<PAGE>
File No. 70-9147
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
TO
APPLICATION OR DECLARATION
ON FORM U-1
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Allegheny Energy, Inc.
10435 Downsville Pike
Hagerstown, MD 21740
(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. 6, Exhibits and
Financial Statements, of their Application or Declaration by
adding Exhibits D-6 through D-9 to the end thereof and filing
herewith Exhibits D-1, D-2, D-3, D-4 and D-9:
(a) Exhibits
D-1 Joint Application of Allegheny
Power System, Inc. and DQE, Inc.
to the FERC (filed in paper
pursuant to continuing hardship
exemption in Item 202(a) of
Regulation S-T granted on April
1, 1998).
D-2 Testimony of Dr. Howard Pifer before
the FERC (filed on paper as part of
Exhibit D-1 above--specifically,
Statement No. 5, Volume 3: Testimony
and Exhibits).
D-3 Application of West Penn Power
Company before the Pennsylvania
Public Utility Commission dated
August 1, 1997 (filed in paper
pursuant to continuing hardship
exemption in Item 202(a) of
Regulation S-T granted on April
1, 1998).
D-4 Application of Allegheny Power
System, Inc. before the Maryland
Public Service Commission dated
August 1, 1997.
D-6 FERC Order (to be filed by
amendment)
D-7 Pennsylvania Public Utility
Commission Order (to be filed by
amendment)
D-8 Maryland Public Service
Commission Order (to be filed by
amendment)
D-9 Nuclear Regulatory Commission
Order
<PAGE>
SIGNATURE
Pursuant to the requirements of the Public Utility
Holding Company Act of 1935, the undersigned company has
duly caused this statement to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLEGHENY ENERGY, INC.
By: /s/ Carol G. Russ
Counsel
Dated: May 12, 1998
<PAGE>
EXHIBIT D-4
July 31, 1997
VIA OVERNIGHT MAIL
Daniel P. Gahagan, Esq.
Executive Secretary
Public Service Commission of Maryland
William Donald Schaefer Tower
6 St. Paul Street
Baltimore, MD 21202-6806
Re: Application of Allegheny Power System, Inc.
Regarding the Issuance of Additional Shares
of its Common Stock
Dear Mr. Gahagan:
I enclose herewith for filing with the Public Service
Commission of Maryland the original and fourteen copies of
the Petition of Allegheny Power System, Inc. (APS) regarding
the issuance of not more than 90,557,682 additional shares
of its common stock.
I have enclosed one extra copy of the cover letter, the
Petition, and the testimony which I would appreciate your
stamping as Afiled@ and returning to me in the self-
addressed stamped envelope provided.
These materials are set forth in electronic format on
the enclosed disk. Exhibits MPM-1 and MPM-2 are not
available electronically.
Thank you for your cooperation in this matter.
Very truly yours,
/s/ Kathy L. Mitchell
Kathy L. Mitchell
Philip J. Bray
Attorneys for APS, Inc.
cc: Michael J. Travieso, People's Counsel
<PAGE>
BEFORE THE
PUBLIC SERVICE COMMISSION
OF MARYLAND
In the matter of the application of *
Allegheny Power System, Inc. *
regarding the issuance of additional * Case No. ________
shares of its common stock *
PETITION
The Petition of Allegheny Power System, Inc. (APS)
respectfully shows:
1. APS is a Maryland corporation and a registered
public utility holding company subject to the Federal Public
Utility Holding Company Act of 1935 (15 USCS '79 et seq.)
(the "Act"). APS has no employees, owns no public utility
property and serves no customers in Maryland or elsewhere.
As permitted by the Act, APS owns all of the common stock of
three public utility companies, one of which, The Potomac
Edison Company (PE), is a public service company in
Maryland. APS also owns an unregulated subsidiary, AYP
Capital, Inc., which itself has unregulated subsidiaries.
2. APS hereby requests that the Commission approve
the issuance of not more than 90,557,682 additional shares
of its authorized and unissued common stock, par value $1.25
per share (the "Additional Common Stock"). The Additional
Common Stock to be issued will be used by APS to acquire the
outstanding shares of DQE, Inc. (DQE) common stock at a
ratio of 1.12 APS shares to one share of DQE pursuant to an
Agreement and Plan of Merger dated as of April 5, 1997 among
DQE, Inc., Allegheny Power System, Inc. and AYP Sub, Inc., a
Pennsylvania corporation to be formed (the "Merger").
3. DQE is a Pennsylvania corporation and an exempt
electric utility holding company headquartered in
Pittsburgh, Pennsylvania. DQE owns Duquesne Light Company, a
Pennsylvania public utility which serves about 600,000
customers in an 800 square-mile service area in
<PAGE>
southwestern Pennsylvania including the city of Pittsburgh. DQE is not
qualified to do business in Maryland and neither owns nor
controls any public utility property in Maryland. DQE also
owns unregulated subsidiaries.
4. The Merger will not affect the ownership of nor
the control over any public utility franchises in Maryland.
5. APS files herewith, marked Exhibit A, a Statement
of Financial Condition of APS as of June 30, 1997.
7. No franchise or right of APS is capitalized,
directly or indirectly, except as authorized by Public
Service Commission Law, nor does APS have any franchises in
Maryland.
Wherefore, for the reasons set forth herein, APS
requests that the Commission:
1) Approve the issuance by APS of up to 90,557,682
additional shares of its common stock; and
2) Grant such other approvals in this matter as may
be appropriate.
Respectfully submitted,
Allegheny Power System, Inc.
By: /s/ Michael P. Morrell
Michael P. Morrell
Senior Vice President
and Chief Financial
Officer
/s/ Philip J. Bray
Philip J. Bray
Attorney at Law
The Potomac Edison Company Building
10435 Downsville Pike
Hagerstown, Maryland 21740-1766
(301) 790-6283
Dated: August 1, 1997
<PAGE>
AFFIDAVIT
State of Maryland
ss
County of Washington
I HEREBY CERTIFY that on July 31, 1997, before me,
the subscriber, a Notary Public of the State of Maryland, in
and for the County of Washington, aforesaid, personally
appeared Michael P. Morrell, Senior Vice President and Chief
Financial Officer of Allegheny Power System, Inc. and made
oath in due form of law that the matters and facts set forth
in the foregoing Petition are true to the best of his
knowledge, information and belief.
