<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 Service Corporation
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 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:
<PAGE>
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>
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
<1>The EMS 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 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>
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.
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.
<PAGE>
Requested Authority
In this application, APS and AYP request Commission
authority to allow AYP or one or more special purpose
subsidiaries ("MARKETCOs") to engage in the following energy-
related activities:
a) to market and sell to industrial, commercial and
residential customers located within the United States,
appliance and equipment repair warranties, service plans, or
other maintenance agreements, covering heating and air
conditioning systems and other major appliances; and
b) to engage in the consulting for, marketing,
selling, leasing, financing, and acquisition and installation
of power quality devices including, but not limited to: surge
suppressors, uninterruptible power supplies, and standby power
supplies to customers located within the United States. The
consulting services may include, but are not limited to:
preventative maintenance inspections of customers' energy
facilities and energy-consuming equipment, grounding of
electrical systems, and lightning protection.
AYP requests authority to engage in these activities
through the first to occur of:
1) the adoption by the Commission of proposed Rule
58 if it exempts the proposed transactions from the need for
approvals; or
<PAGE>
2) the adoption of such other rule, regulation or
order as shall exempt the proposed transaction from Section
9(a) of the Act.
Appliance and Equipment Warranties
Applicants request authority for AYP or a MARKETCO to
provide appliance and equipment repair warranties. These
warranties will cover such items as: heating and air
conditioning systems, water heaters, dish washers,
refrigerators, microwaves, stoves and other gas, electric, or
electronic appliances. These warranties would be marketed and
supplied anywhere within the United States.
AYP or the MARKETCO may contract with a third party
or parties to provide some support services such as
underwriting, handling service claims, marketing, billing
and/or cash processing.
AYP or MARKETCO anticipates the appliance service
operation to be largely self-supporting.
AYP estimates that the program will result in gross
sales revenue of about $700,000 in the first year which will
rise steadily to approximately $2.5 million at the end of the
fifth year.
Sale and Installation of Power Quality Devices
AYP or MARKETCO proposes to offer power quality
services to customers located within the United States. The
<PAGE>
power quality services would consist of consulting with and
selling, leasing and financing to customers items such as, but
not limited to: uninterruptible power supplies, power
monitoring equipment, and surge protection equipment designed
to protect electrical components, communication equipment,
satellite dishes and other electrical equipment from damages
due to transient overvoltage/undervoltage conditions in their
electric supply. AYP or MARKETCO may also provide diagnostic
services and recommend and perform power quality solutions.
AYP or MARKETCO would sell or lease the power quality equipment
to customers and could finance such sales or leases.
AYP and/or MARKETCO would sell or lease the power
quality equipment/services to customers and may make loans to
customers to finance the purchase. Loans would be evidenced by
promissory notes, the term of which shall not exceed the
expected useful life of the equipment. Such secured and
unsecured loans would be at market interest rates and on market
terms and conditions.
AYP estimates that the program will result in gross
sales revenue of about $560,000 in the first year and this will
rise steadily to about $2.6 million at the end of the fifth
year.
Personnel
Under the terms of a Commission-approved Service
Agreement, Allegheny Power Service Corporation ("APSC"), a
<PAGE>
mutual service company formed under the 1935 Act will assist
AYP or MARKETCO with marketing, customer billing, accounting or
other services. It is anticipated that the services to be
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 MARKETCO will be billed at
cost in accordance with Section 13(b) of the Act and Rules 90
and 91 thereunder. All time spent by APSC employees working on
such transactions will be billed to and paid by AYP or MARKETCO
on a monthly basis.
Warranty and Power Quality Programs are Closely
Related to APS' Core Business
APS and AYP believe the proposed warranty and power
quality programs are 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. The appliance and equipment repair warranty will
promote the safe and efficient distribution of electricity by
facilitating the maintenance, repair and replacement of
electricity utilizing equipment that is broken or not working
properly. In addition, the inspection, warranty and repair
services will foster more effective and efficient energy
consumption and enhance customer safety. These services will
promote the safe and efficient distribution of electricity at
retail and will increase customer satisfaction and goodwill.
