<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant X
Filed by a Party other than the Registrant __
Check the appropriate box:
__ Preliminary Proxy Statement __ Confidential, for Use of
the Commission Only (as
permitted by Rule 14a-6(e)(2))
__ Definitive Proxy Statement
X Definitive Additional Materials
__ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Allegheny Power System, Inc.
_______________________________________________________________________________
(Name of Registrant as Specified in Its Charter)
_______________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
_______________________________________________________________________________
Payment of Filing Fee (Check the appropriate box):
X No fee required.
__ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
_______________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_______________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11
(Set forth the amount on which the filing fee is calculated and state
how it was determined):
_______________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
_______________________________________________________________________________
(5) Total fee paid:
_______________________________________________________________________________
__ Fee paid previously with preliminary materials:
_______________________________________________________________________________
__ Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
_______________________________________________________________________________
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
_______________________________________________________________________________
(3) Filing Party:
_______________________________________________________________________________
(4) Date Filed:
_______________________________________________________________________________
<PAGE>
[LETTERHEAD OF ALAN J. NOIA]
July 14, 1997
Dear Allegheny Power Shareholder:
By now you should have received a packet of materials outlining our proposed
merger with DQE, Inc. to form a combined company which, with your approval,
will be named Allegheny Energy. Included in that packet is a proxy card
which I strongly urge you to vote in time to be counted at our special
meeting of shareholders on August 7. Your Board of Directors and I
recommend a vote FOR the merger. Please take the time to vote your shares
and return your proxy card in the postage-paid envelope.
Why should you vote for the merger? Simply put, Allegheny Energy will be
a larger, stronger, more flexible organization poised to compete in a
marketplace with greater opportunities than ever before for electric
utilities. This strategic combination of two innovative companies with a
history of providing value to shareholders and customers should mean even
greater value for you in the future.
After the merger, Allegheny Energy will:
-- be the tenth largest investor-owned electric
utility in the nation in terms of kilowatt-hour
sales;
-- have about 2 million customers in 30,000 square
miles within five states;
-- have a diversified customer base; and
-- have the resources and experience to meet the
challenges of the new electric utility industry.
Your Board of Directors and I also recommend a vote FOR changing the name
of our company from Allegheny Power System, Inc. to Allegheny Energy, Inc.
As our industry evolves and becomes deregulated, it is clear that companies
such as ours must also evolve to meet the needs of consumers. We believe
the name Allegheny Energy more clearly defines the role we intend to play
in serving our customers and in providing you, our shareholders, with
enhanced value.
Enclosed in this packet of materials you'll find my remarks from the Annual
Meeting of Shareholders and a summary sheet providing an overview of the
merger, which assumes that the merger has been completed. I trust the
materials enclosed in this mailing and those included with your proxy will
answer any of your questions concerning the merger. However, if you have
other questions or concerns, please call our representatives at 1-800-322-
2885. We'll be glad to provide you with any additional information you
request on why votes FOR the merger with DQE, Inc. and the name change are
the right choices.
Sincerely,
/s/ Alan J. Noia
<PAGE>
ALLEGHENY ENERGY DQE Symbol
Allegheny Power Symbol
MERGER SUMMARY
On April 7, 1997, Allegheny Power (NYSE: AYP) and DQE (NYSE:
DQE), parent company of Duquesne Light Company, announced an
agreement to merge in a tax-free, stock-for-stock transaction,
creating the 10th largest investor-owned utility based on total
electric sales-with two million customers in five states.
ALLEGHENY POWER & DQE...A NATURAL FIT
Allegheny Energy Profile
- - 10th largest investor-owned utility
(based on electric sales)
- - Sales of 74.4 billion kWh
- - 2 million customers
- - 30,000 square miles of service territory
- - 5 states
- - Complementary customer demand
and mix
- - Diversified earnings base
- - Disciplined investment approach for
market-driven business
- - Progressive management team
with a clear, strategic vision
Allegheny Energy Competitive Outlook
Allegheny Power and DQE are committed to a merger based on
profitability, opportunity, efficient operations and growth:
- To operate as one company under Allegheny Energy brand
- Emphasizing energy supply, marketing/retail products
and services
- Continuing to deliver high quality customer service
- Investing in and developing market-driven businesses
- To use regional strength as a platform for growth
- Will maximize operating efficiencies and synergies
- Will aggressively pursue opportunities generated by
industry move to competition
"This is a good transaction by two well-managed companies. The
new company should be very successful in a deregulated
industry."
