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File No. 70-9121
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO.3
TO FORM U-1
APPLICATION OR DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Monongahela Power Company
1310 Fairmont Avenue
Fairmont, WV 26554
The Potomac Edison Company
10435 Downsville Pike
Hagerstown, MD 21740-1766
(Name of company or companies filing this statement and
addresses of principal executive offices)
Allegheny Energy, Inc.
(Name of top registered holding company parent of each
applicant or declarant)
Thomas K. Henderson, Esq.
Vice President
Allegheny Energy, Inc.
10435 Downsville Pike
Hagerstown, MD 21740
(Name and address of agent for service)
<PAGE>
1. Applicants hereby amend Item No. 1. Description of
Proposed Transaction by adding the following to the end
thereof:
Compliance with Rule 54
Rule 54 provides that in determining whether to approve
certain transactions other than those involving exempt
wholesale generators ("EWGs") or foreign utility companies
("FUCOs"), as defined in the 1935 Act, the Commission will
not consider the effect of the capitalization of earnings of
any subsidiary which an EWG or FUCO if Rule 53(a), (b) and
(c) are satisfied. The requirements of Rule 53(a), (b) and
(c) are satisfied.
Rule 53(a)(1): The parent company of Monongahela and
Potomac Edison, Allegheny Energy, Inc., has an indirect
subsidiary (AYP Energy, Inc.) that is an EWG. As of
September 30, 1997, Allegheny Energy, Inc. through its
subsidiary, AYP Capital, Inc. had invested $18,625,195 in
AYP Energy, Inc. This investment represents less than 2% of
the average of the consolidated retained earnings of
Allegheny Energy, Inc. reported on Form 10-K or Form 10-Q,
as applicable, for the four consecutive quarters ended
September 30, 1997.
Rule 53(a)(2): AYP Energy, Inc. will maintain books
and records and make available the books and records
required by Rule 53(a)(2).
Rule 53(a)(3): No more than 2% of the employees of the
public utility subsidiaries of Allegheny Energy, Inc. will,
at any one time, directly or indirectly, render services to
AYP Energy, Inc.
1
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Rule 53(a)(4): Allegheny Energy, Inc. will submit a
copy of Item 9 and Exhibits G and H of Form U5S to each of
the public service commissions having jurisdiction over the
retail rates of its public utility subsidiaries.
Rule 53(b)(1) : Neither Allegheny Energy, Inc nor any
subsidiary of Allegheny Energy, Inc is the subject of any
pending bankruptcy or similar proceeding.
Rule 53(b)(2): Allegheny Energy, Inc's average
consolidated retained earnings for the four most recent
quarterly periods ($1,012,694,000) represented an increase
of approximately $26,004,000 (or 3%) in the average
consolidated retained earnings from the previous four
quarterly periods ($986,690,000).
Rule 53(b)(3): For the twelve months ended September
30, 1997, there were losses attributable to direct or
indirect investments in EWGs or FUCOs in the amount of
$13,171,368 (AYP Energy).
Rule 53(c): Rule 53(c) is inapplicable because the
requirements of Rule 53(a) and (b) have been satisfied.
2. Applicants hereby amend Item No. 3 Applicable Statutory
Provisions by deleting it in its entirety and substituting
the following therefor:
The Companies are informed by counsel that
the proposed transactions may be subject to
Sections 6(a) and 7 of the Public Utility Holding
Company Act of 1935.
2
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3. Applicants hereby amend Item 4 Regulatory Approval by
deleting it in its entirety and substituting the following
therefor:
The proposed financing transactions will be
authorized by the Public Utilities Commission of
Ohio, as to Monongahela's participation; by the
Public Utility Commission of Pennsylvania as to
such participation by West Penn; and by the State
Corporation Commission of Virginia and the Public
Service Commission of Maryland as to Potomac
Edison's participation and are therefore exempt
under Rule 52(a). The Public Service Commission
of West Virginia does not have jurisdiction over
the financing aspects of the transaction. However,
it does have jurisdiction over the transfer of any
interest in the facilities that act as security
for the notes. Therefore, the Securities and
Exchange Commission has jurisdiction over the
participation by Monongahela and Potomac Edison
insofar as the transfer of any interest in the
facilities is concerned. No regulatory agency,
other than those named, has jurisdiction over the
proposed transactions.
4. Applicants hereby amend Item No. 6 Exhibits and
Financial Statements by filing herewith the following:
(a) Exhibits
D-1 Potomac Edison's Application to the
Maryland Public Service Commission.
D-4 Potomac Edison's Application to the
Virginia State Corporation
Commission.
D-5 No-Action Letter of the Public Service
Commission of West Virginia
regarding Monongahela's and Potomac
Edison's Application.
3
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D-6 Order of the Maryland Public Service Commission.
D-8 Order of the Pennsylvania Public Utility
Commission.
D-9 Order of the Virginia State Corporation
Commission.
4
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SIGNATURE
Pursuant to the requirements of the Public Utility
Holding Company Act of 1935, the undersigned companies have
duly caused this statement to be signed on their behalf by
the undersigned thereunto duly authorized.
MONONGAHELA POWER COMPANY
By /s/ Robert R. Winter
Robert R. Winter
Vice President, Legal Services
THE POTOMAC EDISON COMPANY
By /s/ Robert R. Winter
Robert R. Winter
Vice President, Legal Services
Dated: December 19, 1997
5
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Exhibit D-1
BEFORE THE
PUBLIC SERVICE COMMISSION
OF MARYLAND
In the matter of the application )
of The Potomac Edison Company, )
dba Allegheny Power for authority ) Case No. ____________
to issue up to $200 million of debt securities )
PETITION
The Petition of The Potomac Edison Company, dba
Allegheny Power ("Applicant") respectfully shows:
1. Applicant is a Maryland and Virginia corporation and a
public service company subject to the jurisdiction of
the Commission as fully appears in former proceedings
before the Commission.
2. Applicant requests authority through December 31, 2002,
if market conditions warrant, to issue and sell up to
$200 million aggregate principal amount of first
mortgage bonds (the New Bonds), secured or unsecured
medium term notes (the Notes), unsecured debentures
(the Debentures), pollution control or solid waste
disposal revenue notes (the Revenue Notes), or other
debt securities in any combination, in one or more
series (collectively the Debt Securities). The total
amount of the Debt Securities to be issued will not
exceed $200 million (or its equivalent, based upon the
exchange rate on the applicable trade date in such
foreign or composite currencies as Applicant shall
designate at the time of issuance.).
3. It is difficult to determine, under present debt market
conditions, whether it would be more advantageous for
Applicant to sell first mortgage bonds, secured or
unsecured medium term notes, unsecured debentures,
pollution control or solid waste disposal revenue notes
or other debt securities. Applicant desires to have
available sufficient flexibility to adjust its
financing program to developments in the market for
debt securities when and as they occur, in order to
obtain the best possible price or prices and interest
rate or rates for the Debt Securities.
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4. The annual interest rate to be borne by each series of Debt
Securities, the price to be paid to Applicant (which shall not be
less than 98% and shall not exceed 101.75% of principal amount),
and the compensation to be paid to the underwriters, will be
determined at the time of issuance. Applicant will sell the Debt
Securities from time to time through underwriters, dealers or
agents and/or directly to other purchasers in either negotiated
or competitively bid transactions. The applicable Prospectus
Supplement or Pricing Supplement will set forth the purchase
price of the Debt Securities offered and the proceeds to
Applicant from such sale, any underwriting, discounts and other
items constituting underwriters' compensation, any initial public
offering price and any discounts or concessions allowed or
reallowed or paid to dealers and other specific terms of the
particular Debt Securities. The Debt Securities may also be
offered and sold by Applicant directly or through agents
designated by Applicant from time to time. Any agent involved in
the offer or sale of Debt Securities in respect of which the
Prospectus Supplement or Pricing Supplement is delivered will be
named in, and any commissions payable by Applicant to such agent
will be set forth in, the applicable Prospectus Supplement or
Pricing Supplement.
5. The interest rate and the price to be paid to Applicant
may be fixed or floating and will be determined at the
time of issuance. Applicant will not, without further
order of the Commission, proceed to issue and sell Debt
Securities with interest rates greater than the
following:
a) for the New Bonds and the Notes with a maturity of
ten years of less, not to exceed 125 basis points
above the yield to maturity on United States
Treasury Notes of comparable maturity at the time
of pricing;
b) for the New Bonds and Notes with a maturity of more than ten
years, not in excess of 200 basis points above the yield to
maturity on United States Treasury Bonds of comparable maturity
at the time of pricing;
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c) for the Debentures with a maturity of ten years or less, not
to exceed 175 basis points above the yield to maturity on United
States Treasury Notes of comparable maturity at the time of
pricing;
d) for the Debentures with a maturity of more than ten years,
not in excess of 225 basis points above the yield to maturity on
United States Treasury Bonds of comparable maturity at the time
of pricing; and
e) for the Revenue Notes, no greater than the interest rates on
the pollution control or solid waste disposal revenue notes they
replace.
6. The Debt Securities will be issued in one or more series,
with maturity and call provisions, if any, to be determined at
the time of issuance.
7. If the Debt Securities are first mortgage bonds or secured
medium term notes, they will be issued under and secured,
together with the Applicant's presently outstanding First
Mortgage Bonds, and any bonds of other series hereafter
authorized and issued, by the Indenture dated as of October 1,
1944 between Applicant and The Chase Manhattan Bank, as Trustee,
and Thomas J. Foley, as Individual Trustee, as heretofore
supplemented and amended, and under an indenture supplemental
thereto. If the Debt Securities are unsecured medium term notes
or debentures, they will be issued subject to an indenture
between Applicant and The Bank of New York, as Trustee, dated as
of May 31, 1995.
8. Applicant may use all or a part of the net proceeds of the
Debt Securities to be issued for the redemption of or tender for
certain bonds, redemption of or tender for pollution control or
solid waste disposal notes, redemption of or tender for certain
series of preferred stock, or redemption of or tender for
Quarterly Income Debt Securities (QUIDS).