In addition, the services will foster effective demand-side
<PAGE>
management by reducing unnecessary consumption. Similarly, the
installation of power quality and surge protection equipment
will promote the safe operation of electrical equipment and
will result in increased customer satisfaction and overall
goodwill.
Commission Precedent
The appliance and equipment warranties requested
herein are similar to those that have been approved by the
Commission for Consolidated Natural Gas Company (Release
No. 35-26363, File No. 70-8577, 1995 SEC Lexis 2289, August 28,
1995); for PSI Energy, Inc., (Release No. 35-26412, File
No. 70-8727, 1995 SEC Lexis 3291, November 21, 1995); and for
the Columbia Gas System, Inc., (Release No. 35-26498, File
No. 70-8775, 1996 SEC Lexis 897, March 25, 1996).
The power conditioning program is similar to the one
approved by the Commission for Mississippi Power and Light
Company at Release No. 35-25801, File No. 70-7760, 1993 SEC
Lexis 857, April 21, 1993.
Item 2: Fees, Commissions and Expenses
No fees, commissions or expenses, other than ordinary
expenses of AYP estimated not to exceed $1,000 and the services
of APSC personnel, which are billed at cost are to be paid in
connection with the proposed transaction.
<PAGE>
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 regulatory approval of any commissions, other than
the Securities and Exchange Commission will be required for AYP
or MARKETCO to provide the appliance service warranty or the
power quality services described herein.
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 February 1, 1997. 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
<PAGE>
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.
Item 6: Exhibits and Financial Statements
(a) F. - Opinion of Counsel
G. - Financial Data Schedules
G-1 - APS Consolidated (9/30/96)
G-2 - AYP Consolidated (9/30/96)
H. - Form of Notice
(b) Financial Statements as of September 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.
1-D AYP consolidated statement of income, per
books, and earned surplus.
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
<PAGE>
environment for purposes of Section 102(2)(C) of the National
Environmental Policy Act (42 U.S.C. 4232(2)(C).
b) Not applicable.
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 its behalf by the
undersigned thereunto duly authorized.
By: /s/Philip J. Bray
Philip J. Bray
Attorney for Allegheny Power
System, Inc
and AYP Capital, Inc.
December 6, 1996
<PAGE>
EXHIBIT F
[Letterhead]
LEGAL DEPARTMENT 10435 Downsville Pike
Hagerstown, MD 21740-1766
(301) 790-3400
December 6, 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 appliance and equipment
repair warranties and the marketing, sale and installation of power quality
devices, 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/ Philip J. Bray
Counsel for
Allegheny Power System, Inc. and
AYP Capital, Inc.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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> OCT-1-1995
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 5,065,872
<OTHER-PROPERTY-AND-INVEST> 15,077
<TOTAL-CURRENT-ASSETS> 539,370
<TOTAL-DEFERRED-CHARGES> 697,149
<OTHER-ASSETS> 53,717
<TOTAL-ASSETS> 6,371,185
<COMMON> 151,955
<CAPITAL-SURPLUS-PAID-IN> 1,020,140
<RETAINED-EARNINGS> 992,323
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,164,418
0
170,086
<LONG-TERM-DEBT-NET> 2,230,257
<SHORT-TERM-NOTES> 31,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 67,061
<LONG-TERM-DEBT-CURRENT-PORT> 20,900
0
<CAPITAL-LEASE-OBLIGATIONS> 2,237
<LEASES-CURRENT> 887
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,684,339
<TOT-CAPITALIZATION-AND-LIAB> 6,371,185
<GROSS-OPERATING-REVENUE> 2,339,351
<INCOME-TAX-EXPENSE> 140,522
<OTHER-OPERATING-EXPENSES> 1,792,902
<TOTAL-OPERATING-EXPENSES> 1,933,424
<OPERATING-INCOME-LOSS> 405,927
<OTHER-INCOME-NET> 6,137
<INCOME-BEFORE-INTEREST-EXPEN> 412,064
<TOTAL-INTEREST-EXPENSE> 178,697
<NET-INCOME> 233,367
9,302
<EARNINGS-AVAILABLE-FOR-COMM> 224,065
<COMMON-STOCK-DIVIDENDS> 203,015
<TOTAL-INTEREST-ON-BONDS> 112,585
<CASH-FLOW-OPERATIONS> 0<F1>
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 1.85
<FN>
<F1>*Not calculated for Form U-1 purposes.