- Linda Byus, Nesbitt Burns Securities
[MAP]
This map shows an outline of the states of
Maryland, Ohio, Pennsylvania, Virginia and West
Virginia, within which the service territories
of Allegheny Power and DQE are shown in different
colors.
Merger Benefits
Allegheny Power and DQE believe this combination offers a
compelling strategic rationale for achieving even greater success
in the new, competitive energy marketplace:
- Earnings and cash flow growth expected in the first full
year of merger
- Regional platform and critical mass to better compete
- Estimated savings of $1 billion over 10 years
- Natural fit of operations: winter peak vs. summer peak;
urban vs. suburban service territories; benefits of
contiguous service areas
- Larger customer base to offer additional products and
services
"Compelling strategic rationale...This makes them a player."
- Edward Tirello, NatWest Securities
"This merger represents two strong companies with natural
and obvious synergies."
- Roger McOmber, Lehman Brothers
<PAGE>
COMPELLING STRATEGIC RATIONALE
Allegheny Power and DQE at a Glance
As of March 31, 1997
Allegheny Power DQE
<TABLE>
<CAPTION>
<S> <C> <C>
Revenues $2.3 billion $1.2 billion
Assets $6.6 billion $4.6 billion
Net Income $260 million (1) $182 million
Cash Flow from Operations $545 million $385 million
Earnings Per Share $2.14 (1) $2.35
Annualized Dividends $1.72 $1.36
Share Price (2) $29 3/4 $27 1/8
Shares 122 million 77 million
Market Capitalization (2) $3.6 billion $2.1 billion
Customers 1.4 million .6 million
Service Territory 29,100 sq. miles 800 sq. miles
Sales to Elec. Util. Customers 40,938 GWH 12,399 GWH
Total Generating Capacity 8,346 MW 2,670 MW
Peak Load 7,500 MW 2,463 MW
Employees 4,989 3,425
</TABLE>
(1) Before restructuring charges and asset write-offs of $23.3
million, after tax, or $0.19 per share
(2) Share price and market capitalization on April 4, 1997. The
combined market capitalization is based on the additional
issue
of $86.5 million of Allegheny Power shares, valued at
approximately $2.6 billion, to shareholders of DQE.
Transaction Overview
- - Combined company equity valued at $6.2 billion as of closing
prices, April 4, 1997
- - DQE shareholders to receive 1.12 shares of Allegheny for each
share of DQE common stock they own, which represents a fair
conversion ratio for both DQE and Allegheny
- - The stock-for-stock exchange is tax-free
- - Transaction accounted for as a pooling of interests
- - The merger requires the approval of shareholders and several
regulatory agencies, with a targeted closing of May 1, 1998
[PIE CHART]
Allegheny Energy Combined Generation Mix
This pie chart entitled "Allegheny Energy Combined
Generation Mix as of March 31, 1997" shows the generation mix
after the merger as: Coal 9,196 MW (83.5%); Pumped-Storage 840
MW (7.6%); Nuclear 662 MW (6.0%); Oil 260 MW (2.4%); and Hydro 58
MW (0.5%). It also states that the Total Generating Capability
equals 11,016 MW.
[PIE CHART]
Allegheny Energy Combined Sales Mix
This pie chart entitled "Allegheny Energy Combined Sales Mix as
of March 31, 1997" shows the sales mix after the merger as:
Wholesale and Other 6 percent; Commercial 19 percent; Residential
22 percent; Bulk Power Transactions 24 percent; and Industrial 29
percent. It also states that the total sales are 74.4 billion
kWh.
CONTACTS:
Allegheny Power Symbol
ALLEGHENY POWER:
Allegheny Power
c/o ChaseMellon Shareholder
Services, L.L.C.