Witness my hand and notarial seal, the day and year
last above written.
/s/ Catherine A. Wallace
<PAGE>
AFFIDAVIT OF DIRECTOR
State of Maryland
ss
County of Washington
I hereby certify that on July 30, 1997, before me,
a Notary Public of the State of Maryland, in and for the
County of Washington, aforesaid, personally appeared the
undersigned director of Allegheny Power System, Inc. and
made oath in due form of law that it is the intention of
Allegheny Power System, Inc. in good faith to use the
proceeds of the additional common stock proposed to be
issued in the Petition to which this Affidavit is appended,
for the purposes set forth in said Petition.
Witness my hand and notarial seal, the day and year
last above written.
/s/ Catherine A. Wallace
My commission expires on 8/6/2000
/s/ Alan J. Noia
Alan J. Noia
Chairman,Allegheny Power System, Inc.
AFFIDAVIT OF DIRECTOR
State of New York
ss
County of New York
I hereby certify that on July 30, 1997, before me,
a Notary Public of the State of New York, in and for
the County of New York, aforesaid, personally
appeared the undersigned director of Allegheny Power System,
Inc. and made oath in due form of law that it is the
intention of Allegheny Power System, Inc. in good faith to
use the proceeds of the additional common stock proposed to
be issued in the Petition to which this Affidavit is
appended, for the purposes set forth in said Petition.
Witness my hand and notarial seal, the day and year
last above written.
/s/ Linda A. Ziering
My commission expires on 4/4/98
/s/ Peter L. Shea
Peter L. Shea
Director, Allegheny Power System, Inc.
<PAGE>
AFFIDAVIT OF DIRECTOR
State of New York
ss
County of Westchester
I hereby certify that on July 30, 1997, before me,
a Notary Public of the State of New York, in and for
the County of Westchester, aforesaid, personally
appeared the undersigned director of Allegheny Power System,
Inc. and made oath in due form of law that it is the
intention of Allegheny Power System, Inc. in good faith to
use the proceeds of the additional common stock proposed to
be issued in the Petition to which this Affidavit is
appended, for the purposes set forth in said Petition.
Witness my hand and notarial seal, the day and year
last above written.
/s/ Thomas M. Leslie
My commission expires on 9/30/99
/s/ Steven H. Rice
Director, Allegheny Power System, Inc.
<PAGE>
EXHIBIT A
ALLEGHENY POWER SYSTEM, INC.
STATEMENT OF FINANCIAL CONDITION - JUNE 30, 1997
1. Amount and classes of stock authorized.
260,000,000 shares of Common Stock - $1.25 par value.
2. Amount and classes of stock issued.
122,416,636 shares of Common Stock.
3. Terms of preference of all Preferred Stock.
No Preferred Stock.
4. Brief description of each mortgage upon any property of
the corporation, giving date of execution, name of
trustee, amount of indebtedness actually secured, and
brief description of the mortgaged property or
collateral.
None.
5. 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.
None.
6. Other indebtedness of all kinds, giving same by classes
and describing security, if any.
Unsecured short-term debt:
Commercial paper 81,034,565
7. Amount of interest paid during previous 12 months ended
June 30, 1997, upon each species of indebtedness and
rate thereof, and if different rates were paid, amount
paid at each rate.
See Schedule 1 attached.
8. Amount of dividends paid upon each class of stock during
12 months ended June 30, 1997.
Amount Rate Per Share Stock
$208,109,316 $1.71 Common
9. Detailed statement of earnings and expenditures for 12
months ended June 30, 1997 and balance sheet showing
condition at that date.
See Schedule 2 attached.
<PAGE>
Schedule 1
12 Months Ended June 30, 1997
Commercial Paper
Interest Interest
Rate Paid
5.300% $ 323.89
5.325% 5,325.00
5.330% 440,935.39
5.340% 558,920.01
5.350% 403,735.52
5.360% 587,590.00
5.375% 2,127.60
5.380% 561,096.63
5.390% 46,211.76
5.400% 168,435.00
5.420% 2,559.44
5.425% 423,489.06
5.430% 1,387.67
5.440% 78,577.78
5.450% 73,450.10
5.460% 274,183.00
5.480% 378,120.00
5.500% 5,710.83
5.520% 7,022.67
5.550% 14,029.17
5.590% 14,813.50
5.620% 2,497.78
5.640% 20,210.00
5.660% 1,084.83
5.670% 9,103.50
5.685% 397,950.00
5.700% 231,974.17
5.900% 290.90
6.250% 26,736.11
6.400% 622.22
6.950% 965.28
_____________
$4,739,478.81
<PAGE>
Schedule 2
ALLEGHENY POWER SYSTEM, INC.
STATEMENT OF INCOME FOR THE 12 MONTHS ENDED JUNE 30, 1997
(Thousands)
Income
Dividends on common stock of subsidiaries $219,734
Equity in undistributed earnings of subsidiaries 21,229
Interest from subsidiary companies 129
Income from Ohio Valley Electric Corporation investment 186
Other income (deductions) (537)
________
Total Income 240,741
Expenses, Taxes, and Income Deductions
Administrative and fiscal expenses and other charges 1,857
Interest on shot-term debt 4,739
Other interest expense 28
Total Expenses and Income Deductions 6,624
________
Net Income $234,117
<PAGE>
Schedule 2 (continued)
ALLEGHENY POWER SYSTEM, INC.
BALANCE SHEET - JUNE 30, 1997
(Thousands)
ASSETS:
Investments:
Subsidiaries consolidated:
Common stocks, at equity $2,205,937
Excess of cost over book equity at acquisition 15,077
Ohio Valley Electric Corporation - common stock,
at cost which approximates equity 1,250
Benefit plans' investments 65,752
2,288,016
_________
Current assets:
Cash and temporary cash investments 4,793
Notes receivable due within one year 2,488
Accounts receivable - affiliates 6,338
Other 93
_________
3,712
Total Assets $2,301,728
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common stock - $1.25 par value per share, authorized
260,000,000 shares, outstanding 122,416,636 shares $ 153,021
Other paid-in capital 1,043,513
Retained earnings 1,013,041
_________
2,209,575
Current Liabilities:
Short-term debt 81,035
Accounts payable 10,195
Other 708
_________
91,938
Deferred credit 215
_________
Total Capitalization and Liabilities $2,301,728
<PAGE>
BEFORE THE
PUBLIC SERVICE COMMISSION
OF MARYLAND
In the matter of the application of *
Allegheny Power System, Inc. * Case No. _________
regarding the issuance of *
additional shares of its common stock *
DIRECT TESTIMONY
OF
MICHAEL P. MORRELL
On Behalf
of
Allegheny Power System, Inc.