</FN>
</TABLE>
<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> OCT-1-1995
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 308
<OTHER-PROPERTY-AND-INVEST> 2,743
<TOTAL-CURRENT-ASSETS> 994
<TOTAL-DEFERRED-CHARGES> 1,097
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 5,142
<COMMON> 1
<CAPITAL-SURPLUS-PAID-IN> 5,537
<RETAINED-EARNINGS> (1,058)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 4,480
0
0
<LONG-TERM-DEBT-NET> 0
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 662
<TOT-CAPITALIZATION-AND-LIAB> 5,142
<GROSS-OPERATING-REVENUE> 0
<INCOME-TAX-EXPENSE> (262)
<OTHER-OPERATING-EXPENSES> 5
<TOTAL-OPERATING-EXPENSES> (257)
<OPERATING-INCOME-LOSS> (257)
<OTHER-INCOME-NET> (809)
<INCOME-BEFORE-INTEREST-EXPEN> (552)
<TOTAL-INTEREST-EXPENSE> 0
<NET-INCOME> (552)
0
<EARNINGS-AVAILABLE-FOR-COMM> (552)
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 0<F1>
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>*Not calculated for Form U-1 purposes.
<F2>**All common stock is owned by parent, no EPS required.
</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 appliance
and equipment repair warranties and to market,
sell and install power quality devices
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 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>
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.
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
<1> The EMS 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 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>
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 or one or more special purpose
subsidiaries ("MARKETCOs") to engage in the following energy-
related activities:
a) to market and sell to industrial, commercial and
residential customers located within the United States,
appliance and equipment repair warranties, service plans, or
other maintenance agreements, covering heating and air
conditioning systems and other major appliances; and
b) to engage in the consulting for, marketing,
selling, leasing, financing, and acquisition and installation
of power quality devices including, but not limited to: surge
suppressors, uninterruptible power supplies, and standby power
supplies to customers located within the United States. The
consulting services may include, but are not limited to:
preventative maintenance inspections of customers' energy
facilities and energy-consuming equipment, grounding of
electrical systems, and lightning protection.
AYP requests authority to engage in these activities
through the first to occur of:
1) the adoption by the Commission of proposed Rule
58 if it exempts the proposed transactions from the need for
approvals; or
2) the adoption of such other rule, regulation or
order as shall exempt the proposed transaction from Section
9(a) of the Act.
Appliance and Equipment Warranties
Applicants request authority for AYP or a MARKETCO to
provide appliance and equipment repair warranties. These
warranties will cover such items as: heating and air
conditioning systems, water heaters, dish washers,
refrigerators, microwaves, stoves and other gas, electric, or
electronic appliances. These warranties would be marketed and
supplied anywhere within the United States.
<PAGE>
AYP or the MARKETCO may contract with a third party
or parties to provide some support services such as
underwriting, handling service claims, marketing, billing
and/or cash processing.
AYP or MARKETCO anticipates the appliance service
operation to be largely self-supporting.
AYP estimates that the program will result in gross
sales revenue of about $700,000 in the first year which will
rise steadily to approximately $2.5 million at the end of the
fifth year.
Sale and Installation of Power Quality Devices
AYP or MARKETCO proposes to offer power quality
services to customers located within the United States. The
power quality services would consist of consulting with and
selling, leasing and financing to customers items such as, but
not limited to: uninterruptible power supplies, power
monitoring equipment, and surge protection equipment designed
to protect electrical components, communication equipment,
satellite dishes and other electrical equipment from damages
due to transient overvoltage/undervoltage conditions in their
electric supply. AYP or MARKETCO may also provide diagnostic
services and recommend and perform power quality solutions.