P.O. Box 3315
South Hackensack, NJ 07606
(T) 1-800-648-8389
(F) 1-212-947-7629
http://www.alleghenypower.com
Analysts, Investment Managers & Brokers should direct their
inquiries to:
Gregory L. Fries
Manager, Investor Relations
10435 Downsville Pike
Hagerstown, MD 21740-1766
T (301) 665-2713
F (301) 665-2736
DQE Symbol
DQE
DQE
Shareholder Relations
Box 68
Pittsburgh, PA 15230-0068
Toll-free: 1-800-247-0400
In Pittsburgh: 393-6167
(F) 1-412-393-6087
http://www.dqe.com
DQE Shareholder Direct
1-888-247-0401
Analysts, Investment Managers & Brokers should direct their
inquiries to:
M. Beth Straka
Manager, Investor Relations
Box 68
Pittsburgh, PA 15230-0068
T (412) 393-6265
F (412) 393-6571
<PAGE>
<PAGE>
Allegheny Symbol
ALLEGHENY POWER
Report to Shareholders
Annual Meeting - May 8, 1997
The 1997 annual meeting of the Company's shareholders was held on
Thursday, May 8, 1997, at 10:30 a.m. at Chase World Headquarters,
270 Park Avenue, New York, NY. Holders of nearly 80% of the
outstanding shares of common stock were present in person or
represented by proxy. Eleanor Baum, William L. Bennett, Wendell
F. Holland, Phillip E. Lint, Frank A. Metz, Jr., Alan J. Noia,
Steven H. Rice, Gunnar E. Sarsten, and Peter L. Shea were elected
Directors.
The shareholders approved the appointment of Price Waterhouse
LLP as independent accountants for 1997. Two shareholder
proposals, one dealing with Board of Directors' compensation and
one dealing with the number of independent directors, were
defeated.
Also at the annual meeting, Alan J. Noia, President and Chief
Executive Officer of Allegheny Power, assumed the additional
responsibility of Chairman of the Board, succeeding retiring
Chairman Klaus Bergman, who had held that position since January
1994. Mr. Bergman was honored at the meeting by Mr. Noia and
members of the Board.
Mr. Noia also honored Edward H. Malone, a Director of the
Company since 1985, for his contributions to Allegheny Power. Mr.
Malone retired from the Board on May 1.
<PAGE>
Mr. Noia presided at the annual meeting and made the following
remarks while the ballots were being counted.
A group of advisors once came to the White House to tell
President Lincoln about the problems facing the country. The list
was long and the details many. After a while, Lincoln interrupted
them with a story from his youth. Lincoln said he and a young
friend were out one night, when a shower of meteorites fell from
the sky. The young man was frightened, but Lincoln said, "Let's
not mind the meteors; let's keep our eyes on the stars."
At last year's annual meeting, I spoke to you about our plans
to seize opportunities that are resulting from the revolution
taking place in the electric utility industry and also about our
ongoing efforts to create a more competitive, customer-friendly,
and market-driven organization--an organization focused on its
vision to be the energy supplier of choice.
Since late 1994, we've been involved in an intensive
reengineering process that has transformed our Company from top
to bottom. We evaluated each process within
our business and implemented the most efficient methods of
operation. We integrated processes and operations that were
handled separately by the three operating subsidiaries as well as
those that were done centrally. Not only did we reengineer the
Company, we reorganized it. We combined the operations of our
subsidiaries to function as a unified Company--Allegheny Power.
These successful efforts have been extensively reported to our
shareholders at our last two annual meetings and in our 1995 and
1996 Annual Reports.
The many changes taking place in our industry and within our
Company did not deter us from keeping squarely on target and
delivering strong financial results for the year. 1996 results
and achievements are also well described in our Annual Report.
So, I will not dwell on them here.
<PAGE>
The first quarter of 1997 has been disappointing, however,
mostly because of extremely mild weather. February, in my
recollection, was the worst month in terms of sales compared to
budget that we have ever had. During the first three months of
the year, there were 15 percent fewer heating degree days than
during the corresponding period in 1996 and 9 percent fewer than
normal. These results are, of course, reported in the current
quarterly report to shareholders. We have a challenge ahead of us
to improve our financial results for the year, to be sure. But, a
few months of uncooperative weather is not something to
get excited about.
ALLEGHENY ENERGY
What we are excited about is the new Allegheny Power--soon to have
a strong new partner and a new name, Allegheny Energy.
With the success of reengineering and reorganization in our
sights by mid-1996 and with our new marketing organization and
efforts under way, senior management turned its attention to
further improvements and growth. Our merger with DQE, Inc. is the
next bold move to improve and grow and position us to win in a
more competitive industry.
I would like to spend most of the time we have remaining
talking about the natural fit between Allegheny Power and DQE.
The primary reason for the merger, however, goes beyond the
natural fit between the two of us. Simply put, together we can
achieve what we most likely could not achieve separately. In
modern parlance, this is a strategic fit.
