew its offer to purchase the system.
The Virginia State Corporation Commission on October
29, 1996, approved an agreement filed by Potomac Edison and the Staff of
the Commission that will lower electric rates for Virginia customers. The
decrease in gross revenues will be about $1.2 million on an annual basis.
The new rates became effective with service rendered on November 1, 1996.
The Company continues to advocate true competition in
the electric utility industry. The most active debate on competition in
the states we serve is in Pennsylvania, where the Company is working with
a group of legislators, regulators, utility representatives, and others to
attempt to draft consensus legislation that would bring retail customer
choice in a meaningful time frame. Also, in Virginia, the Company told
the State Corporation Commission that "the public interest will be best
served by moving to implement a more competitive structure for the
delivery of retail electric service." The Company is very proactive in
its efforts to promote deregulation in the electric utility industry in
the states in which it serves. The Company also believes that a Federal
framework of legislation to speed customer choice and provide uniform
rules for all players is necessary because of differences among the
states. Along with Federal legislation, the Company supports deregulation
of all generation, regulation of transmission by the Federal Energy
Regulatory Commission (FERC), and regulation of distribution companies by
the states.
Nonutility Business
The PUC and the FERC approved AYP Capital Inc.'s
request to become a hybrid Exempt Wholesale Generator. AYP Capital
intends to market power from its 50% ownership in Fort Martin Power
Station Unit No. 1. Financial closing on the $170 million purchase from
Duquesne Light Company was completed on October 31, 1996. AYP Energy,
Inc., the AYP Capital subsidiary created to
<PAGE>
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sell the Fort Martin energy, has received an order from FERC to sell, at
market price, electricity which comes from its half of the above mentioned
generating unit.
ALLEGHENY POWER SYSTEM, INC.
Part II - Other Information to Form 10-Q
for Quarter Ended September 30, 1996
ITEM 5. OTHER INFORMATION
The Potomac Edison Company (PE) received a
questionnaire on October 1, 1996 from the U.S. Environmental Protection
Agency (EPA) concerning a release or threat of release of hazardous
substances, pollutants, or contaminants into the environment at the Butler
Tunnel Site located in Luzerne County, Pennsylvania.
Following a diligent and reasonable search of its
records and discussions with appropriate employees, PE notified the EPA
that it has no records or recollection of any business relations with the
site or any of the companies identified in the questionnaire.
It is not possible to determine at this time what
impact, if any, this matter may have on PE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) (27) Financial Data Schedule
(b) No reports on Form 8-K were filed on behalf of the
Company for the quarter ended September 30, 1996.
Signature
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ALLEGHENY POWER SYSTEM, INC.
/s/ K. M. JONES
K. M. Jones, Vice President
(Chief Accounting Officer)
November 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 18,341
<SECURITIES> 0
<RECEIVABLES> 284,419
<ALLOWANCES> 13,269
<INVENTORY> 141,002
<CURRENT-ASSETS> 539,370
<PP&E> 7,936,917
<DEPRECIATION> 2,871,045
<TOTAL-ASSETS> 6,371,185
<CURRENT-LIABILITIES> 508,876
<BONDS> 2,230,257
0
170,086
<COMMON> 151,955
<OTHER-SE> 2,012,463
<TOTAL-LIABILITY-AND-EQUITY> 6,371,185
<SALES> 1,752,953
<TOTAL-REVENUES> 1,752,953
<CGS> 1,012,820
<TOTAL-COSTS> 1,352,932
<OTHER-EXPENSES> 6,967
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 133,440
<INCOME-PRETAX> 263,051
<INCOME-TAX> 101,620
<INCOME-CONTINUING> 161,431
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 161,431
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.33
</TABLE>