9. If the Debt Securities are pollution control notes, they
will be for refunding purposes only. They will be for the same
dollar amount and will replace the currently outstanding notes
issued with respect to the series of bonds to which they
correspond. The notes will support the issuance of a series of
tax exempt pollution control or solid waste disposal
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bonds by the
County Commission of the particular County. The tax-exempt
revenue bonds that may be refinanced are the Greene County, PA
6.30% Series A, due 2002 with the principal amount outstanding of
$4 million and a call price of 100; the Pleasants County, WV
6.30% Series A, due 2007 with the principal amount outstanding of
$30 million and a call price of 100; the Pleasants County, WV
6.15% Series C, due 2015 with the principal amount outstanding of
$21 million and callable after May 1, 2005; the Harrison County,
WV 6-7/8% Series A, due 2022 with the principal amount
outstanding of $6.55 million and callable after April 15, 2002;
the Harrison County, WV 6-1/4% Series B, due 2023 with the
principal amount outstanding of $13.99 million and callable after
May 1, 2003; the Harrison County, WV 6-3/4% Series C, due 2024
with the principal amount outstanding of $11.56 million and
callable after August 1, 2004; and the Monongalia County, WV
5.95% Series B, due 2013 with the principal amount outstanding of
$8.6 million and callable after April 1, 2003.
10. The First Mortgage Bonds that may be redeemed by
optional call provision or by tender offer are the 5-
7/8% series issued in 1993 and due in 2000 with the
principal amount outstanding of $75 million and a no
call to maturity; the 8% series issued in 1991 and due
in 2006 with the principal amount outstanding of $50
million and a call price of 103.97; the 8-7/8% series
issued in 1991 and due in 2021 with the principal
amount outstanding of $50 million and a no call until
after August 1, 2001; the 8% series issued in 1992, due
in 2022 with the principal amount outstanding of $55
million and a no call until after December 1, 2002; the
7- 3/4% series issued on 1993, due in 2023 with the
principal amount outstanding of $45 million and a no
call until after February 1, 2003; the 8% series issued
in 1994, due in 2024 with the principal amount
outstanding of $75 million and a no call until after
June 1, 2004; the 7-5/8% series issued in 1995, due in
2025 with the principal amount outstanding of $80
million and a no call until after May 1, 2005 and the 7-
3/4% series issued in 1995, due in 2025 with the
principal amount outstanding of $65 million and a no
call until after May 1, 2005.
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11. The series of cumulative preferred stock that may be
redeemed are the 3.60% series issued in 1946 with the
principal amount outstanding of $6.378 million
representing 63,784 shares with a current call price of
$103.75 and the $5.88 series C issued in 1967 with the
principal amount outstanding of $10 million
representing 100,000 shares with a current call price
of $102.85.
12. The Quarterly Income Debt Securities (QUIDS) that may
be redeemed by tender offer are the 8% Series, due
2025 with a principal amount outstanding of $40 million
and callable after July 1, 2000 at a call price of 100%
of the amount redeemed.
13. Applicant represents that it will not redeem or tender
for its outstanding securities unless the estimated
present value savings derived from the difference
between interest payments on a new issue of Debt
Securities and those securities refunded is on an after-
tax basis greater than the estimated present value of
all redemption, tendering and issuing costs, assuming
an appropriate discount rate. Such discount rate will
be based on meeting Applicant's long-term capital
structure goals, with appropriate adjustments for
income taxes.
14. Applicant may also use all or a portion of the net
proceeds of the Debt Securities to be issued for the
reimbursement of monies (not secured by or obtained
from the issuance of stocks, bonds, securities, notes
or other evidences of indebtedness, payable in whole or
in part more than twelve months after the date of
issuance) expended by Applicant for the acquisition of
property and the construction, completion, extension
and improvement of its facilities, within five years
next prior to the filing of the Petition. Applicant has
kept its accounts and vouchers of such expenditures so
as to enable the Commission to ascertain the amount of
money so expended and the purposes for which such
expenditures were made. A statement of Applicant's
unreimbursed expenditures for the past five years is
set forth on attached Exhibit No. 1.
15. Applicant files as a part hereof the direct testimony
and exhibits of Nancy L. Campbell detailing the
proposed transactions.
<PAGE>
16. A statement of the financial condition of Applicant is
set forth on attached Exhibit No. 2.
17. Appended hereto is an affidavit by three directors of
Applicant showing that it is the intention of
Applicant, in good faith, to use the proceeds of the
Debt Securities proposed to be issued for the purposes
set forth in this Petition.
WHEREFORE, Applicant prays that the Public Service
Commission of Maryland, by its order, authorize the issuance by
Applicant of additional Debt Securities as set forth in this
Petition and take such further action in the premises as may be
requisite.
Respectfully submitted,
The Potomac Edison Company
dba Allegheny Power
By: /s/ Michael P. Morrell
Michael P. Morrell
Counsel: Vice President
/s/ Philip J. Bray
Philip J. Bray, Esq.
The Allegheny Power Building
10435 Downsville Pike
Hagerstown, Maryland 21740-1766
(301) 790-6283
Dated: October 6, 1997
<PAGE>
AFFIDAVIT OF THREE DIRECTORS
State of Maryland )
) ss:
County of Washington )
I HEREBY CERTIFY that on this 6th day of October, 1997
before me, the subscriber, a Notary Public of the State of
Maryland, in and for the County of Washington aforesaid,
personally appeared Peter J. Skrgic, Michael P. Morrell and Alan
J. Noia, three of the directors of The Potomac Edison Company,
dba Allegheny Power ("Applicant"), and made oath in due form of
law that they are the directors of Applicant; that they have read
the foregoing Petition; and that is the intention of Applicant in
good faith to use the proceeds of the Debt Securities proposed to
be issued for the purposes set forth in said Petition.
Witness my hand and notarial seal, the day and year last
above written.
/s/ Patti M. Sowers
Patti M. Sowers
Notary Public
My commission expires: December 1, 1998.
<PAGE>
AFFIDAVIT
State of Maryland )
) ss:
County of Washington )
I HEREBY CERTIFY that on this 6th day of October, 1997
before me, the subscriber, a Notary Public of the State of
Maryland, in and for the County of Washington, personally
appeared Nancy L. Campbell, Treasurer of The Potomac Edison
Company dba Allegheny Power ("Applicant"), and made oath and due
form of law that the matters and facts set forth in the Petition
including her direct testimony and exhibits are true to the best
of her knowledge, information and belief.
Witness my hand and notarial seal, the day and year last
above written.
/s/ Patti M. Sowers
Patti M. Sowers
Notary Public
My commission expires: December 1, 1998.
<PAGE>
EXHIBIT
No. 1
THE POTOMAC EDISON COMPANY
Statement of Unreimbursed Expenditures
The proceeds (less expenses of issuance), will be used to
reimburse the treasury of the Applicant in part for money
expended from income and from other monies in its treasury, not
capitalized, with respect to which the following statement is
furnished:
(1) The expenditures to be reimbursed over the period:
October 1, 1992 through December 18, 1993 (inclusive).
2) The purposes of the expenditures to be reimbursed:
For the acquisition of property and for the construction,
completion, extension and improvement of the electric light
and power facilities of the applicant.
(3) The amount of expenditures (gross capital charge)
and all credits to capital account within the period above
stated:
Total expenditures (gross capital charge) $ 213,746,570
Total credits to capital account 13,117,915
Balance not yet capitalized $ 200,628,655
(4) The primary accounts to which the expenditures or
retirements were charged or credited:
Accounts 101, 105, 106 & 107 Electric Plant Additions Retirements
Production Plant $ 18,863,716 $ 5,970,098
Transmission Plant 14,980,044 1,278,419
Distribution Plant 65,169,627 5,525,506
General Plant 7,443,586 343,890
Construction workin Progress 107,289,595 -
Electric Plant Held for Future Use 0 _____ -____
TOTAL $ 213,746,568 $ 13,117,913
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Exhibit No. 2
THE POTOMAC EDISON COMPANY
STATEMENT OF FINANCIAL CONDITION
June 30, 1997
Filed herewith as an exhibit to Amendment 3, Item 2, Exhibit D-4
(Potomac Edison's Application to the Virginia State Corporation
Commission).
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Schedule A
AVERAGE PRINCIPAL AND RATE ANALYSIS
01/01/96 - 01/01/97
THE POTOMAC EDISON COMPANY
Filed herewith as an exhibit to Amendment 3, Item 2, Exhibit D-4
(Potomac Edison's Application to the Virginia State Corporation
Commission).
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Schedule B
THE POTOMAC EDISON COMPANY
STATEMENT OF INCOME
FOR PERIOD ENDED JUNE 30, 1997 ($000)
Filed herewith as an exhibit to Amendment 3, Item 2, Exhibit D-4
(Potomac Edison's Application to the Virginia State Corporation
Commission).
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Schedule C
THE POTOMAC EDISON COMPANY
BALANCE SHEET ($000's)
Filed herewith as an exhibit to Amendment 3, Item 2, Exhibit D-4
(Potomac Edison's Application to the Virginia State Corporation
Commission).
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BEFORE THE
PUBLIC SERVICE COMMISSION
OF MARYLAND
IN THE MATTER OF THE APPLICATION OF )
THE POTOMAC EDISON COMPANY, )
dba ALLEGHENY POWER FOR AUTHORITY )
TO ISSUE UP TO $200 MILLION OF ) CASE NO. __________
OF DEBT SECURITIES )
DIRECT TESTIMONY AND EXHIBITS
OF
NANCY L. CAMPBELL
THE POTOMAC EDISON, dba ALLEGHENY POWER
October 6, 1997
<PAGE>
TABLE OF CONTENTS
Prepared Testimony of Nancy L. Campbell
DESCRIPTION PAGE
A. INTRODUCTION 1
B. PURPOSE AND OUTLINE 1
C. SUMMARY 1
D. EXHIBIT LIST 2
E. DISCUSSION 2
1. The Proposed Debt Securities Financing 2
2. The Approvals Required 5
3. Use of Proceeds 5
4. Applicant's Financial Condition 7
5. Effect on Capital Structure 8
6. Expenses 8
F. CONCLUSIONS 9
G. RESPONSIBILITIES AND QUALIFICATIONS 9
<PAGE>
A. INTRODUCTION
Q. Please state your name, address, position including its
duties, and your educational and professional
qualifications.