Duquesne Light Company, which serves Pittsburgh, is the
principal subsidiary of DQE, Inc. and, as such, accounts for
most, but not all, of DQE's revenue and earnings.
[MAP]
The map entitled "A Natural Fit" shows an outline of the states
of Maryland, Ohio, Pennsylvania, Virginia and West Virginia,
within which the service territories of Allegheny Power and DQE
are shown in different colors.
The map shows our respective electric service territories. The
geographical fit could hardly be better and helps create an ideal
electric fit, which I will further explain shortly.
Let me first review the transaction. This is a $10.6 billion
merger with a combined equity value of $6.2 billion. Under the
transaction, DQE shareholders will receive 1.12 shares of
Allegheny Power stock for each share of DQE stock they own. This
exchange ratio represents a reasonable price and provides a
premium of about 17.6 percent for DQE shareholders based upon 30-
day average prices as of the day before the merger announcement.
This will be a stock-for-stock exchange accounted for as a pooling
of interests. After the merger, the dividend will be set at the then
current Allegheny Power dividend, now $1.72 per share on
an annual basis. No change in dividend policy is expected as a
result of this merger, although dividend policy will have to be
reviewed as it has in the past in light of the new competitive
environment facing us over more and more of our service
territories.
<PAGE>
By merging with DQE, we will be creating a large regional
company with the so-called critical mass necessary to compete in
this region and beyond and grow in the future. Allegheny Energy
will serve a population of more than 4 1/2 million with 2 million
electric accounts and a 30,000-square-mile franchised service
area. Our new Company will have substantial generating capacity
and a strong and extensive delivery system. As I mentioned
earlier, Allegheny Power's subsidiaries have been doing business
under the Allegheny Power name, and we would expect to operate
the overall Allegheny Energy system under the Allegheny Energy
brand where that is appropriate. We believe that this is a strong
brand, which will support our efforts to emphasize marketing and
our retail products and services. DQE's brands will be maintained
where it makes sense to do so. The offering of retail products
and services will expand as a result of the combination. At
Allegheny Power, we are also extremely interested in the market-
driven businesses which have been so successfully started and
nurtured by DQE. We will grow the Company using this strong
platform and pursue opportunities generated by our industry's
move to competition. There are many synergies associated with
this combination, and we will move quickly to achieve the
efficiencies and savings.
[PIE CHART]
The pie chart entitled "Synergies - Ten Year Net Savings: $1
Billion" breaks down the savings as follows: Facilities 2
percent; Financing 5 percent; Electric Dispatch 5 percent;
Purchasing Economies 6 percent; Capacity Deferral 19 percent;
Corporate and Administrative Programs 26 percent; and Labor
37 percent.
<PAGE>
The potential savings related to the merger are substantial--we
estimate $1 billion over 10 years. The result of the savings will
be improved shareholder value through essentially immediate
earnings improvement and through strong cash flow, especially
from DQE. But, this combination is about positioning for the
future; about gearing up, not downsizing; about bulking up for
competition, not hunkering down just to cut costs. We've been
there and done that. Under the Allegheny Energy brand, we will be
large enough to be a competitor in the deregulated generation
market and agile enough to seize opportunities available to us in
both the energy services and electricity businesses and in the
various market-driven businesses in which each of the companies
is already involved. There is shareholder value in these market-
driven businesses, and we will work hard to enhance that
shareholder value.
THE ELECTRICAL FIT
Upon completion of the merger, Allegheny Energy will be, in terms
of kilowatt-hour sales, the nation's tenth largest investor-owned
utility and will serve an impressive portion of the country. By
combining with DQE, we will be able to capitalize on our
complimentary electrical profiles, including Allegheny Power's
heavy industrial compared to DQE's commercial and residential
load; Allegheny Power's suburban and rural compared to DQE's
urban customers; and Allegheny Power's winter peaking as compared
to DQE's summer peaking load.
Also, DQE had generally concluded that its generation business
was not large enough to survive in the competitive generation
market. I believe that was the correct decision for DQE as a
stand-alone company. However, Allegheny Power is known for its
low-cost, coal-fired generating stations, and the combination of
DQE, which is 80 percent coal-fired, and Allegheny Power will
give us a large generating capability for future success. We
believe strongly that we will be able to compete and do well in
the generation markets and intend to continue to emphasize that
part of the business.