Dated: August 1, 1997
<PAGE>
Q. Please state your name and business address.
A.My name is Michael P. Morrell. I am Senior Vice President
and Chief Financial Officer, Allegheny Power System, Inc.
(APS) and Allegheny Power Service Company (APSC), 10435
Downsville Pike, Hagerstown, Maryland 21740-1766. My
educational background, work experience and duties are
set forth at the end of my testimony.
OUTLINE
Q.Please outline the testimony you plan to present in this
case.
A.I will describe APS and its plan to issue up to
90,557,682 additional shares of its authorized and
unissued common stock. I will explain how APS proposes
to use the additional shares and APS= current financial
condition.
SUMMARY
Q.Please summarize your testimony.
A.APS is requesting that the Commission approve the
issuance of up to 90,557,682 additional shares of its
authorized and unissued common stock. At the current
market price of about $29 per share, APS would be issuing
stock with a total market value of about $2.6 billion.
The shares to be issued will be used by APS to acquire
all of the outstanding shares of DQE, Inc. (DQE) common
stock at a ratio of 1.12 APS shares to 1 share of DQE.
Additionally, subject to shareholder approval, APS will
change its name to Allegheny Energy, Inc. whether or not
the merger is completed.
<PAGE>
EXHIBITS
Q.Do you have any exhibits to your testimony?
A.Yes. There are four exhibits to my testimony:
Exhibit MPM-1 is a map showing the service areas of the
public utility subsidiaries of Allegheny Energy after the
merger;
Exhibit MPM-2 is the Agreement and Plan of Merger Among
DQE, Inc., Allegheny Power System, Inc. and AYP Sub, Inc.
Dated as of April 5, 1997.
MPM-3 is a statement of APS' financial condition as of
June 30, 1997;
MPM-4 is a summary of my educational and professional
experience.
DISCUSSION
Background
Q.Please describe APS.
A.Incorporated in Maryland in 1925 with headquarters near
Hagerstown,
<PAGE>
Maryland,<1> APS is a registered public utility
holding company under the Federal Public Utility Holding
Company Act of 1935. It derives most of its income from
operations of its electric utility subsidiaries-
Monongahela Power Company (Mon Power), The Potomac Edison
Company (PE) and West Penn Power Company (West Penn). In
1996, the operations of the subsidiaries were combined to
act as a unified company trading and doing business as
Allegheny Power.
Allegheny Power has about 4,980 employees and provides
electric service to nearly 1.4 million customers in parts
of Maryland, Ohio, Pennsylvania, Virginia and West
Virginia-an area of about 29,100 square miles with a
population of nearly 3 million. Of these totals
approximately 200,000 customers (14%) and approximately
.5 million people (14%) are located in Maryland and
served by PE. Allegheny Power is a winter-peaking
electric utility, with a significant load from its
industrial customers.
APS is linked to neighboring utilities through membership
in the East Central Area Reliability Coordination
Agreement (ECAR), one of ten regions under the North
American Electric Reliability Council. APS is also
responsible for overseeing and coordinating electrical
system security in ECAR's eastern region.
APS has a wholly-owned, non-utility subsidiary, AYP
Capital, which is pursuing and developing unregulated
opportunities related to its core utility business, as
permitted by law. Among other ventures, AYP Capital has
formed 1) AYP Energy, Inc., an exempt wholesale
generator, which owns and markets as a merchant plant its
276 mw interest in the Fort Martin Unit No. 1 coal-fired
facility in West
_________________________
<1> In 1996, APS relocated its headquarters from New York City to Hagerstown.
<PAGE>
Virginia; 2) Allegheny Communications Connect, Inc., an
independent telecommunications company; and is forming
3) Allegheny Energy Solutions, Inc., an unregulated retail
subsidiary to provide electric energy and related services
to retail customers as retail energy and service markets
are opened to competition.
On April 7, 1997, APS and DQE announced that they had
signed an agreement to merge in a tax free, stock-for-
stock transaction with a total market capitalization of
approximately $10.6 billion. APS is also seeking
shareholder approval to change its name to Allegheny
Energy, Inc.
Q.Please describe DQE.
A.DQE, an exempt electric utility holding company whose
origin dates back to 1880, has subsidiaries engaged in
the production, transmission and sale of electric energy.
DQE employs 3,439 people. Duquesne Light Company, a
Pennsylvania public utility and wholly-owned subsidiary
of DQE, serves about 600,000 customers in an 800 square-
mile service area in southwestern Pennsylvania, including
the city of Pittsburgh. Duquesne Light=s service area has
a population of 1.5 million. Neither DQE nor Duquesne
Light are qualified to do business in Maryland nor do
they own or control any public utility facilities or
franchises in Maryland.
Duquesne Light Company, which is summer peaking,
experiences its highest demand from commercial and
residential customers. As a member of ECAR, Duquesne
Light also follows ECAR's principles and procedures for
ensuring electrical system reliability.
DQE's market-driven subsidiaries include Duquesne
Enterprises, which
<PAGE>
makes strategic investments beneficial
to DQE's core energy business; Montauk, a financial
services company, which makes long-term investments and
provides financing to DQE's other market-driven
businesses; DQE Energy Services, which provides energy
solutions for customers in domestic and international
markets; and DQE Energy Partners, which aligns DQE with
strategic partners to capitalize on opportunities in the
dynamic energy services industry.
The Merger
Q.Describe the merger in general.
A.On April 7, 1997 APS and DQE announced a definitive
agreement to merge into a company that will be well
prepared to offer consumers, over the long term, lower
prices, a greater range of services and increased
reliability of service as the electric industry reshapes
itself into a more competitive mode. The merger will be a
tax-free, stock-for-stock transaction in accordance with
Sec. 368 of the Internal Revenue Code. DQE shareholders
will receive 1.12 shares of APS common stock for each
share of DQE common stock. The combined company will be
headquartered near Hagerstown, Maryland.