AYP or MARKETCO would sell or lease the power quality equipment
to customers and could finance such sales or leases.
AYP and/or MARKETCO would sell or lease the power
quality equipment/services to customers and may make loans to
customers to finance the purchase. Loans would be evidenced by
promissory notes, the term of which shall not exceed the
expected useful life of the equipment. Such secured and
unsecured loans would be at market interest rates and on market
terms and conditions.
AYP estimates that the program will result in gross
sales revenue of about $560,000 in the first year and this will
rise steadily to about $2.6 million at the end of the fifth
year.
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 MARKETCO with marketing, customer billing, accounting or
other services. It is anticipated that the services to be
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 MARKETCO will be billed at
cost in accordance with Section 13(b) of the Act and Rules 90
<PAGE>
and 91 thereunder. All time spent by APSC employees working on
such transactions will be billed to and paid by AYP or MARKETCO
on a monthly basis.
Warranty and Power Quality Programs are Closely
Related to APS' Core Business
APS and AYP believe the proposed warranty and power
quality programs are 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. The appliance and equipment repair warranty will
promote the safe and efficient distribution of electricity by
facilitating the maintenance, repair and replacement of
electricity utilizing equipment that is broken or not working
properly. In addition, the inspection, warranty and repair
services will foster more effective and efficient energy
consumption and enhance customer safety. These services will
promote the safe and efficient distribution of electricity at
retail and will increase customer satisfaction and goodwill.
In addition, the services will foster effective demand-side
management by reducing unnecessary consumption. Similarly, the
installation of power quality and surge protection equipment
will promote the safe operation of electrical equipment and
will result in increased customer satisfaction and overall
goodwill.
Commission Precedent
The appliance and equipment warranties requested
herein are similar to those that have been approved by the
Commission for Consolidated Natural Gas Company (Release
No. 35-26363, File No. 70-8577, 1995 SEC Lexis 2289, August 28,
1995); for PSI Energy, Inc., (Release No. 35-26412, File
No. 70-8727, 1995 SEC Lexis 3291, November 21, 1995); and for
the Columbia Gas System, Inc., (Release No. 35-26498, File
No. 70-8775, 1996 SEC Lexis 897, March 25, 1996).
The power conditioning program is similar to the one
approved by the Commission for Mississippi Power and Light
Company at Release No. 35-25801, File No. 70-7760, 1993 SEC
Lexis 857, April 21, 1993.
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
<PAGE>
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>
CONTENTS
Statement
No.
Balance sheets at September 30, 1996:
AYP Capital, Inc. and Subsidiaries 1-C
Allegheny Power System, Inc. and Subsidiaries 1-A
Statements of income and retained earnings for twelve months
ended September 30, 1996:
AYP Capital, Inc. and Subsidiaries 1-D
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, June 30, 1996,
and September 30, 1996.
<PAGE>
Statement 1-C
AYP CAPITAL, INC.