A. My name is Nancy L. Campbell. My business address is The
Potomac Edison Company Building, 10435 Downsville Pike,
Hagerstown, Maryland 21740-1766. I am Treasurer of The
Potomac Edison Company, dba Allegheny Power ("Applicant").
My duties, educational background, professional credentials
and work experience are included at the end of my testimony.
B. PURPOSE AND OUTLINE
Q. What is the purpose of your testimony?
A. My testimony will describe our request for authority to
issue, prior to December 31, 2002, not more than $200
million of additional debt securities consisting of one or
more of the following: First Mortgage Bonds (the New
Bonds); secured or unsecured medium term notes (the Notes);
pollution control or solid waste disposal revenue notes (the
Revenue Notes); unsecured indebtedness (the Debentures) or
any combination thereof. Collectively I shall refer to the
New Bonds, the Notes, the Revenue Notes and the Debentures
as the Debt Securities.
Q. Please outline the testimony you plan to present in this
case.
A. I will testify to:
1. The Proposed Debt Securities Financing
2. The Approvals Required
3. Use of Proceeds
4. Applicant's Financial Condition
5. Effect of the Proposed Financings on Capital
Structure
6. Expenses
C. SUMMARY
Q. Please summarize your testimony.
<PAGE>
A. Applicant is filing a petition under Sections 65(a)(iii) and
65(a)(v) of the Public Service Commission Law and Section
20.07.04.02 of COMAR for authority to issue up to $200
million of additional Debt Securities. The proceeds of the
Debt Securities will be used to discharge or refund
obligations and/or to reimburse Applicant for monies (not
secured by or obtained from the issuance of long-term
securities) expended within the past five years for
acquiring property, constructing facilities and refunding
obligations. The financing will permit the Company to raise
cash for general business purposes and will be accomplished
with minimal cost to the Company's customers. The
Commission's approval of Applicant's petition in these
matters is in the public interest.
D. EXHIBIT LIST
Q. Have you prepared or had prepared any exhibits to accompany
your direct testimony?
A. Yes. I have prepared and am sponsoring exhibits labeled for
convenience as NLC-1 through NLC-4 as follows:
NLC-1 - The Company's Petition filed in this case.
NLC-2 - Statement of Unreimbursed Expenditures
NLC-3 - Statement of Financial Condition
NLC-4 - 1997 Debt Financing - Effect on Capital Structure
E. DISCUSSION
1. The Proposed Debt SecuritiesFinancing
Q. Are you familiar with Applicant's proposed debt financings
which are the subject of this proceeding?
A. Yes, I am. My exhibit NLC-1 is the Petition filed by
Applicant to institute this proceeding.
Q. Please describe the Debt Securities financing briefly.
A. Applicant requests authority through December 31, 2002, if
market conditions warrant, to issue up to $200 million of
New Bonds, Notes, Revenue Notes, or Debentures, or any
combination thereof, in one or more series. Applicant
desires to have available sufficient flexibility to adjust
its financing program and choose the type of debt security
to be issued to take advantage of developments in the market
for debt securities when and as they occur, in order to
obtain the best possible price or prices
<PAGE>
for the new debt.
The timing and type of security to be issued will depend on
a determination by Applicant of the market conditions
expected to prevail through the maturity of the securities.
Applicant's objective is to achieve the necessary financing
at the overall lowest cost to the benefit of its customers.
The Debt Securities will be issued in one or more
series, with maturity and call provisions, if any, to be
determined at the time of issuance. The interest rate and
price to be paid by Applicant may be fixed or floating and
will be determined at the time of issuance. However,
Applicant will not, without further order of the Commission,
proceed to issue and sell the Debt Securities at interest
rates greater than as follows:
a) for the New Bonds and the Notes with a maturity of ten years
or less, not to exceed 125 basis points above the yield to
maturity on United States Treasury Notes of comparable maturity
at the time of pricing;
b) for the New Bonds and Notes with a maturity of more than ten
years, not in excess of 200 basis points above the yield to
maturity on United States Treasury Notes of comparable maturity
at the time of pricing;
c) for the Debentures with a maturity of ten years or less, not
to exceed 175 basis points above the yield to maturity on United
States Treasury Notes of comparable maturity at the time of
pricing;
d) for the Debentures with a maturity of more than ten years,
not in excess of 225 basis points above the yield to maturity on
United States Treasury Notes of comparable maturity at the time
of pricing; and
e) for the Revenue Notes, no greater than the interest rates on
the pollution control or solid waste disposal revenue notes they
replace.
Q. Describe the procedure and state the terms upon which the
Applicant proposes to issue the Debt Securities.
<PAGE>
A. The Company will sell the Debt Securities from time to time
through underwriters, dealers or agents and/or directly to
other purchasers in either negotiated or competitively bid
transactions. Any Debt Securities acquired by any
underwriters will be acquired by such underwriters for their
own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at a
fixed public offering price, at market prices prevailing at
the time of sale or at varying prices determined at the time
of sale. The underwriter or underwriters with respect to a
particular underwritten offering of Debt Securities will be
named in the Prospectus Supplement or Pricing Supplement
relating to such offering and, if an underwriting syndicate
is used, the managing underwriter or underwriters will be
set forth on the cover page of such Prospectus Supplement or
Pricing Supplement. The applicable Prospectus Supplement or
Pricing Supplement will also set forth the purchase price of
the Debt Securities offered and the proceeds to Applicant
from such sale, any underwriting discounts and other items
constituting underwriters' compensation, any initial public
offering price and any discounts or concessions allowed or
reallowed or paid to dealers and other specific terms of the
particular Debt Securities.
The Debt Securities may be offered and sold by
Applicant directly or through agents designated by Applicant
from time to time. Any agent involved in the offer or sale
of the Debt Securities in respect of which a Prospectus
Supplement or Pricing Supplement is delivered will be named
in, and any commissions payable by Applicant to such agent
will be set forth in the applicable Prospectus Supplement or
Pricing Supplement. Unless otherwise indicated in the
applicable Prospectus Supplement or Pricing Supplement, each
such agent will be acting on a reasonable-efforts basis for
the period of its appointment.
Underwriters, dealers and agents that participate in
the distribution of the Debt Securities may be deemed to be
underwriters and any discounts or commissions received by
them from Applicant and any profit on the resale of the Debt
Securities by them may be deemed to be underwriting
discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under
agreements to be entered into with Applicant, to
indemnification against certain civil liabilities, including
liabilities under the Securities Act.
<PAGE>
Q. Why have you not decided on the type of debt securities to
be issued?
A. Because of the uncertainty of market conditions and our cash
needs at a specific time, we want the flexibility to chose
the type of debt security to be issued. This is one
advantage of a shelf-registration whereby the securities may
be offered on a continuous basis from the initial effective
date of the registration. Therefore, it is proposed that
Applicant decide on the number and type of offerings
depending on market conditions. We are requesting authority
to issue not more than $200 million of these securities for
a definite period through December 31, 2002 and with the
restrictions on interest rates described above.
2. The Approvals Required
Q. What approvals must be acquired before the Debt Securities
can be issued?
A. The proposed financing requires the approval of the Public
Service Commission of Maryland and the Virginia State
Corporation Commission.
3. Use of Proceeds
Q. For what purpose will Applicant use the proceeds of these
financings?
A. Applicant may use all or a part of the net proceeds of the
Debt Securities to be issued for the redemption of or tender
for certain bonds, redemption of or tender for pollution
control or solid waste disposal notes, redemption of or
tender for certain series of preferred stock, or redemption
of or tender for Quarterly Income Debt Securities (QUIDS).
The First Mortgage Bonds that may be redeemed by
optional call provision or by tender offer are the 5-7/8%
series issued in 1993 and due in 2000 with the principal
amount outstanding of $75 million and a no call to maturity
call price of 100; the 8% series issued in 1991 and due in
2006 with the principal amount outstanding of $50 million
and a
<PAGE>
call price of 103.97; the 8-7/8% series issued in 1991
and due in 2021 with the principal amount outstanding of $50
million and a no call until after August 1, 2001; the 8%
series issued in 1992, due in 2022 with the principal amount
outstanding of $55 million and a no call until after
December 1, 2002; the 7-3/4% series issued on 1993, due in
2023 with the principal amount outstanding of $45 million
and a no call until after February 1, 2003; the 8% series
issued in 1994, due in 2024 with the principal amount
outstanding of $75 million and a no call until after June 1,
2004; the 7-5/8% series issued in 1995, due in 2025 with the
principal amount outstanding of $80 million and a no call
until after May 1, 2005 and the 7-3/4% series issued in
1995, due in 2025 with the principal amount outstanding of
$65 million and a no call price until after May 1, 2005.
The tax-exempt revenue bonds that may be refinanced are
the Greene County, PA 6.30% Series A, due 2002 with the
principal amount outstanding of $4 million and a call price
of 100; the Pleasants County, WV 6.30% Series A, due 2007
with the principal amount outstanding of $30 million and a
call price of 100; the Pleasants County, WV 6.15% Series C,
due 2015 with the principal amount outstanding of $21
million and callable after May 1, 2005; the Harrison County,
WV 6-7/8% Series A, due 2022 with the principal amount
outstanding of $6.55 million and callable after April 15,
2002; the Harrison County, WV 6-1/4% Series B, due 2023 with
the principal amount outstanding of $13.99 million and
callable after May 1, 2003; the Harrison County, WV 6-3/4%
Series C, due 2024 with the principal amount outstanding of
$11.56 million and callable after August 1, 2004; and the
Monongalia County, WV 5.95% Series B, due 2013 with the
principal amount outstanding of $8.6 million and callable
after April 1, 2003.
