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File No. 70-9121
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
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)
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1. Applicants hereby amend Item No. 1. Description of
Proposed Transaction by deleting it in its entirety and
substituting the following therefor:
The proposed transactions involve the issuance of notes
by Monongahela Power Company ("Monongahela")and The Potomac
Edison Company ("Potomac Edison"), (collectively, the
"Companies"), public utility subsidiaries of Allegheny
Energy, Inc., a registered holding company, to support the
contemporaneous issuance of pollution control revenue bonds
by The Greene County Industrial Authority, Greene County,
Pennsylvania (the "Authority"). The proceeds from the bonds
will be used to effect the redemption of presently
outstanding pollution control revenue bonds, all of which
are Series A Bonds. The bonds were issued by the Authority
in 1977 in the following amounts with the following interest
rates: (i) $5,500,000 principal amount Pollution Control
Revenue Bonds (The Potomac Edison Company Hatfield's Ferry
Project), 1977 Series A, 6.30%; (ii) $3,560,000 principal
amount Pollution Control Revenue Bonds (Monongahela Power
Company Hatfield's Ferry Project), 1977 Series A, 6.30% ;
(iii) $1,000,000 principal amount Pollution Control Revenue
Bonds (Monongahela Power Company Hatfield's Ferry Project),
1977 Series A, 6.40%; and (iv) $3,000,000 principal amount
Pollution Control Revenue Bonds (Monongahela Power Company
Hatfield's Ferry Project), 1977 Series A, 6.40%
(collectively, the "Series A Bonds"). Due to the change in
interest rates since the time that the Series A Bonds were
originally issued, the Authority proposes to refund the
Series A Bonds by issuing one new series of pollution
control revenue bonds for each of the Companies
(collectively, the "Series B Bonds") at a lower interest
rate. The Companies request authority from the Securities
and Exchange Commission ("Commission") to enter into new
long-term promissory notes insofar as the terms and
conditions of the long-term bonds to be issued by the
Authority affect the payments to be made by the Companies
under the
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current long-term promissory notes presently
outstanding. As information, the presently outstanding
Series A notes will be canceled and new notes will be
entered into to reflect the new terms.
A. Background
On February 4, 1977, the Commission authorized
Monongahela, Potomac Edison and West Penn Power Company
("West Penn") to issue notes in connection with the tax
exempt financing by the Authority of certain air and water
pollution control equipment and facilities at the Hatfield's
Ferry Power Station located in Greene County, Pennsylvania
(Hatfield). (HCAR 19875.) Hatfield is jointly owned by
Monongahela, Potomac Edison and West Penn in the following
undivided percentages: Monongahela 27 1/2 %, Potomac Edison
20% and West Penn 52 l/2 %. The tax exempt financing provided
money for the installation of pollution control equipment
and facilities at Hatfield. The pollution control equipment
and facilities at Hatfield (Facilities) included
electrostatic precipitators, fly ash handling facilities, a
cooling tower and cooling water recirculating system, a
water treatment system and associated equipment. The
Facilities have been completed.
B. Requested Authorization
The Authority proposes to issue $10,560,000
aggregate principal amount in two new series of long-term
bonds (each series to be designated as "Series B Bonds",
collectively hereinafter referred to as the "Series B
Bonds"), the proceeds of which will be used to refund the
Authority's Series A Bonds presently outstanding which
correspond to notes issued by Monongahela and Potomac
Edison. The figure represents $2,500,000 less than the
aggregate amount of Series A Bonds originally issued due to
the operation of a mandatory sinking fund for Monongahela
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and Potomac Edison. In February 1996 and February 1997,
Monongahela redeemed $500,000 and $500,000 of the Series A
Bonds, respectively. In February 1996 and February 1997
Potomac Edison redeemed $700,000 and $800,000 of the Series
A Bonds, respectively.