<PAGE>
The combined electric sales and revenue of Allegheny Energy
will be well diversified between residential, commercial,
industrial, and bulk power transactions. We believe that this
customer diversity will continue to be a source of strength in
the future competitive markets. Also, given the new regulatory
environment in Pennsylvania, we believe our shareholders will be
able to benefit from increased bulk power transactions in the
future.
[PIE CHART]
The pie chart entitled "Allegheny Energy Combined Sales Mix -
Total Sales: 75.7 Billion kWh as of December 31, 1996" breaks
down the combined sales mix after the merger as: Wholesale and
Other 6 percent; Commercial 18 percent; Residential 22 percent;
Bulk Power Transactions 25 percent; and Industrial 29 percent.
All of these factors add up to a great electrical fit. But there
is more.
<PAGE>
DIVERSIFIED ACTIVITIES
We believe our new partner's notable success in market-driven
businesses will be a significant plus for the combined Company.
DQE has shown it can skillfully compete in a non-utility
environment. In 1996, DQE's market-driven businesses contributed
43 cents a share, or 19 percent, to the DQE's earnings. This
amounts to a 34 percent increase over what these businesses added
in 1995.
[BAR GRAPH]
The bar graph entitled "DQE's Growth of Market-Driven
Subsidiaries - Earnings Per Share" sets out for the years 1992
through 1996, the amount of earnings per share contributed by (i)
the utility earnings and (ii) the market-driven businesses. In
1992 the total earnings per share were $1.78, of which the
market-driven businesses provided $.01. In 1993 the total
earnings per share were $1.81, of which the market-driven
businesses provided $.07. In 1994 the total earnings per share
were $1.98, of which the market-driven businesses provided $.19.
In 1995 the total earnings per share were $2.20, of which the
market-driven businesses provided $.32. In 1996 the total
earnings per share were $2.31, of which the market-driven
businesses provided $.43. The DQE market-driven subsidiaries
provided $.43 per share or 19 percent of DQE's total earnings for
the 12-month period ended December 31, 1996.
In addition, we can gain ground in our own unregulated
initiatives by following DQE's lead. We can transfer DQE's
expertise to our own markets, our customers, and our service area
and beyond--such as into the Washington-Baltimore corridor and the
Philadelphia area.
As competition moves ahead, more opportunities for growing our
earnings through market-driven initiatives will emerge. This is
an area of enormous potential and opportunity for those who do it
well. Our new partner does.
<PAGE>
NUCLEAR POWER
A number of people have questioned our willingness to involve
ourselves in nuclear power. I would be remiss in not addressing
that issue here. Allegheny Energy will have in excess of 11,000
Megawatts (MW) of generation, 662 MW of which will be nuclear.
[PIE CHART]
The pie chart entitled "Allegheny Energy Generation Mix - Total
Generating Capability = 11,016 MW as of December 31, 1996" sets
out the generation mix after the merger as: Coal 9,196 MW;
Pumped-Storage 840 MW; Nuclear 662 MW; Oil 260 MW; and Hydro 58
MW.
Notwithstanding that relatively small amount--about 6
percent--Allegheny Power management performed considerable
analysis and review of the nuclear issue. Included in the review
were two independent nuclear consultants and one legal firm
specializing in nuclear matters. We satisfied ourselves on the
soundness of DQE's nuclear operation and management.
Furthermore, with the passage of the competition legislation in
Pennsylvania last year, one of the major risks associated with
ownership of nuclear power was significantly reduced.
Specifically, the legislation provides for the recovery of
stranded costs, as determined by the Pennsylvania Public Utility
Commission. DQE has done more than any other Pennsylvania utility
to mitigate its exposure
<PAGE>
to nuclear power and is therefore the best-positioned electric utility
in Pennsylvania to take advantage of stranded cost recovery under the
legislation. DQE's actions, pursuant to a rate plan already in place,
substantially mitigate its exposure to nuclear costs.
Steps taken by DQE include acceleration of depreciation and
amortization of nuclear plant, use of the proceeds from the sale
of generation to write down nuclear plant, increased
decommissioning funding, and other financial steps. The end
result is that DQE is expected to have about $1,000 per kilowatt
invested in nuclear plants by the year 2000 and about zero
investment, or book value, by the year 2005. DQE is funding
decommissioning into an external trust fund at about $9 million
per year. Based upon current estimates, this should be adequate
to cover DQE's share of decommissioning costs for its nuclear
interests.