PE is not a party to the merger. APS will create AYP Sub,
Inc., a Pennsylvania corporation which will then be
merged with DQE, with DQE as the surviving corporation.
DQE will then be a wholly owned subsidiary of APS.
The combination of winter-peaking Allegheny Power, with a
substantial industrial load and summer-peaking Duquesne
Light, with a higher proportion of commercial and
residential load, offers opportunities for more efficient
use of generating resources. It is anticipated that these
complimentary characteristics and efficiencies will be a
<PAGE>
significant factor in allowing the combined company to
maintain low prices for customers, while allowing the
company to effectively compete in the emerging market
place.
Q.How will combined Allegheny Energy operate?
A.Allegheny Energy will operate as an integrated electric
utility holding company system, subject to the Public
Utility Holding Company Act of 1935. While Allegheny
Energy will operate as an integrated utility, the
regulated electric utility subsidiaries (Duquesne Light,
Mon Power, PE and West Penn) will continue to exist as
separate legal entities and will retain their separate
service territories and regulated rate tariffs, under the
jurisdiction of the appropriate state commission or FERC
just as the APS subsidiaries currently operate. From the
point of view of the Maryland Commission, Duquesne Light
will be essentially the same type operation as West Penn
and will continue to be regulated by the Pennsylvania
Public Utility Commission. Allegheny Energy intends to
build on the activities of the unregulated subsidiaries
of APS and DQE to expand offerings of competitively
priced products and services. The merger is expected,
over the long term, to result in rates for the four
regulated subsidiaries that would be lower than they
would have been on a stand alone basis.
Allegheny Energy will continue a strong commitment to the
utility customers served by the public utility
subsidiaries of APS and DQE. Allegheny Energy will
maintain its significant presence in the existing service
territories, with major subsidiary operations near
Hagerstown, Maryland; in Fairmont, West Virginia; in
Greensburg, Pennsylvania; and in Pittsburgh,
Pennsylvania. Allegheny Energy will
<PAGE>
also maintain its corporate headquarters near Hagerstown.
Q.What will the service area of Allegheny Energy look like?
A.Attached to my testimony marked as Exhibit MPM-1 is a map
showing the service territories of the Allegheny Energy
regulated utility companies together with a synopsis of
operating statistics for Allegheny Power, DQE and the
combined company.
The Merger Process
Q.Describe the process for merging the two companies.
A.I have attached a copy of the Agreement and Plan of
Merger Among DQE, Inc., Allegheny Power System, Inc. and
AYP Sub, Inc. dated as of April 5, 1997 (Merger
Agreement) as Exhibit MPM-2 to my testimony. The Merger
Agreement should be referenced to provide specific
details with respect to the merger process. PE is not
involved in the merger process.
In general, the following procedure will be used to merge
APS and DQE. A new company, AYP Sub, Inc., will be
formed as a Pennsylvania corporation and a wholly-owned
subsidiary of APS. AYP Sub, Inc. will then be merged with
and into DQE and the separate corporate existence of AYP
Sub, Inc. will cease. DQE will be the surviving
corporation and will become a wholly-owned subsidiary of
APS. It will continue to be governed by the laws of
Pennsylvania and its regulated subsidiary, Duquesne
Light, will continue to be regulated by the Pennsylvania
<PAGE>
Public Utility Commission. Upon the merger becoming
effective, each share of DQE common stock issued and
outstanding immediately prior to such time, will be
converted into the right to receive and become
exchangeable for 1.12 shares of APS common stock. No
fractional shares of APS common stock will be issued in
the merger. Instead, the Merger Agreement provides that
each holder of DQE common stock who would otherwise have
been entitled to receive a fractional share of APS common
stock will be entitled to receive, in lieu thereof, cash
representing such holder=s proportional interest in a
share of APS common stock. Upon consummation of the
merger, holders of DQE common stock immediately prior to
the merger will own approximately 42% of the outstanding
shares of APS common stock after the merger. Therefore,
there is no change of control for APS or PE.
Additionally, PE is not a party to the merger. The
transaction is intended to qualify as a "pooling of
interests" for accounting purposes and as a
reorganization within the meaning of Sec. 368(a) of the
Internal Revenue Code of 1986, as amended, for federal
income tax purposes.
Q.How was the exchange ratio of 1.12 shares of APS common
stock for each share of DQE stock determined?
A.The exchange ratio was a matter of negotiation between
APS and DQE. Both parties hired financial consultants
(Merrill Lynch & Co. for APS and Credit Suisse-First
Boston Corporation for DQE) to advise them concerning the
appropriate exchange ratio. Each financial consultant,
after becoming thoroughly acquainted with both companies,
conducted a number of analyses to determine the
appropriate exchange rate. At the conclusion of their
investigation, each consultant issued an opinion to the
effect that as of April 4, 1997, the exchange ratio of
1.12 shares of APS common stock for each share of DQE
common stock was
<PAGE>
fair to the holders of both companies from a financial point of view.
Q.Has the merger been approved by the stockholders of APS
and DQE?
A.A special meeting of the stockholders of APS to
consider and vote upon 1) the approval of the issuance of
shares of common stock to be exchanged for DQE stock; and
2) the approval of an amendment to the charter of APS to
change the name of APS to Allegheny Energy Inc. will be
held on August 7, 1997 in Hagerstown, Maryland. The
merger proposal will also be considered at the annual
meeting of DQE to be held on August 7, 1997 in
Pittsburgh. The affirmative vote of a majority of the
votes cast at the APS special meeting is necessary for
the approval of the issuance of the additional shares of
common stock and the affirmative vote of a majority of
the total number of shares of APS common stock
outstanding is necessary for the adoption of the charter
amendment to change the corporate name. The affirmative
vote of a majority of the votes cast at the DQE meeting
is necessary for the adoption of the Merger Agreement and
approval of the transactions contemplated therein.
Q.How will the merger benefit Maryland customers?