The series of cumulative preferred stock that may be
redeemed are the 3.60% series issued in 1946 with the
principal amount outstanding of $6.378 million representing
63,784 shares with a current call price of $103.75 and the
$5.88 series C issued in 1967 with the principal amount
outstanding of $10 million representing 100,000 shares with
a current call price of $102.85.
<PAGE>
The Quarterly Income Debt Securities (QUIDS) that may
be redeemed by optional call provision or tender offer are
the 8% Series, due 2025 with a principal amount outstanding
of $40 million and callable after July 1, 2000 at a call
price of 100% of the amount redeemed.
Applicant represents that it will not redeem or tender for
its outstanding securities unless the estimated present
value of savings derived from the difference between
interest payments on a new issue of Debt Securities and
those securities refunded is on an after-tax basis greater
than the estimated present value of all redemption,
tendering and issuing costs, assuming an appropriate
discount rate. Such discount rate will be based on meeting
Applicant's long-term capital structure goals, with
appropriate adjustments for income taxes.
Q. For what other purposes could Applicant use the proceeds
from this financing?
A. Applicant could use all or a portion of the net proceeds
derived from the issuance and sale of the Debt Securities
for the purpose of reimbursing Applicant for expenditures
made for the acquisition of property and the construction,
completion and extension of its facilities within the five
years next prior to the filing of the Petition.
Exhibit NLC-2 shows that between October 1, 1992 and
December 18, 1993, Applicant for the acquisition of property
and the construction, completion, extension and improvement
of its facilities, had incurred $213,746,570.19 in gross
capital charges and credited against accounts $13,117,914.84
which leaves a balance not yet capitalized of
$200,628,655.35. A detailed listing by functional
classification of accounts is a part of the exhibit.
The period of time covered by the exhibit falls within
the five year requirement of Section 65(a)(v) of the Public
Service Commission Law.
4. Applicant's Financial Condition
Q. Please describe Applicant's financial condition.
A. Exhibit NLC-3 is Applicant's statement of financial
condition for the twelve (12) month period ended June 30,
1997. This exhibit was prepared in accordance with COMAR,
Section 20.07.04.01 and sets forth as of June 30, 1997,
amount and classes of stock authorized, amount and classes
of stock
<PAGE>
issued, terms of preference of all preferred stock,
a brief description of Potomac's mortgage, the number and
amount of bonds authorized and issued and interest paid
thereon during the preceding fiscal year, other indebtedness
of all kinds, interest paid during the previous fiscal year
on other indebtedness, and the amount of dividends paid on
each class of stock during the previous fiscal year,
detailed statements of income for the twelve month period
ended June 30, 1997 and Applicant's balance sheet as of June
30, 1997.
There has been no material change in the financial
condition of Applicant since June 30, 1997 which is not in
the ordinary course of business.
5. Effect on Capital Structure
Q. Have you determined the effect on Applicant's capital
structure of the proposed issuance of up to $200 million of
Debt Securities?
A. Yes. Exhibit NLC-4 sets forth a comparison of Applicant's
capitalization ratios as of June 30, 1997, and shows the
effect of the issuance of up to $200 million of Debt
Securities applied for in this case. The dollar amounts of
the actual capitalization are taken from Exhibit NLC-3, the
Statement of Financial Condition.
The exhibit shows that as of June 30, 1997, Applicant's
capital structure ratios were 46.2 percent long-term debt
(i.e. excluding short-term notes), 1.2 percent preferred
stock and 52.6 percent common equity. Assuming the issuance
by Applicant of up to $200 million of Debt Securities
applied for in this case, the pro forma capital structure
ratios become 53.1 percent long-term debt, 1.1 percent
preferred stock and 45.8 percent common equity.
6. Expenses
Q. What expenses do you foresee in connection with the proposed
issuance of the Debt Securities?
A. The total expenses of the issuance of the Debt Securities
applied for in this case are estimated to be $320,992. This
estimate is comprised of the following expenses and fees:
<PAGE>
Independent Accountants $ 48,000
Legal Fees 100,000
Printing Expenses 90,000
Trustees' Fees and Expenses 17,500
Blue Sky Fees 1,000
SEC Registration Fee 40,492
Bond Rating Fees 15,000
Recordation Fees, Taxes and Miscellaneous 9,000
TOTAL $ 320,992
Q. What will be the effect on customers of the cost of issuing
the additional Debt Securities applied for in this case?
A. The expenses of issuing the Debt Securities will be amortized
over the life of the Debt Securities. The effect on customers
will be minimal.
F. CONCLUSIONS
Q. Ms. Campbell, what conclusions, if any, do you have concerning
Applicant's request in this case?
A. I believe our proposal meets previously established Commission
criteria and is in the best interests of our customers. The
flexibility requested is similar to that granted in Case No.
8265, which enabled us to issue intermediate bonds to take
advantage of market conditions making their rates relatively
lower than long-term issues. The Debt Securities will give
Applicant needed financial flexibility to take advantage of
changing market conditions to the benefit of our customers.
G. RESPONSIBILITIES AND QUALIFICATIONS
Q. Please describe your duties, educational background and
professional qualifications.
A. I am Treasurer of The Potomac Edison Company. As Treasurer, I
am responsible for handling Applicant's cash resources, the
budgeting, collection, deposit and custody of cash, and the
financing by loans, stock and bond issues to meet the cash
requirements of Applicant.
I graduated from the University of Pittsburgh in 1982 with a
B.A. degree in Economics.
<PAGE>
The following exhibits are incorporated by reference to parts of this
Exhibit D-1:
Exhibit NLC-1 Potomac Edison's Petition for Authority to Issue
up to $200 Million of Debt Securities.
Exhibit NLC-2 Potomac Edison's Statement of Unreimbursed
Expenditures is incorporated herein from Exhibit No. 1.
Exhibit NLC-3 Potomac Edison's Statement of Financial Condition
is incorporated herein from Exhibit No 2.
Exhibit NLC-4 Potomac Edison's 1997 Debt Financing Effect on
Capital Structure, June 30, 1997, is incorporated
herein from an exhibit to Exhibit D-4 (Potomac Edison's
Application to the Virginia State Corporation
Commission).
<PAGE>
Exhibit D-4
Before The
State Corporation Commission
of Virginia
COMMONWEALTH OF VIRGINIA, ex rel.
STATE CORPORATION COMMISSION
In Re: Application by The Potomac Edison Company,
dba Allegheny Power For Authority To Issue Case No. _________
Not More Than $200,000,000 Of Debt Securities
APPLICATION FOR AUTHORITY TO ISSUE SECURITIES
The Potomac Edison Company, dba Allegheny Power
("Applicant"), a Maryland and Virginia corporation, respectfully
shows:
1. Applicant is a public service company and the primary
supplier of electricity to portions of the Commonwealth of
Virginia and the states of Maryland and West Virginia.
2. Prior to December 31, 2002, if market conditions warrant,
Applicant proposes to issue and sell up to $200 million
aggregate principal amount of first mortgage bonds (the New
Bonds), secured or unsecured medium term notes (the Notes),
unsecured debentures (the Debentures), pollution control or
solid waste disposal revenue notes (the Revenue Notes), or
other debt securities, or any combination thereof, in one or
more series (collectively the Debt Securities). The total
amount of the Debt Securities to be issued will not exceed
$200 million (or its equivalent, based upon the exchange
rate on the applicable trade date in such foreign or
composite currencies as Applicant shall designate at the
time of issuance).
3. It is difficult to determine, under present debt market
conditions, whether it would be more advantageous for
Applicant to sell first mortgage bonds, secured or unsecured
medium term notes, unsecured debentures, pollution control
or solid waste disposal revenue notes, or other debt
securities. Applicant desires to have available sufficient
flexibility to adjust its financing program to developments
in the market for debt
<PAGE>
securities when and as they occur, in order to obtain the best
possible price or prices and interest rate or rates for the Debt Securities.
4. The annual interest rate to be borne by each series of Debt
Securities, the price to be paid to Applicant (which shall not be
less than 98% and shall not exceed 101.75% of principal amount),
and the compensation to be paid to the underwriters, will be
determined at the time of issuance. Applicant will sell the Debt
Securities from time to time through underwriters, dealers or
agents and/or directly to other purchasers in either negotiated
or competitively bid transactions. The applicable Prospectus
Supplement or Pricing Supplement will set forth the purchase
price of the Debt Securities offered and the proceeds to
Applicant from such sale, any underwriting, discounts and other
items constituting underwriters' compensation, any initial public
offering price and any discounts or concessions allowed or
reallowed or paid to dealers and other specific terms of the
particular securities. The Debt Securities may also be offered
and sold by Applicant directly or through agents designated by
Applicant from time to time. Any agent involved in the offer or
sale of securities in respect of which a Prospectus Supplement or
Pricing Supplement is delivered will be named in, and any
commissions payable by Applicant to such agent will be set forth
in, the applicable Prospectus Supplement.
5. The interest rate and the price to be paid to Applicant may
be fixed or floating and will be determined at the time of
issuance. Applicant will not, without further order of the
Commission, proceed to issue and sell Debt Securities with
interest rates greater than the following:
a) for the New Bonds and the Notes with a maturity of ten
years of less, not to exceed 125 basis points above the
yield to maturity on United States Treasury Notes of
comparable maturity at the time of pricing;
2
<PAGE>
b) for the New Bonds and Notes with a maturity of more
than ten years, not in excess of 200 basis points above
the yield to maturity on United States Treasury Bonds
of comparable maturity at the time of pricing;
c) for the Debentures with a maturity of ten years or
less, not to exceed 175 basis points above the yield to
maturity on United States Treasury Notes of comparable
maturity at the time of pricing;
d) for the Debentures with a maturity of more than ten years,
not in excess of 225 basis points above the yield to maturity on
United States Treasury Bonds of comparable maturity at the time
of pricing; and
e) for the Revenue Notes, no greater than the interest rates on
the pollution control or solid waste disposal revenue notes they
replace.