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
(Thousands)
Assets Per Books
<S> <C>
Property, plant, and equipment:
At original cost $312
Accumulated depreciation (4)
Investments and other assets:
Nonutility investments 2,743
Current assets:
Cash 892
Accounts receivable 102
Deferred charges 1,097
Total Assets $5,142
Capitalization and Liabilities
Capitalization:
Common stock:
Common stock - $10 par value, authorized
1,000 shares, outstanding 100 shares $1
Other paid-in capital 5,537
Retained earnings (1,058)
Current liabilities:
Accounts payable 1
Accounts payable to affiliates 303
Taxes accrued - federal and state income 358
Total Capitalization and Liabilities $5,142
</TABLE>
<PAGE>
Statement 1-A
ALLEGHENY POWER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
<S> <C>
Assets Per Books
Property, plant, and equipment:
At original cost $7,936,917
Accumulated depreciation (2,871,045)
5,065,872
Investments and other assets:
Subsidiaries consolidated--excess of cost
over book equity at acquisition 15,077
Benefit plan's investments 48,572
Other 5,145
68,794
Current assets:
Cash 18,341
Accounts receivable:
Electric service, net of $13,269,000 uncollectible allowance 260,443
Other 10,707
Materials and supplies--at average cost:
Operating and construction 83,940
Fuel 57,062
Prepaid taxes 46,904
Deferred income taxes 40,411
Other 21,562
539,370
Deferred charges:
Regulatory assets 597,123
Unamortized loss on reacquired debt 54,366
Other 45,660
697,149
Total Assets $6,371,185
Capitalization and Liabilities
Capitalization:
Common stock $151,955
Other paid-in capital 1,020,140
Retained earnings 992,323
2,164,418
Preferred stock 170,086
Long-term debt and QUIDS 2,230,257
4,564,761
Current liabilities:
Short-term debt 98,061
Long-term debt due within one year 20,900
Accounts payable 115,501
Taxes accrued:
Federal and state income 37,087
Other 39,774
Interest accrued 41,301
Deferred power costs 30,044
Restructuring liabilities 47,339
Other 78,869
508,876
Deferred credits and other liabilities:
Unamortized investment credit 143,579
Deferred income taxes 989,627
Regulatory liabilities 94,795
Restructuring liabilities 2,075
Other 67,472
1,297,548
Total Capitalization and Liabilities $6,371,185
</TABLE>
<PAGE>
Statement 1-D
AYP CAPITAL, INC.
CONSOLIDATED STATEMENT OF INCOME FOR TWELVE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
(Thousands)
Per Books
<S> <C>
OPERATING EXPENSES:
Operation $4
Taxes other than income taxes 1
Federal and state income taxes (262)
Total Operating Expenses (257)
Operating Income 257
OTHER INCOME AND DEDUCTIONS: (809)
Net Income (Loss) ($552)
</TABLE>
<PAGE>
Statement 1-D
(continued)
AYP CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
FOR TWELVE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
(Thousands)
Per Books
<S> <C>
Balance at October 1, 1995 $ (506)
Add:
Net income (Loss) (552)
Balance at September 30, 1996 ($1,058)
</TABLE>
<PAGE>
Statement 1-B
ALLEGHENY POWER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME FOR TWELVE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
(Thousands)
Per Books*
<S> <C>
ELECTRIC OPERATING REVENUES $2,339,351
OPERATING EXPENSES:
Operation:
Fuel 512,546
Purchased power and exchanges 182,282
Deferred power costs, net 28,465
Other 366,928
Maintenance 255,047
Depreciation 260,408
Taxes other than income taxes 187,226
Federal and state income taxes 140,522
Total Operating Expenses 1,933,424
Operating Income 405,927
OTHER INCOME AND DEDUCTIONS:
Allowance for other than borrowed funds
used during construction 2,632
Other income, net 3,505
Total Other Income and Deductions 6,137
Income Before Interest Charges and
Preferred Dividends 412,064
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest on first mortgage bonds 112,585
Interest on other long-term obligations 53,444
Other interest 15,682
Allowance for borrowed funds used during
construction (3,014)
Dividends on preferred stock of subsidiaries 9,302
Total Interest Charges and
Preferred Dividends 187,999
Consolidated Net Income $224,065
</TABLE>
*Includes a charge of $82.2 million for restructuring and asset write-off.
<PAGE>
Statement 1-B
(continued)
ALLEGHENY POWER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
FOR TWELVE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
(Thousands)
Per Books
<S> <C>
Balance at October 1, 1995 $971,322
Add:
Consolidated net income 224,065
1,195,387
Deduct:
Dividends on common stock of Allegheny
Power System, Inc. (cash) 203,015
Charge on redemption of preferred stock of subsidiaries 49
Total deductions 203,064
Balance at September 30, 1996 $992,323
</TABLE>