A.Since PE is not involved in this merger, and there will
be no change of control of PE, there will be no direct
effect on Maryland customers. However, Maryland
customers will indirectly benefit by PE sharing some of
the synergy savings. These issues would be addressed in a
separate PE rate filing at an appropriate time. Further,
the merger of APS and DQE will create a company that will
be well prepared to offer customers lower rates, a
greater range of services and increased reliability as
the electric utility industry evolves to
<PAGE>
a more competitive future. The efficiencies produced will be a
significant factor to allow the merged company to
maintain low prices for customers while preparing the
company to be a strong competitor in the emerging
marketplace. With the merger, Allegheny Energy will be
the tenth largest utility in the country in terms of
kilowatt hour sales. The larger company will have an
expanded customer base from which to grow unregulated
activities and a stronger financial and operational
position from which to compete for new business. The
combination of Allegheny Power=s winter-peaking-low-cost-
efficient operations and suburban and rural customer base
will complement Duquesne Light=s summer-peaking
operations and urban customer base. The result should be
an improvement in APS= already enviable operating
efficiencies.
A larger, more efficient, more reliable and more
innovative corporation headquartered in western Maryland
with a regulated public utility subsidiary serving
customers in western Maryland should be a more valuable
asset for the state. The merged company should have rates
for the utility subsidiaries lower than if the existing
Allegheny Power companies were operated on a stand alone
basis. Considering all factors, the proposed APS/DQE
merger should benefit Maryland and customers of PE in
Maryland.
Issuance of Additional Shares of Common Stock
Q.Are you familiar with APS= request to issue additional
shares of common stock?
A.Yes I am.
<PAGE>
Q.Please describe generally APS' common stock.
A.The authorized common stock of APS currently consists of
260 million authorized shares of $1.25 par value. As of
June 1, 1997 there were 122,111,567 shares outstanding.
That stock was held by 56,082 holders of record.
Q.How much additional common stock of APS is required to be
issued to carry out the terms of the merger?
A.Under the Merger Agreement each share of DQE common
stock, no par value, will be converted into 1.12 shares
of APS common stock, $1.25 par value. To fulfill this
requirement, APS has filed a Registration Statement
pursuant to the Securities Act of 1933, covering a
maximum number of shares of APS common stock estimated to
be issuable upon consummation of the merger. APS has
registered 90,557,682 shares of common stock under the
Registration Statement. The additional common stock to be
issued will be exchanged for DQE common stock at the rate
of 1.12 shares of APS common stock for each share of DQE
stock.
Q.Will there be a negotiated sale to underwriters or
alternatively competitive bidding with respect to the
issuance of this common stock?
A.No. APS will issue the stock directly to an Exchange
Agent who will then exchange the additional shares for
the DQE shares.
Q.What is the financial condition of APS?
A.Exhibit MPM-3 is a statement of APS' financial condition
setting
<PAGE>
forth the information included in the COMAR
rules. The statement includes APS' income account for the
12-month period ending June 30, 1997 and the balance
sheet for the same date. There have been no material
changes in the financial condition of APS since that date
which are not the ordinary the course of usual business.
Q.Is any franchise or right of APS capitalized directly or
indirectly, except as authorized by Maryland's Public
Service Commission law?
A.No it is not. APS has no franchise rights and owns no
public utility property.
Duties and Qualifications
Q.Will you briefly trace your educational and employment
history.
A.I received a B.S. degree from the United States Naval
Academy in 1971 and an M.B.A. from Fairleigh Dickinson
University in 1980. I served in the United States Navy
for five years, achieving the rank of Lieutenant. I was
employed as an engineer for Burns and Roe, an architect
engineering firm, in Oradell, New Jersey from 1976-1977,
and in various positions at GPU, Inc. from 1977-1996,
rising to the level of Vice President and Treasurer. I
became Senior Vice President and Chief Financial Officer
for APS in May, 1996. See Exhibit MPM-4 for a summary of
my education and employment history.
Q.What are your duties as Senior Vice President and Chief
Financial Officer of APS?
<PAGE>
A.I am the chief financial officer of APS, Inc., and a
member of the Boards of Directors of the Allegheny Power
operating companies. I am responsible for all financing,
treasury, accounting, rates, and financial planning
functions. I also oversee all insurance and risk
management matters and all system employee benefit plan
investments.
Q.Does this complete your testimony?
A.Yes it does.
<PAGE>
Exhibit MPM-1
Previously filed on July 11, 1997, on Schedule 14A pursuant
to Rule 14a-6(b) of the Securities Exchange Act of 1934, as
amended.
<PAGE>
Exhibit MPM-2
Filed with Merger U-1, Exh. B-1.
<PAGE>
EXHIBIT MPM-3
ALLEGHENY POWER SYSTEM, INC.
STATEMENT OF FINANCIAL CONDITION - JUNE 30, 1997
1. Amount and classes of stock authorized.
260,000,000 shares of Common Stock - $1.25 par value.
2. Amount and classes of stock issued.
122,416,636 shares of Common Stock.
3. Terms of preference of all Preferred Stock.
No Preferred Stock.
4. Brief description of each mortgage upon any property of
the corporation, giving date of execution, name of
trustee, amount of indebtedness actually secured, and
brief description of the mortgaged property or
collateral.
None.
5. 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.
None.
6. Other indebtedness of all kinds, giving same by classes
and describing security, if any.
Unsecured short-term debt:
Commercial paper 81,034,565
7. Amount of interest paid during previous 12 months ended
June 30, 1997, upon each species of indebtedness and
rate thereof, and if different rates were paid, amount
paid at each rate.
See Schedule 1 attached.
8. Amount of dividends paid upon each class of stock during
12 months ended June 30, 1997.
Amount Rate Per Share Stock
$208,109,316 $1.71 Common
9. Detailed statement of earnings and expenditures for 12
months ended June 30, 1997 and balance sheet showing
condition at that date.
See Schedule 2 attached.
<PAGE>
Schedule 1
12 Months Ended June 30, 1997
Commercial Paper
Interest Interest
Rate Paid
5.300% $ 323.89
5.325% 5,325.00
5.330% 440,935.39
5.340% 558,920.01
5.350% 403,735.52
5.360% 587,590.00
5.375% 2,127.60
5.380% 561,096.63
5.390% 46,211.76
5.400% 168,435.00
5.420% 2,559.44
5.425% 423,489.06
5.430% 1,387.67
5.440% 78,577.78
5.450% 73,450.10
5.460% 274,183.00
5.480% 378,120.00
5.500% 5,710.83
5.520% 7,022.67
5.550% 14,029.17
5.590% 14,813.50
5.620% 2,497.78
5.640% 20,210.00
5.660% 1,084.83
5.670% 9,103.50
5.685% 397,950.00
5.700% 231,974.17
5.900% 290.90
6.250% 26,736.11
6.400% 622.22
6.950% 965.28
$4,739,478.81
<PAGE>
Schedule 2
ALLEGHENY POWER SYSTEM, INC.