6. The Debt Securities will be issued in one or more series,
with maturity and call provisions, if any, to be determined
at the time of issuance.
7. If the Debt Securities are first mortgage bonds or secured
medium term notes, they will be issued under and secured,
together with the Applicant's presently outstanding First
Mortgage Bonds, and any bonds of other series hereafter
authorized and issued, by the Indenture dated as of October
1, 1944 between Applicant and The Chase Manhattan Bank, as
Trustee, and Thomas J. Foley, as Individual Trustee, as
heretofore supplemented and amended, and under an indenture
supplemental thereto. If the Debt Securities are unsecured
medium term notes or debentures, they will be issued subject
to an indenture between Applicant and The Bank of New York,
as Trustee, dated as of May 31, 1995.
8. Applicant will use the net proceeds of the Debt Securities:
1) to have available funds to compete effectively in a new
restructured electric utility market; 2) for possible tender
offers and early redemption for certain bonds and preferred
stock; 3) for replacement of certain bonds at maturity; 4)
for general corporate purposes, including the retirement of
3
<PAGE>
short-term debt and payment of ongoing construction
expenditures; 5) to raise new funds for general corporate
addition of assets; or 6) for any combination of the above.
9. Applicant may use all or a portion of the net proceeds from
the Debt Securities to prepare for competition in the new
era of electric utility restructuring. Broad-based
competition appears to be inevitable for electric utilities
and the future will be determined by the marketplace. As
Applicant prepares for competition, it needs to be in a
position to act quickly to raise funds. While unsure of the
particular application of these funds since legislation has
not been enacted in our states, developments such as
corporate restructuring, Regional Power Exchange (RPX)
funding and regional transmission pacts are possible uses.
10. In view of current and prospective market conditions for
interest rates, Applicant believes that the optional
redemption of securities may be advantageous by reducing the
cost of its outstanding series of debt and equity.
Applicant may use all or a part of the proceeds
realized from the issuance and sale of the Debt Securities
either to make a tender offer for or to effect the optional
redemption prior to maturity, if market conditions warrant,
of any one or more of its currently outstanding First
Mortgage Bonds, Pollution Control or Solid Waste Disposal
Bonds, Quarterly Income Debt Securities, and Preferred Stock
series, not to exceed $200 million in the aggregate.
However, Applicant represents that it will not redeem or
tender for its outstanding securities unless the estimated
present value savings derived from the difference between
interest payments on a new issue of Debt Securities and
those securities refunded is on an after-tax basis greater
than the estimated present value of all redemption,
tendering and issuing costs, assuming an appropriate
discount rate. Such discount rate will be based on meeting
Applicant's long-term capital structure goals, with
appropriate adjustments for income taxes.
4
<PAGE>
A statement of Applicant's currently outstanding
indebtedness is included as a part of its statement of
financial condition included herein as Exhibit A.
11. All or a portion of the net proceeds from the issuance of
the Debt Securities may be used to provide Applicant with
funds to pay at maturity the following series of bonds:
Principal Current Next Change
Series Maturity Amount Optional In
Outstanding Redemption Redemption
Price Price
5-7/8% 2000 $75,000,000 NC N/A
12. All or a portion of the net proceeds to be realized by the
sale of the Debt Securities may be used for general
corporate purposes, to pay off short-term debt and ongoing
construction expenditures or to raise new funds for
construction expenditures.
13. A statement of the financial condition of Applicant as of
June 30, 1997 is included as Exhibit A.
Applicant requests that all requisite authorization under
the laws of Virginia be given for this proposed financing.
The Potomac Edison Company
/s/ Michael P. Morrell
Michael P. Morrell
Vice President
ATTEST:
/s Eileen M. Beck
Eileen M. Beck
Corporate Secretary
/s/ Philip J. Bray
Philip J. Bray, Esq.
The Allegheny Power Building
10435 Downsville Pike
Hagerstown, Maryland 21740-1766
(301) 790-6283
Counsel for Applicant
October 6, 1997
5
<PAGE>
EXHIBIT A,
page 1 of 2
THE POTOMAC EDISON COMPANY
STATEMENT OF FINANCIAL CONDITION
June 30, 1997
(a) Amount and classes of stock authorized:
(1) 23,000,000 shares Common Stock - no par value
(2) 5,378,611 shares Cumulative Preferred Stock - par value
$100.
(b) Amount and classes of stock issued and outstanding as of
June 30, 1997:
(1) 22,385,000 shares Common Stock
163,784 shares Cumulative Preferred Stock, as follows:
3.60% Series - 63,784 shares
$5.88 Series C - 100,000 shares.
(c) Terms of preference of all preferred stock:
All shares of equal rank.
(d) Brief description of each mortgage upon any property of the
corporation, giving date of execution, name of trustee,
amount of indebtedness authorized to be secured thereby,
amount of indebtedness actually secured and brief
description of the mortgaged property or collateral:
See Indenture dated October 1, 1944, as supplemented,
between The Potomac Edison Company and Chemical Bank, as
Trustee, and Thomas J. Foley, as Individual Trustee as
heretofore filed with this Commission from time to time
in Case No. 8265 and cases referred to therein.
(e) Number and amount of bonds authorized and issued under each
mortgage; describing each class separately, giving date of
issue, par value, rate of interest, date of maturity and how
secured:
Potomac has bonds issued and outstanding under the above-
mentioned Indenture consisting of series, all of which are
First Mortgage Bonds, as follows:
Amount
Issued Par Value Series Outstanding
1991 $1,000 8-7/8% Due 2021 $ 50,000,000
1991 1,000 8% Due 2006 50,000,000
1992 1,000 8% Due 2022 55,000,000
1993 1,000 7-3/4% Due 2023 45,000,000
1993 1,000 5-7/8% Due 2000 75,000,000
1994 1,000 8% Due 2024 75,000,000
1995 1,000 7-3/4% Due 2025 65,000,000
1995 1,000 7-5/8% Due 2025 80,000,000
$495,000,000
<PAGE>
EXHIBIT A,
page 2 of 2
(f) Other indebtedness of all kinds, giving same by classes and
describing security, if any:
(1) $4,000,000 long-term unsecured pollution control notes
(2) $91,700,000 long-term secured pollution control notes
(3) $45,456,500 quarterly income debt securities.
(g) Amount of interest paid during previous fiscal year upon
each species of indebtedness and rate thereof and, if
different rates were paid, amount paid at each rate:
(1) $38,397,500 interest with respect to bonds
(2) $324,450 on long-term unsecured pollution control notes
(3)$5,798,188 on long-term secured pollution control
notes and solid waste disposal notes
(4) $3,636,520 interest on quarterly income debt securities
(5) See attached Schedule A for interest on short-term debt.
(h) Amount of dividends paid upon each class of stock during
previous fiscal year and rate thereof:
1996
Class of Stock Amount
Cumulative Preferred:
3.60% Series $ 229,623
$5.88 Series C 588,000
Common Stock 66,483,450
(i) A statement of income for the twelve months ended June 30,
1997 and balance sheet as of June 30, 1997 are attached as
Schedules B and C, respectively.