Additionally, the variable costs of nuclear plants are
relatively low, which should help them compete in the upcoming
competitive market. Nuclear power will, therefore, add a measure
of diversity to the overall Allegheny Energy generation fleet.
In summary, Allegheny Power's management determined that
nuclear risks do exist, but they are manageable in the combined
generation portfolio that will emerge from this transaction, and
that such risks have been adequately reflected in the price.
Given the combined companies' nuclear exposure, we believe that
the benefits of and synergies associated with the merger far
outweigh the incremental risk associated with nuclear power.
THE TRANSITION
Before our merger can become final, we need approval from our
shareholders and from DQE's. There are also numerous regulatory
filings to be made, including with the Securities and Exchange
Commission, the Nuclear Regulatory Commission, the Federal Energy
Regulatory Commission, the Department of Justice, the Federal
Trade Commission,
<PAGE>
the Pennsylvania Public Utility Commission, and the Maryland Public
Service Commission.
As a result, some concern has been expressed that this merger
will put our Company on hold for a year to 18 months while we
wait for it to become effective. Nothing could be further from
the truth. We are using this time to build our new organization
and to become an even tougher competitor.
We have already named a transition steering committee with
representatives from both companies. Its mission is to manage the
overall transition to the new organization. We will ensure both
companies are ready to join forces when our merger is approved.
This is an integrated effort on the part of Allegheny Power and
DQE, and we are not wasting any time.
CONCLUSION
Let me now wrap up these comments about the merger by saying we
believe strongly that Allegheny Energy will be positioned to
compete and that this is the right combination. The two companies
will combine DQE's experience in the unregulated markets and
Allegheny Power's strong track record for low-cost, efficient
operations to create an even stronger company. We will work hard
to capture the savings inherent in this merger. We will carefully
review and seize growth opportunities as they present themselves
and will maintain our commitment to the market-driven businesses
already begun by DQE. We are excited. We are confident about our
future. And, we are keeping our eyes on the stars.
<PAGE>
BOARD RETIREMENTS
In closing, I would like to report on two retirements.
The first is that of Edward H. Malone, who joined our Board in
1985.
A graduate of Columbia University, Ed had extensive banking
experience before moving to General Electric. At a young age, Ed
was made a vice president of General Electric and its Chief
Investment Officer for its savings plans and pension fund, which
remain among the
country's largest.
Ed has great insight into financial matters, no matter how
complex. At the same time, you could always count on Ed's advice
to be practical and down to earth. We will miss his presence.
Also retiring is our Chairman and my boss and friend of many
years, Klaus Bergman. Klaus is also a Columbia graduate. He
started with Allegheny in 1971, coming
from one of our neighbors. He was elected Vice President in 1973
and ran our legal department for 9 years before becoming
Executive Vice President. He became President and Chief Executive
Officer in 1985 and retired as Chief Executive one year ago.
I first started working with Klaus in 1974 and remember how
surprised I was to find out he was a lawyer and not an engineer
like me. As in any large company, we faced many challenges over
those years. Under Klaus' leadership, Allegheny Power never shied
away from any of them. And, more often than not, we were right on
target with our approaches and solutions. The record speaks for
itself.
The Company was indeed fortunate that Klaus was on our team. And
speaking personally, I have been lucky to have worked with him
over the years and to have had him as a mentor, more recently as
a confidant, and always as a friend.
<PAGE>
The following information was given in response to questions at
the meeting.
The Nuclear Regulatory Commission (NRC) is the federal agency
that oversees nuclear power and monitors safety issues. All of
the plants which Duquesne Light owns are well within the NRC
guidelines and the industry's own self-policing guidelines.
Before signing a merger agreement with Duquesne Light's parent
organization, DQE, Inc., we took an extensive look at nuclear
issues and how the Company runs its plants. We feel comfortable
with its positive track record.
Over the last several years, our lines maintenance program has
increased and improved, and we have allocated additional funds to
complete maintenance work on our equipment. With regard to our
substation maintenance program, we completed an extensive study
and determined that we could extend the period between
inspections as well as extend the life of the equipment without
affecting safety or reliability.
The Company and the unions representing certain employees at
Allegheny Power have worked hard to improve their relationship
over the last couple of years. Contracts negotiated in 1996 have
all been settled.