STATEMENT OF INCOME FOR THE 12 MONTHS ENDED JUNE 30, 1997
(Thousands)
Income
Dividends on common stock of subsidiaries $219,734
Equity in undistributed earnings of subsidiaries 21,229
Interest from subsidiary companies 129
Income from Ohio Valley Electric Corporation investment 186
Other income (deductions) (537)
________
Total Income 240,741
Expenses, Taxes, and Income Deductions
Administrative and fiscal expenses and other charges 1,857
Interest on shot-term debt 4,739
Other interest expense 28
_______
Total Expenses and Income Deductions 6,624
_______
Net Income 234,117
<PAGE>
Schedule 2 (continued)
ALLEGHENY POWER SYSTEM, INC.
BALANCE SHEET - JUNE 30, 1997
(Thousands)
ASSETS:
Investments:
Subsidiaries consolidated:
Common stocks, at equity $2,205,937
Excess of cost over book equity at acquisition 15,077
Ohio Valley Electric Corporation - common stock,
at cost which approximates equity 1,250
Benefit plans' investments 65,752
_________
2,288,016
Current assets:
Cash and temporary cash investments 4,793
Notes receivable due within one year 2,488
Accounts receivable - affiliates 6,338
Other 93
_________
13,712
_________
Total Asset $2,301,728
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common stock - $1.25 par value per share, authorized
260,000,000 shares, outstanding 122,416,636 shares $ 153,021
Other paid-in capital 1,043,513
Retained earnings 1,013,041
_________
2,209,575
_________
Current Liabilities:
Short-term debt 81,035
Accounts payable 10,195
Other 708
_________
91,938
Deferred credit 215
_________
Total Capitalization and Liabilities $2,301,728
<PAGE>
M. P. Morrell
Biographical Summary
1996 - Present: Allegheny Power System, Inc. - Hagerstown, Maryland
1996 - Present: Senior Vice President and Chief Financial Officer
1977 - 1996: GPU, Inc. - Parsippany, New Jersey
- 1993 - 1996: Jersey Central Power and Light Company
- 1994 - 1996: Vice President - Regulatory and Public Affairs
- 1993 - 1994: Vice President - Materials, Services and
Regulatory Affairs
- 1993 - 1996: Member of Board of Directors
- 1977 - 1993: GPU, Inc. and GPU Service Corporation
- 1986 - 1993: Vice President and Treasurer, and Treasurer of
all GPU Subsidiaries from 1989 - 1993
- 1984 - 1986: Assistant Treasurer
- 1981 - 1984: Manager of Treasury Operations
- 1980 - 1981: Financial Projects Manager
- 1979 - 1980: Special (generation) Projects Manager
- 1977 - 1979: Power Plant Systems Engineer
1976 - 1977: Burns & Roe, Inc. - Oradell, New Jersey
- 1976 - 1977: Support Engineer/Cognizant Engineer - Clinch River Project
1971 - 1976: United States Navy
Nuclear submarine duty, with final rank of Lieutenant
Education and Other:
M.B.A., Finance and Economics - Fairleigh Dickinson University,
Teaneck, NJ, 1980
B.S., major in Oceanography - U.S. Naval Academy, Annapolis, MD, 1971
Naval nuclear power and submarine training - Mare Island, CA;
Idaho Falls, ID; Groton, CT, 1971-1972
Licensed Professional Engineer - Pennsylvania
Former member:
- Board of Directors of Utilities Mutual Insurance Company, New
York, NY
- Board of Trustees and Chairman of Business and Education
Together Foundation - Morristown, NJ
- Board of Trustees and Secretary of The Visiting Nurse
Association of Morris County - Morristown, NJ
<PAGE>
EXHIBIT D-9
UNITED STATES
NUCLEAR REGULATORY COMMISSION
WASHINGTON, D.C. 20555-0001
January 23, 1998
Mr. J. E. Cross
President-Generation Group
Duquesne Light Company
Post Office Box 4
Shippingport, PA 15077
SUBJECT: ORDER APPROVING APPLICATION REGARDING
MERGER AGREEMENT BETWEEN DQE, INC.
AND ALLEGHENY POWER SYSTEM, INC.
AFFECTING FACILITY OPERATING LICENSES NOS.
DPR-66 AND NPF-73, BEAVER VALLEY POWER STATION,
UNIT NOS. 1 AND 2 (TAC NOS. M99386 AND M99387)
Dear Mr. Cross:
The enclosed Order is in response to your request, dated
August 1, 1997, as supplemented October 30, 1997, for consent of
the Nuclear Regulatory Commission (NRC), pursuant to Section
50.80 of Title 10 of the Code of Federal Regulations, of the
indirect transfer of the Beaver Valley Power Station, Unit Nos. 1
and 2, Facility Operating Licenses (DPR-66 and NPF-73) to the
extent held by Duquesne Light Company (DLC), that will occur
under a proposed merger of DQE, Inc. (the parent holding company
of DLC) and Allegheny Power System, inc. DQE, Inc. will become a
wholly owned subsidiary of Allegheny Power System, Inc., which
will be renamed Allegheny Energy, Inc. DLC will remain a direct
subsidiary of DQE, Inc., but will become an indirect subsidiary
of Allegheny Energy, Inc. The NRC staff's safety evaluation in
support of the Order is also enclosed.
The Order is being forwarded to the Office of the Federal
Register for publication.