<PAGE>
Schedule A
REPORT:RAOI ALLEGHENY POWER SYSTEM, INC. DATE: 09/29/97
AVERAGE PRINCIPAL AND RATE ANALYSIS PAGE: 1
01/01/96 - 01/01/97
PORTFOLIOS: pe
SECURITIES: cp
<TABLE>
<CAPTION>
AVERAGE # DAYS AVG ANNUAL INTEREST AVERAGE
TYPE DATE AMOUNT PER DAY OUTSTANDING PRINCIPAL FOR PERIOD INTEREST RATE
The Potomac Edison Company
<S> <C> <C> <C> <C> <C> <C> <C>
CP 12/29/95 $21,650,000.00 $60,138.89 1 $ 60,138.89 $3,668.47 6.1000
CP 01/02/96 $23,200,000.00 $64,444.44 1 $ 64,444.44 $3,750.67 5.8200
CP 01/03/96 $20,850,000.00 $57,916.67 1 $ 57,916.67 $3,561.88 6.1500
CP 01/04/96 $20,950,000.00 $58,194.44 1 $ 58,194.44 $3,404.38 5.8500
CP 01/09/96 $13,650,000.00 $37,916.67 1 $ 37,916.67 $2,161.25 5.7000
CP 01/09/96 $ 5,000,000.00 $13,888.89 7 $ 97,222.22 $5,493.06 5.6500
CP 01/10/96 $13,650,000.00 $37,916.67 1 $ 37,916.67 $2,104.38 5.5500
CP 01/11/96 $11,800,000.00 $32,777.78 1 $ 32,777.78 $1,819.17 5.5500
CP 01/16/96 $ 7,000,000.00 $19,444.44 7 $136,111.11 $7,622.22 5.6000
CP 01/18/96 $14,000,000.00 $38,888.89 1 $ 38,888.89 $2,187.50 5.6250
CP 01/19/96 $11,900,000.00 $33,055.56 3 $ 99,166.67 $5,503.75 5.5500
CP 01/23/96 $17,850,000.00 $49,583.33 1 $ 49,583.33 $2,761.79 5.5700
CP 01/24/96 $ 6,200,000.00 $17,222.22 8 $137,777.78 $7,619.11 5.5300
CP 01/26/96 $ 7,250,000.00 $20,138.89 3 $ 60,416.67 $3,413.54 5.6500
CP 02/01/96 $14,550,000.00 $40,416.67 1 $ 40,416.67 $2,182.50 5.4000
CP 02/02/96 $ 4,050,000.00 $11,250.00 3 $ 33,750.00 $1,797.19 5.3250
CP 02/06/96 $10,650,000.00 $29,583.33 1 $ 29,583.33 $1,576.79 5.3300
CP 02/12/96 $ 900,000.00 $ 2,500.00 1 $ 2,500.00 $ 135.00 5.4000
CP 02/12/96 $ 450,000.00 $ 1,250.00 1 $ 1,250.00 $ 67.50 5.4000
CP 02/15/96 $ 3,100,000.00 $ 8,611.11 1 $ 8,611.11 $ 473.61 5.5000
CP 02/16/96 $ 2,200,000.00 $ 6,111.11 4 $ 24,444.44 $1,276.00 5.2200
CP 05/06/96 $ 450,000.00 $ 1,250.00 1 $ 1,250.00 $ 67.25 5.3800
CP 12/17/96 $ 1,500,000.00 $ 4,166.67 1 $ 4,166.67 $ 277.92 5.4701
CP 12/31/96 $ 7,500,000.00 $20,833.33 2 $ 41,666.67 $2,916.67 7.0000
TOTAL $1,156,111.12 $ 65,791.60 5.6908
=============== ============ =======
GRAND TOTAL $1,156,111.12 $ 65,791.60 5.6908
=============== ============ =======
</TABLE>
<PAGE>
Schedule A
REPORT:RAOI ALLEGHENY POWER SYSTEM, INC. DATE: 09/29/97
AVERAGE PRINCIPAL AND RATE ANALYSIS PAGE: 3
01/01/96 - 01/01/97
PORTFOLIOS: pe
SECURITIES: bl
<TABLE>
<CAPTION>
AVERAGE # DAYS AVG ANNUAL INTEREST AVERAGE
TYPE DATE AMOUNT PER DAY OUTSTANDING PRINCIPAL FOR PERIOD INTEREST RATE
The Potomac Edison Company
<S> <C> <C> <C> <C> <C> <C> <C>
BL 01/05/96 $13,500,000.00 $37,500.00 3 $112,500.00 $6,356.25 5.6500
BL 01/05/96 $ 6,500,000.00 $18,055.56 3 $ 54,166.67 $3,033.33 5.6000
BL 01/08/96 $ 6,500,000.00 $18,055.56 1 $ 18,055.56 $1,056.25 5.8500
BL 01/08/96 $13,500,000.00 $37,500.00 1 $ 37,500.00 $2,175.00 5.8000
BL 01/12/96 $ 9,100,000.00 $25,277.78 4 $101,111.11 $5,662.22 5.6000
BL 01/16/96 $19,700,000.00 $54,722.22 1 $ 54,722.22 $1,146.53 5.7500
BL 01/17/96 $14,500,000.00 $40,277.78 1 $ 40,277.78 $2,456.94 6.1000
BL 01/22/96 $12,300,000.00 $34,166.67 1 $ 34,166.67 $1,906.50 5.5800
BL 01/24/96 $10,000,000.00 $27,777.78 1 $ 27,777.78 $1,536.11 5.5300
BL 01/25/96 $ 8,250,000.00 $22,916.67 1 $ 22,916.67 $1,283.33 5.6000
BL 01/29/96 $ 5,000,000.00 $13,888.89 1 $ 13,888.89 $ 791.67 5.7000
BL 01/29/96 $ 7,650,000.00 $21,250.00 1 $ 21,250.00 $1,215.50 5.7200
BL 01/30/96 $10,400,000.00 $28,888.89 1 $ 28,888.89 $1,652.44 5.7200
BL 01/31/96 $ 3,750,000.00 $10,416.67 1 $ 10,416.67 $ 627.08 6.0200
BL 02/02/96 $ 9,400,000.00 $26,111.11 3 $ 78,333.33 $4,190.83 5,3500
BL 02/05/96 $13,850,000.00 $38,472.22 1 $ 38,472.22 $2,058.26 5.3500
BL 02/07/96 $ 7,500,000.00 $20,833.33 1 $ 20,833.33 $1,104.17 5.3000
BL 02/08/96 $ 6,450,000.00 $17,916.67 1 $ 17,916.67 $ 946.00 5.2800
BL 02/09/96 $ 3,500,000.00 $ 9,722.22 3 $ 29,166.67 $1,545.83 5.3000
BL 02/20/96 $ 2,100,000.00 $ 5,833.33 1 $ 5,833.33 $ 306.25 5.2500
BL 05/01/96 $ 4,050,000.00 $11,250.00 1 $ 11,250.00 $ 608.63 5.4100
BL 05/02/96 $ 2,000,000.00 $ 5,555.56 1 $ 5,555.56 $ 303.89 5.4700
BL 05/03/96 $ 1,450,000.00 $ 4,027.78 3 $ 12,083.33 $ 640.42 5.3000
BL 12/16/96 $ 3,250,000.00 $ 9,027.78 1 $ 9,027.78 $ 516.39 5.7200
TOTAL $ 806,111.13 $45,119.82 5.5972
============= ========== ======
GRAND TOTAL $ 806,111.13 $45,119.82 5.5972
=============== ============ =======
</TABLE>
<PAGE>
Schedule B
The Potomac Edison Company
Statement of Income
For Period Ended June 30, 1997 ($000)
Description 12 Months
Electric Operating Revenues:
Residential 305,653
Commercial 145,636
Industrial 197,554
Wholesale and other, excluding affiliates 30,586
Bulk power transactions, net 22,028
Affiliated companies 5,479
Total Operating Revenues 706,936
Operating Expenses:
Power Cost:
Fuel 135,421
Purchased power & exchanges 139,584
Deferred power costs, net (2,634)
Other 56,841
Transmission & distribution 36,929
Customers accounting & services 18,912
Administrative & general 50,295
Total Operation & Maintenance 435,348
Depreciation 72,594
Taxes other than income 47,727
Federal & state income taxes 35,120
Total Operating Expenses 590,789
Operating Income 116,147
Other Income and Deductions:
AOFDC 1,622
Other income, net 11,865
Total Other Income & Deductions 13,487
Income Bef Interest Charges 129,634
Interest Charges:
Interest on first mortgage bonds 37,872
Interest on other long-term obligations 9,772
Other Interest 2,242
ABFDC (1,292)
Total Interest Charges 48,594
Net Income 81,040
<PAGE>
Schedule C
The Potomac Edison Company
Balance Sheet ($000's)
June 30,
1997
ASSETS:
Property, Plant, and Equipment:
At original cost, including $49,771,000
and $60,082,000 under construction $ 2,150,580
Accumulated depreciation (828,079)
1,322,501
Investments:
Allegheny Generating Company - common stock at equity 55,384
Other 588
55,972
Current Assets:
Cash 137
Accounts receivable:
Electric service, net of $1,114,000 and $1,580,000
uncollectible allowance 84,989
Affiliated and other 7,081
Notes receivable from affiliates 34,650
Materials and supplies - at average cost:
Operating and construction 23,719
Fuel 20,336
Prepaid taxes 14,465
Other 7,224
192,601
Deferred Charges:
Regulatory assets 88,606
Unamortized loss on reacquired debt 17,552
Other 10,031
116,189
Total Assets $ 1,687,263
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common stock $ 447,700
Other paid-in capital 2,690
Retained earnings 263,119
713,509
Preferred stock 16,378
Long-term debt and QUIDS 627,821
1,357,708
Current Liabilities:
Short-term debt -
Long-term debt due within one year 800
Accounts payable 22,008
Accounts payable to affiliates 15,914
Taxes accrued:
Federal and state income -
Other 16,641
Interest accrued 9,433
Customer deposits 5,058
Restructuring liability 7,959
Other 8,630
86,443
Deferred Credits and Other Liabilities:
Unamortized investment credit 22,546
Deferred income taxes 180,886
Regulatory liabilities 13,190
Other 26,490
243,112
Total Capitalization and Liabilities $ 1,687,263
<PAGE>
THE POTOMAC EDISON COMPANY
dba ALLEGHENY POWER
Application for Authority to Issue
Up to $200 Million of Debt Securities
Financing Summary
Item 1: Description of Issue and Proposed Uses:
A) Type of Security - Up to $200 million of First Mortgage
Bonds (the New Bonds), secured or unsecured medium term
notes (the Notes), or unsecured indebtedness (the
Debentures), pollution control or solid waste disposal
revenue notes (the Revenue Notes), or other debt securities,
or any combination thereof, in one or more series
(collectively the Debt Securities).
B) Type of Offering - There may be a public offering or private
placement of the securities depending on market conditions
and investor interest at the time of issuance.
C) Proposed amount - up to $200 million.
D) Proposed date(s) of issue - prior to December 31, 2002.
E) Specific use of proceeds with estimated amounts -The
securities will be sold to raise funds to be used for the
following:
1. to permit Applicant to compete effectively in a new
restructured utility market;
2. for possible early redemption or tender offer for
certain bonds or preferred stock;
3. for replacement of certain bonds at maturity;
4. for general corporate purposes, including the
retirement of any short-term debt and payment of on-
going construction expenditures;
5. to raise new funds for general corporate addition of
assets; and
6. for any combination of the above.
<PAGE>
Item 2: Terms of Issue
Debt and/or Preferred Stock Financings
A) Estimated interest or dividend rates may be either fixed or
floating and
1. For the New Bonds and Notes with a maturity of ten
years or less, not to exceed 125 basis points above the
yield to maturity on United States Treasury Notes of
comparable maturity at the time of pricing;
2. For the New Bonds and Notes with a maturity of more
than ten years, not to exceed 200 basis points above
the yield to maturity of United States Treasury Notes
of comparable maturity at the time of pricing;
3. For the Debentures with a maturity of ten years or
less, not to exceed 175 basis points above the yield to
maturity of United States Treasury Bonds of comparable
maturity at the time of pricing;
4. For the Debentures with a maturity of more than ten years,
not to exceed of 225 basis points above the yield to maturity of
United States Treasury Bonds of comparable maturity at the time
of pricing; and .