Monongahela and Potomac Edison request authority
through December 31, 2002 to enter into the proposed
transaction and to issue new promissory notes. The Series B
Bonds will be issued under a supplemental trust indenture
with a corporate trustee, approved by the Companies, and
sold at such time, at such interest rate and for such price
as shall be approved by the Companies. However, the
interest rate for each series of Series B Bonds will not
exceed the interest rate of the corresponding series of
Series A Bonds presently outstanding. The timing of the
financing will depend upon a subjective determination by the
Companies of market conditions. The Series B Bonds will
mature no later than the year 2020.
Each Company will deliver concurrently with the
issuance of the Series B Bonds, its non-negotiable Pollution
Control Note (collectively, the "Notes") corresponding to
such series of Bonds in respect of principal amount,
interest rate and redemption provisions (which may include a
special right of the holder to require the redemption or
repurchase of the Bond at stated intervals) and having
installments of principal corresponding to any mandatory
sinking fund payments and stated maturities. The Notes will
be secured by a second lien on the Facilities and certain
other properties, pursuant to a Pollution Control Financing
Agreement dated as of February 1. 1977 between the Authority
and the Companies. There is also a Trust Indenture dated as
of February 1, 1977 between the Authority and Mellon Bank,
N.A. as Trustee creating a mortgage and security interest in
the Facilities and certain other property (subject to the
lien securing each
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Company's first mortgage bonds). Payment
on the Notes will be made to the Trustee under supplemental
indentures to be entered into between the Companies and the
Trustee, described below, and shall be applied by the
Trustee to pay the maturing principal and redemption price
of and interest and other costs on the Series B Bonds as the
same become due. Each Company also proposes to pay any
trustees' fees or other expenses incurred by the Authority.
It is expected that the Authority will engage an
underwriter or underwriters to provide financial advice and
underwrite the sale of the Series B Bonds. Fees,
commissions and expenses of the underwriters and legal
counsel in connection with the proposed transaction will be
filed by amendment. The Companies have been informed that
the Authority has legal authority to issue tax exempt
revenue bonds in accordance with the proposed documents and
the Companies understand that legal opinions to that effect
will be delivered to appropriate parties at, or prior to,
the closing date. The Series B Bonds will be in registered
form and initially will be registered in the name of Cede &
Co., as nominee for The Depository Trust Company, New York,
New York. The Series B Bonds will bear interest semi-
annually at rates to be determined. The Series B Bonds will
be issued pursuant to supplemental indentures, which will
provide for parameters to be determined. The supplemental
indentures will also provide that all of the proceeds from
the sale of the Series B Bonds by the Authority must be
applied to the cost of the Facilities, including the cost of
refunding the Series A Bonds.
The Series B Bonds will be secured by the Notes
and will be supported by various covenants of each Company
contained in the original Pollution Control Financing
Agreement dated as of February 1, 1977, copies of which have
previously been filed in File No. 70-5946.
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Applicants desire to consummate the proposed
transactions and refund the Series A Bonds to provide the
lowest cost of permanent financing for non-revenue-producing
pollution control equipment which the Companies have been
required to install to meet environmental standards. The
Companies have been advised that the annual interest rate on
tax exempt bonds has been approximately 1% to 3% lower than
the interest rate on taxable obligations of comparable
quality, depending upon the type to be sold by the
Authority.
2. Applicants hereby amend Item No. 4 Regulatory Approval
by deleting it in its entirety and substituting the
following therefor:
The proposed transactions will be authorized by
the Public Utilities Commission of Ohio, as to
Monongahela's participation; and by the State
Corporation Commission of Virginia and the Public
Service Commission of Maryland as to Potomac Edison's
participation and are exempt under Rule 52(a). The
Public Service Commission of West Virginia is not
expressly ruling on the issuance of new pollution
control notes. Therefore, the Securities and Exchange
Commission has jurisdiction over the participation by
Monongahela and Potomac Edison insofar as West Virginia
is concerned. No regulatory agency, other than those
named, has jurisdiction over the proposed transactions.
3. Applicants hereby amend Item No. 6 Exhibits and
Financial Statements by deleting all references to Exhibits
D-3 and D-8.
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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
WEST PENN POWER COMPANY
By /s/ Robert R. Winter
Robert R. Winter
Vice President, Legal Services
Dated: November 19, 1997
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