Sincerely,
Donald S. Brinkman
Senior Project Manager
Project Directorate I-2
Division of Reactor Projects - I/II
Office of Nuclear Reactor Regulation
Docket Nos. 50-334 and 50-412
enclosures: 1. Order
2. Safety Evaluation
cc w/encls: See next page
<PAGE>
J. E. Cross Bever Valley Power Station
Duquesne Light Company Units 1 & 2
cc:
Dr. Judith Johnsrud
National Energy Committee
Sierra Club
433 Orlando Avenue
Jay E. Silberg, Esquire State College, PA 16803
Shaw, Pittman, Potts &
Trowbridge Duquesne Light Company
2300 N Street, NW Beaver Valley Power Station
Washington, DC 20037 PO Box 4
Shippingport, PA 15077
Director-Safety and Licensing ATTN: R. L. Grand, Division Vice
Department (BV-A) President, Nuclear Operations
Duquesne Light Company Group and Plant Manager (BV-SOSB-7)
Beaver Valley Power Station
PO Box 4
Shippingport, PA 15077
Bureau of Radiation Protection
Commissioner Roy M. Smith Pennsylvania Department of
West Virginia Department of Environment Resources
Labor ATTN: Michael P. Murphy
Building 3, Room 319 Post Office Box 2063
Capitol Complex Harrisburg, PA 17120
Charleston, WVA 25305
Mayor of the Borrough of
Director, Utilities Department Shippingport
Public Utilities Commission Post Office Box 3
180 East Broad Street Shippingport, PA 15077
Columbus, OH 43266-0573
Regional Administrator, Region
Director, Pennsylvania I
Emergency U.S. Nuclear Regulatory
Management Agency Commission
Post Office Box 3321 475 Allendale Road
Harrisburg, PA 17105-3321 King of Prussia, PA 19406
Ohio EPA-DERR Resident Inspector
ATTN: Zack A. Clayton U.S. Nuclear Regulatory
Post Office Box 1049 Commission
Columbus, OH 43266-0149 Post Office Box 298
Shippingport, PA 15077
Duquesne Light Company
Beaver Valley Power Station
PO Box 4
Shippingport, PA 15077
ATTN: S. C. Jain, Vice
President
Nuclear Services (BV-A)
<PAGE>
UNITED STATES OF AMERICA
NUCLEAR REGULATORY COMMISSION
In the Matter of )
)
THE CLEVELAND ELECTRIC ILLUMINATING ) Docket Nos. 50-334
COMPANY ) and 50-412
TOLEDO EDISON COMPANY )
OHIO EDISON COMPANY )
PENNSYLVANIA POWER COMPANY )
DUQUESNE LIGHT COMPANY )
)
(Beaver Valley Power Station, Unit )
Nos. 1 and 2) )
ORDER APPROVING APPLICATION REGARDING MERGER AGREEMENT
BETWEEN DQE, INC. AND ALLEGHENY POWER SYSTEM, INC.
I.
The Cleveland Electric Illuminating Company (CEI),
Duquesne Light Company (DLC), Ohio Edison Company (OE),
Pennsylvania Power Company (Penn Power), and Toledo Edison
Company (TE) are the licensees of Beaver Valley Power
Station, Unit Nos. 1 and 2 (BVPS-1 and BVPS-2). DLC acts as
agent for the other licensees and has exclusive
responsibility for and control over the physical
construction, operation, and maintenance of BVPS-1 and BVPS-
2 as reflected in Facility Operating Licenses Nos. DPR-66
and NPF-73. The Nuclear Regulatory Commission (NRC) issued
Licenses Nos. DPR-66 and NPF-73 on July 2, 1976, and on
August 14, 1987, respectively, pursuant to Part 50 to Title
10 of the Code of Federal Regulations (10 CFR Part 50). The
facility is located on the southern shore of the Ohio River
in Beaver County, Pennsylvania, approximately 22 miles
northwest of Pittsburgh and 5 miles east of East Liverpool,
Ohio.
II.
Under cover of a letter dated August 1, 1997, DLC
submitted an application for consent under 10 CFR 50.80
regarding a proposed merger of DQE, Inc. (the parent holding
company of DLC) and Allegheny Power
<PAGE>
System, Inc., which would result in DQE, Inc. becoming a wholly
owned subsidiary of Allegheny Power System, Inc. Allegheny Power
System, Inc. would change its name to Allegheny Energy, inc. (Allegheny
Energy). CEI, OE, Penn Power, and TE are not involved in the
merger. Supplemental information was submitted by letter
dated October 30, 1997.
Under the proposed merger, DLC will become an indirect
subsidiary of Allegheny Energy by reason of DQE, Inc.
becoming a subsidiary of Allegheny Energy. DLC and the other
current licensees will continue to hold the licenses, and no
direct transfer of the licenses will result from the merger.
On September 12, 1997, a Notice of Consideration of Approval
of Application Regarding Proposed Corporate Restructuring
was published in the Federal Register (62 FR 48113). An
Environmental Assessment and Finding of No Significant
Impact was published in the Federal Register on
September 25, 1997 (52 FR 50411).
Under 10 CFR 50.80, no license shall be transferred,
directly or indirectly, through transfer of control of the
license, unless the Commission gives its consent in writing.
Upon review of the information submitted in the application
and letters of August 1, 1997, and October 30, 1997, the NRC
staff has determined that the proposed merger will not
affect the qualifications of DLC as holder of Facility
Operating Licenses Nos. DPR-66 and NPF-73, and that the
transfer of control of the licenses, to the extent effected
by the proposed merger, is otherwise consistent with
applicable provisions of law, regulations, and orders issued
by the Commission, subject to the conditions set forth
herein. These findings are supported by a safety evaluation
dated January 23, 1998.
<PAGE>
III.
Accordingly, pursuant to Sections 161b, 161i, 161o and
184 of the Atomic Energy Act of 1954, as amended, 42 USC
2201(b), 2201(1), 2201(o), and 2234; and 10 CFR 50.80, IT
IS HERBY ORDERED that the Commission approves the
application regarding the merger agreement between DQE, Inc.
and Allegheny Power System, Inc. subject to the following:
(1) DLC shall provide the Director of the Office of Nuclear
Reactor Regulation a copy of any application, at the time it
is filed, to transfer (excluding grants of security
interests or liens) from DLC to its first- or second- tier
parent or to any other affiliated company, facilities for
the production, transmission, or distribution of electric
energy having a depreciated book value exceeding 10 percent
of DLC's consolidated net utility plant, as recorded on
DLC's books of account; and (2) should the merger not be
completed by December 31, 1998, this Order shall become null
and void, unless upon application and for good cause shown
this date is extended.
This Order is effective upon issuance.
IV.
By March 2, 1998, any person adversely affected by this
Order may file a request for a hearing with respect to
issuance of the Order. Any person requesting a hearing shall
set forth with particularity how such person's interest is
adversely affected by this Order and shall address the
criteria set forth in 10 CFR 2.714(d).