5. For the Revenue Notes, no greater than the interest rates on
the pollution control or solid waste disposal revenue notes they
replace.
B) Terms of any rate adjustment - Any rate adjustments will
depend upon the type of security issued and market
conditions at the time of issuance.
C) Timing of Payments, e.g. Monthly, Quarterly, Annually - The
timing of interest payments will depend upon the type of
security issued and market conditions at the time of
issuance.
D) Proposed Maturity - The length of maturity will depend upon
the type of security issued and market conditions at the time of
issuance.
E) Current Security Rating of Each Rating Agency - Applicant's
debt is rated by the various rating agencies as follows:
2
<PAGE>
First Mortgage Bonds
Moody's Standard and Poor's Fitch
A1 A+ AA-
Unsecured Debt
Moody's Standard & Poor's Fitch
A2 A A+
F) Underwriter(s) - Underwriters, if any, will be determined at
the time of issuance.
G) Estimate of all costs related to the issuance - The costs
related to the issuance of the Debt Securities are estimated as
follows:
Independent Accountants $ 48,000
Legal Fees $100,000
Printing Expenses $ 90,000
Trustees' Fees and Expenses $
17,500
Blue Sky Fees $ 1,000
SEC Registration Fee $
40,492
Bond Rating Fee $ 15,000
Recordation Fees, Taxes and Miscellaneous
$ 9,000
Total $320,992
H) Number of shares currently authorized and issued - The
number of shares of securities currently authorized and issued is
shown in Applicant's Statement of Financial Condition attached to
the application as Exhibit A.
Number of shares to be issued and par value - The
application in this matter is to issue Debt Securities and
therefore there is no number of shares or par value per
share associated with this financing.
Call provisions - The call provisions, if any,
associated with the Debt Securities will be determined at
the time of issuance.
Sinking fund provisions - Sinking fund of provisions,
if any, associated with the Debt Securities will be
determined at the time of issuance.
3
<PAGE>
Conversion privileges - The conversion privileges, if
any, associated with the Debt Securities will be determined
at the time of issuance.
Assets pledged - First Mortgage Bonds will be issued
subject to the lien of Applicant's Indenture dated as
October 1, 1944 between Applicant and The Chase Manhattan
Bank, as Trustee and Thomas J. Foley, as Individual Trustee.
The Notes will be issued subject to an Indenture between
Applicant and The Bank of New York, as Trustee, dated as of
May 15, 1995.
Restrictive covenants - Restrictive covenants, if any,
will be determined at the time of issuance.
I) Parent/subsidiary intercompany financing arrangement - This
is not a parent/subsidiary inter-company financing
arrangement.
Item 3: Brief Discussion of Reasonableness of Issue/Financing
Strategy
A) How does the proposed issue fit in with the company's
financing plan - The proposed issuance of Debt Securities
was described in Applicant's amendment to its Annual
Financing Plan filed with the Commission on September 12,
1997. The effect of the issuance on Applicant's capital
structure is shown on attached Exhibit No. 1.
B) Expected interest rates - Applicant expects that the
interest rates to be paid on the Debt Securities will approximate
the yield to maturity on United States Treasury Notes of
comparable maturity plus a spread at the time of pricing.
Applicant has placed limits on the interest rates to be paid on
the Debt Securities as described in its application.
C) Equity comparisons - Not applicable.
D) Leasing considerations - Not applicable.
E) Refunding possibilities - A purpose of the proposed
financing may be to refund current long term obligations.
Possible obligations to be refunded include all preferred stock,
bonds and debt securities described below:
4
<PAGE>
FIRST MORTGAGE BONDS:
Series Issued Due Amt. Outstanding Call
5-7/8% 1993 2000 $75,000,000 N/C
8% 1991 2000 $50,000,000 103.97
8-7/8% 1991 2021 $50,000,000 N/C
8% 1992 2022 $55,000,000 N/C
7-3/4% 1993 2023 $45,000,000 N/C
8% 1994 2024 $75,000,000 N/C
7-5/8% 1995 2025 $80,000,000 N/C
7-3/4% 1995 2025 $65,000,000 N/C
TAX EXEMPT BONDS:
Series Due Amt. Outstanding Call
Greene Co. PA 6.30% 2002 $ 4,000,000 100
Pleasants Co. WV 6.30%, Series A 2007 $30,000,000 100
Pleasants Co. WV 6.15%, Series C 2015 $21,000,000 N/C
Harrison Co. WV 6-7/8%, Series A 2022 $ 6,550,000 N/C
Harrison Co. WV 6-1/4%, Series B 2023 $13,990,000 N/C
Harrison Co. WV 6-3/4% Series C 2024 $11,560,000 N/C
Monongalia Co. WV 5.95%,Series B 2013 $ 8,600,000 N/C
CUMULATIVE PREFERRED STOCK:
Series Issued Amt. Outstanding Shares Outstanding Call
3.60% 1946 $ 6,378,400 63,784 $103.75
$5.88, Series C 1967 $10,000,000 100,000 $102.85
QUARTERLY INCOME DEBT SECURITIES (QUIDS):
Series Due Amt. Outstanding Call
8% 2025 $45,456,500 N/C
Applicant will not redeem or tender for any outstanding
securities unless the estimated present value savings
derived from the difference between the interest payments on
the new Debt Securities and those securities refunded is on
an after-tax basis greater than the estimated present value
of all redemption, tendering and issuing costs assuming an
appropriate discount rate. Such discount rate will be based
on meeting Applicant's long term capital structure goals
with appropriate adjustments for income taxes.
5
<PAGE>
To the extent the net proceeds of the new securities
are used to refund obligations, Applicant will provide to
Staff a cost/benefit analysis indicting a break even refund
rate fifteen days prior to the time such securities are
refunded.
F) Amendments - Not applicable.
Item 4: Impact on Company
A) Change in capital structure due to issue - The change in
Applicant's capital structure due to issuance of the Debt
Securities is shown on attached Exhibit No. 1.
B) Change in interest coverage due to issue - The proposed
financing will not result in a negative change to the Applicant's
interest covering ratio of 0.25 times or more. For this reason,
this section does not apply.
6
<PAGE>
EXHIBIT
No. 1
THE POTOMAC EDISON COMPANY
1997 DEBT FINANCING
EFFECT ON CAPITAL STRUCTURE
June 30, 1997
Actual Pro Forma
Amount(000's) % Amount(000's) %
Common Stock:
Common Stock $ 447,700 $ 447,700
Other paid-in Capital 2,690 2,690
Retained earnings 263,119 263,119
Total 713,509 52.6 713,509 52.6
Preferred stock (5,378,611 shares
Authorized, 163,784
Outstanding):
Cumulative preferred stock 16,378 16,378
Total 16,378 1.2 16,378 1.1
First Mortgage Bonds:
Outstanding, including debt
Premium and discount, net 489,330 489,330
Total 489,330 36.0 489,330 31.4
Quarterly Income Debt Securities
(QUIDS) 44,120 3.2 44,120 2.8
Debt Securities 200,000<1>12.8
Other Long-term obligations 94,371 7.0 94,371 6.1
Total Long-term Debt and QUIDS 627,821 46.2 827,821 53.1
Total Capitalization $1,357,708 100.0 $1,557,708 100.0
Short-term Debt $ 0 $ 0
<FN1> The sale of up to $200 million of debt securities
<PAGE>
EXHIBIT D-5
Public Service Commission WEST VIRGINIA
Richard E. Hitt, General Counsel STATE SEAL
201 Brooks Street, P.O. Box 812 Phone: (304) 340-0317
Charleston, West Virginia 25323 FAX: (304) 340-0372
October 28, 1997
Gary A. Jack, Esq.
P. O. Box 1392
Fairmont, WV 26555-1392
RE: Monongahela Power Company and
The Potomac Edison Company
Pollution Control Bond
Refinancing
Dear Mr. Jack:
I have received and reviewed your letter dated October
2, 1997 concerning whether or not action is required by the
Public Service Commission prior to the Companies engaging in
bond refinancing.
As I understand the situation if market conditions
warrant, Monongahela Power Company and The Potomac Edison
Company will be refinancing certain pollution control or
waste disposal bonds in order to obtain more favorable
interest rates. The authority for the initial bond
issuances was granted by Commission order dated January 26,
1997, in Case No. 8857 and October 27, 1997 in Case No.
9109.
Since the refinancing will only occur if the Companies
can obtain more favorable interest rates, I do not believe
any additional Commission approvals are necessary to
undertake such refinancing.
Sincerely,
/s/ Richard E. Hitt
Richard E. Hitt
General Counsel
REH/cbd
rickmisc/jack.wpd
<PAGE>
EXHIBIT D-6
STATE OF MARYLAND
PUBLIC SERVICE COMMISSION
ORDER NO. 73776
IN THE MATTER OF THE APPLICATION OF * BEFORE THE
THE POTOMAC EDISON COMPANY DBA * PUBLIC SERVICE COMMISSION
ALLEGHENY POWER FOR AUTHORITY TO * OF MARYLAND
ISSUE UP TO $200 MILLION OF DEBT
SECURITIES
* CASE NO. 8775
On October 7, 1997, The Potomac Edison Company dba
Allegheny Power ("PE") filed an application with the Commission
for authority to issue up to $200 million of additional debt
securities. The debt will be in the form of first mortgage
bonds, secured or unsecured medium term notes, unsecured
debentures, pollution control or solid waste disposal revenue
notes, or other debt securities in any combination, in one or
more series (collectively, "debt securities"). The interest rate
and the price to be paid to PE may be fixed or floating and will
be determined at the time of issuance. PE will not, without
further order of the Commission, proceed to issue and sell the
debt securities at interest rates greater than those identified
in its application. According to the Company, the issuance of
these debt securities is necessary for the reimbursement of
moneys expended by PE within five years prior to the filing of
this applications for (I) the acquisition of property, (ii) the
construction, completion, extension and improvements of its
facilities, and (iii) the discharge or lawful refunding of its
obligations. Upon the sale of the debt, the proceeds will be
used for general corporate purposes relating to PE's utility
business.
By memorandum dated October 27, 1997, the Commission's
Staff filed its comments. While an immediate $200 million
issuance would increase PE's debt ratio to 53.1% from 46.2%.
Staff suggested that the Company will be capable of repaying the
principal and interest associated with the debt securities[1]. In
this regard, the Company has substantial net
<PAGE>
STATE OF MARYLAND
PUBLIC SERVICE COMMISSION
income and assets and its times interest earned ratio was about
1.7 as of June 30, 1997. Finally, staff noted that the Company's
proposal would provide it with the flexibility to act quickly to
capture favorable changes in market conditions. According to Staff,
the proposed issuance is consistent with the public convenience
and necessity and should, therefore, be authorized.
Section 24(c) of The Public Service Commission Law[2]
requires a public service company to obtain authorization from the
Commission before issuing stocks, bonds and other
securities. Section 65(a) of The Public Service Commission Law
also provides:
The Commission shall authorize the
issuance by any public service company of stocks,
bonds, securities, notes, or other evidences of
indebtedness. if, and only if, it finds that such
issuance is reasonably required for (i) the
acquisition by the issuing company of property, or
(ii) the construction, completion, extension or
improvement of its facilities, or (iii) the
discharge or lawful refunding of its obligations,
or (iv) the maintenance or improvement of service,
or (v) the reimbursement of moneys ...expended for
any of the purposes enumerated in items (i)
through
(iii) of this subsection ....
After considering this matter at the Administrative
Meeting of November 5, 1997, the Commission grants The Potomac
Edison Company's application to issue debt securities in an
aggregate amount not to exceed $200 million. The record
indicates that the proceeds will be used to support the Company's
utility operations; and that a continuous financing arrangement
will minimize delays and provide flexibility during periods of
substantial fluctuations in financial markets. Accordingly, the
Commission finds that the proposed issuance is consistent with
the public convenience and necessity and is reasonably required
for one or more of the purposes enumerated in 65(a) of The Public
Service Commission Law.
IT IS, THEREFORE, this 5th day of November in the year
Nineteen Hundred and Ninety-seven, by the Public Service
Commission of Maryland,
2
<PAGE>
ORDERED: (1) That The Potomac Edison Company dba
Allegheny Power is authorized to issue debt securities in an
aggregate amount of not more than $200 million in accordance
with its application.
(2) That The Potomac Edison Company dba
Allegheny Power shall use the proceeds from this issuance for
the purposes stated in the application.
(3) That The Potomac Edison Company dba
Allegheny Power shall file reports as necessary to comply
with COMAR 20.07.04.02C.
By Direction of the Commission,
/s/ Daniel P. Gahagan
Daniel P. Gahagan
Executive Secretary
3
<PAGE>
Exhibit D-8
PENNSYLVANIA
PUBLIC UTILITY COMMISSION
HARRISBURG, PA 17105-3265
Public Meeting held October 23, 1997
Commissioners Present:
John M. Quain, Chairman
Robert K. Bloom, vice Chairman
John Hanger
David W. Rolka
Nora Mead Brownell
S-00970640
Securities Certificate of West Penn Power Company
for the issuance of debt securities in a principal amount
not to exceed $200 million.
OPINION AND ORDER
BY THE COMMISSION:
On September 24, 1997, West Penn Power Company (West
Penn) filed for registration pursuant to Chapter 19 of the
Public Utility Code, 66 Pa. C.S. 1901, et seq., a
securities certificate for the issuance of debt securities
in a principal amount not to exceed $200 million.
West Penn is a subsidiary of Allegheny Energy, Inc.,
formerly known as Allegheny Power System, Inc.
West Penn proposes to issue and sell prior to January
1, 2003 up to $200 million aggregate principal amount of
secured or unsecured medium term notes, debentures, first
mortgage bonds, pollution control or solid waste disposal
revenue notes, or other debt securities in one or more
series, but not to exceed a total of $200 million. The
annual interest rate to be borne by each series of debt
securities, the price to be paid to the Company and the
compensation to be paid to underwriters will be determined
at the time of issuance. The interest rate for each series
of debt securities may be fixed or
<PAGE>
floating. West Penn desires to have available sufficient
flexibility to adjust its financing program to developments
in the market for debt securities when and as they occur,
in order to obtain the best possible price or prices for the
debt securities.
The debt securities will be issued in one or more
series, each such series to have a term or maturity not to
exceed 30 years.
If the debt securities are pollution control notes,
they will be for refunding purposes only. They will be for
the same dollar amount and will replace the currently
outstanding notes for the series of bonds to which they
correspond. The notes will support the issuance of a series
of pollution control or solid waste tax-exempt bonds by the
County or Commission of the particular county.
West Penn desires to consummate some or all of the
proposed transactions outlined above over the next five
years in order to reduce its cost of long-term financing and
thereby to maintain its position as a low cost producer of
electric energy in order to meet the challenges presented
over the next five years in a competitive business
environment.
Proceeds from the sale of debt securities will be used
(1) to compete effectively in the new utility market, (2)
for possible early redemption of certain notes and bonds,
(3) for replacement of certain bonds at maturity, (4) for
tender offers for notes and bonds, (5) for redemption of or
tender for series of preferred stock, (6) for general
corporate purposes, including the retirement of any short-
term debt and ongoing construction expenditures, or (7) for
any combination of the above.
The Commission has examined West Penn Power Company's
instant Securities Certificate and has determined that the
proposed financing appears to be necessary or proper for the
present or probably future capital needs of the utility, and
that the Securities Certificate should be registered;
THEREFORE,
<PAGE>
IT IS ORDERED:
1. That the Securities Certificate of West Penn Power
Company for the issuance of up to $200 million of debt
securities is hereby registered.
2. That West Penn Power Company filed with this Commission
within 60 days of the completion of the issuance described
in Ordering Paragraph No. 1, above, a statement setting
forth the principal amount, terms, and conditions of each
series issued.
BY THE COMMISSION,
/s/ James J. McNulty
Acting Secretary
(SEAL)
ORDER ADOPTED: October 23, 1997
ORDER ENTERD: October 23, 1997
<PAGE>
Exhibit D-9
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
AT RICHMOND, NOVEMBER 7,
1997
APPLICATION OF
THE POTOMAC EDISON COMPANY CASE NO. PUF970031
d/b/a ALLEGHENY POWER
For authority to issue debt securities
ORDER GRANTING AUTHORITY
On October 7, 1997, The Potomac Edison Company d/b/a
Allegheny Power ("the Company" or "Applicant") filed an
application with the Commission under Chapter 3 of Title 56 of
the authority to issue up to $200,000,000 in aggregate
principal of debt securities ("the Debt") prior to December
31, 2002. Applicant has paid the requisite fee of $250.
The proceeds from the sale of the Debt will be used to
have available funds to compete effectively in a restructured
electric utility market, to support the ongoing construction
program, to retire short-term debt, for the replacement of
bonds at maturity, for addition of utility assets, and early
redemption of outstanding bonds or preferred stock. Refunding
will only occur if savings are expected to result.
Applicant seeks flexibility to determine the interest
rate, maturity, and other terms and conditions of the Debt at
the time of issuance and according to market conditions.
Applicant proposes to issue the Debt in one or more forms,
including first mortgage bonds, secured or unsecured medium
term notes, unsecured debentures, pollution control or solid
waste disposal notes. Applicant may issue the Debt directly or
through agents designated by Applicant from time to time.
Applicant's shelf registration of the Debt with the SEC became
effective on August 18, 1997.
The Commission, upon consideration of the application and
having been advised by its Staff, is of the opinion and finds
that approval of
<PAGE>
the application will not be detrimental to
the public interest. However, we find that authority to issue
debt should be limited from the date of this Order through
December 31, 2000.
Accordingly,
IT IS ORDERED THAT:
1) Applicant is hereby granted authority to issue up to
$200,000,000 in aggregate principal in debt securities through
December 31, 2000, all in a manner, under the terms and
conditions and for the purposes as set forth in the
application.
2) Applicant shall submit a preliminary report within
seven(7)days after the issuance of any debt securities
pursuant to this Order including the date of the issue, the
amount issued, the coupon rate, the maturity date, the
comparable U.S. Treasury rate and an explanation for the
timing of the issue and type of debt security issued.
3) Within sixty (60) days after the end of each
calendar quarter in which any debt securities are issued
pursuant to this Order, Applicant shall file a more detailed
report with respect to all debt securities sold during said
calendar quarter, which shall provide the date, type, and
amount of the issue(s), coupon rate, net proceeds to
Applicant, the cumulative principal amount issued under the
authority granted herein, the amount remaining to be issued, a
general statement of the purposes for which the Debt was
issued, and if the purpose is for the early redemption of an
outstanding issue, a schedule showing any associated losses on
reacquired debt along with a calculation of the refunding
issue's effective cost rate after inclusion of any related
losses on reacquired debt, and overall cost savings from the
refunding, and a balance sheet reflecting the actions taken.
4) Applicant shall file a final report of action, on or
before March 31, 2001, to include all information required in
Ordering
<PAGE
Paragraph 3 which incorporates then-current actual expenses
and fees paid for the financings with an explanation of any
variances from the estimated expenses contained in the
Financing Summary attached to the Company's application.
5) Approval of this application shall have no
implications for ratemaking purposes.
6) This matter shall be continued, subject to the
continuing review, audit and appropriate directive of the
Commission.
AN ATTESTED COPY hereof shall be sent to the Applicant,
attention Philip J. Bray, Esquire, 10435 Downsville Pike,
Hagerstown, Maryland 21740-1766; and to the Division of
Economics & Finance of the Commission.
William J. Bridge
Clerk of the State Corporation Commission