If a hearing is to be held, the Commission will issue
an order designating the time and place of such hearing.
The issue to be considered at any such hearing shall be
whether this order should be sustained.
<PAGE>
Any request for a hearing must be filed with the
Secretary of the Commission, U.S. Nuclear Regulatory
Commission, Washington, DC 20555-0001. Attention:
Rulemakings and Adjudications Staff, or may be delivered to
the Commission's Public Document Room, the Gelman Building,
2120 L Street, NW., Washington, DC, by the above date.
Copies should also be sent to the Office of the General
Counsel and to the Director, Office of Nuclear Reactor
Regulation, U.S. Nuclear Regulatory Commission, Washington,
DC 20555-0001, and to John O'Neill, Esquire, Shaw, Pittman,
Potts and Trowbridge, 2300 N Street, NW., Washington, DC
20037, attorney for DLC.
For further details with respect to this action, see
the application submitted under cover of a letter dated
August 1, 1997, and supplemental letter dated October 30,
1997, and the safety evaluation dated January 23, 1998 which
are available for public inspection at the Commission's
Public Document Room, the Gelman Building, 2120 L Street,
NW., Washington, DC., and at the local public document room
located at the B. F. Jones Memorial Library, 663 Franklin
Avenue, Aliquippa, PA 15001.
Dated at Rockville, Maryland, this 23rd day of January
1998.
FOR THE NUCLEAR REGULATORY COMMISSION
/s/
Samuel J. Collins, Director
Office of Nuclear Reactor Regulation
<PAGE>
UNITED STATES
NUCLEAR REGULATORY COMMISSION
WASHINGTON, D.C. 20555-0001
SAFETY EVALUATION BY THE OFFICE OF NUCLEAR REACTOR
REGULATION
REGARDING PROPOSED MERGER
DUQUESNE LIGHT COMPANY
DOCKET NOS. 50-334 AND 50-412
BEAVER VALLEY POWER STATION, UNIT NOS. 1 AND 2
1.0 INTRODUCTION
Under cover of a letter dated August 1, 1997, Duquesne Light
Company (DLC), requested the consent of the Nuclear
Regulatory Commission (NRC) in connection with a proposed
merger of the parent of DLC and Allegheny Power System, Inc.
DLC, a wholly owned subsidiary of DQE, Inc., owns a 47.50%
interest in Beaver Valley Power Station, Unit No. 1 (BVPS-1)
and a 13.74% interest in Beaver Valley Power Station, Unit
No. 2 (BVPS-2). Under the proposed merger of DQE, Inc. and
Allegheny Power System, Inc., DLC will become an indirect
subsidiary of Allegheny Power System, Inc., which will
change its name to Allegheny Energy, Inc. (Allegheny
Energy). The merger agreement provides that DQE, Inc. common
stockholders will be entitled to exchange each DQE, Inc.
share for 1.12 shares of Allegheny Energy stock.
After the merger, DLC will continue to be a public utility
providing the same utility services as it did immediately
preceding the merger. DLC will continue to be a licensee for
BVPS-1 and BVPS-2. No direct transfer of the operating
licenses or interests in the units will result from the
proposed merger. The technical management and nuclear
organization of DLC currently responsible for operating and
maintaining BVPS-1 and BVPS-2 will remain responsible for
the plants' operation and maintenance after the merger.
Approval for the indirect transfer of the licenses to the
extent affected by the proposed merger is being sought from
the NRC pursuant to 10 CFR 50.80.
Pursuant to 10 CFR 50.80, the NRC may approve the transfer
of the control of a license after notice to interested
persons. Such approval is contingent upon the NRC's
determination that the holder of the license following the
transfer of control is qualified to hold the license, and
the transfer is otherwise consistent with applicable
provisions of law, regulations, and orders of the NRC.
2.0 FINANCIAL QUALIFICATIONS
DLC will continue as an owner operator of BVPS-1 and BVPS-2
(47.50% and 13.74% ownership interests, respectively) and
will remain an electric utility engaged in the generation
and distribution of electricity for
<PAGE>
wholesale and retail markets, the cost of which electricity is
recovered through rates established by separate regulatory authorities.
DLC's application states that the proposed merger will have
no effect on the funds available for DLC to carry out
activities under the operating licenses. The Federal Energy
Regulatory Commission will still regulate DLC's wholesale
electric rates, and the Pennsylvania Public Utility
Commission will also maintain jurisdiction over the
licensee's retail electric rates. In addition, the
application states that the proposed merger will have no
effect on DLC's capital structure or capital costs and will
not result in any change in DLC's wholesale or retail rates.
moreover, there will be no change in DLC's source of funds
for operating costs and eventual decommissioning costs for
BVPS-1 and BVPS-2. As an electric utility, DLC is exempt
from further financial qualifications review, pursuant to 10
CFR 50.33(f).
However, in view of the NRC's concern that a merger or
restructuring can lead to a diminution of assets necessary
for the safe operation and eventual decommissioning of a
licensee's nuclear power plant, the NRC's practice has been
to condition respective license transfer approvals upon a
requirement that the licensee not transfer significant
assets from the licensee to an affiliate without notifying
the NRC. This requirement assists the NRC in assuring that a
licensee will continue to maintain adequate resources to
contribute to the safe operation and decommissioning of its
facility. Thus, the following should be made a condition of
the Order approving the application regarding the proposed
merger and restructuring whereby DLC will become an indirect
subsidiary of Allegheny Energy.
DLC shall provide the Director of the Office of Nuclear
Reactor Regulation a copy of any application, at the
time it is filed, to transfer (excluding grants of
security interests or liens) from DLC to its first- or
second- tier parent, or to any other affiliated
company, facilities for the production, transmission,
or distribution of electric energy having a depreciated
book value exceeding ten percent (10%) of DLC's
consolidated net utility plant, as recorded on DLC's
books of accounts.
3.0 TECHNICAL QUALIFICATIONS
DLC has stated in its application that the proposed merger
will not change the technical qualifications of DLC to
operate and maintain BVPS-1 and BVPS-2. The utility will
continue to exist as a separate entity that will function in
the same fashion as it did before the proposed merger. DLC's
technical management and nuclear organization will continue
unchanged. Accordingly, the proposed merger will not affect
the technical qualifications of DLC.
4.0 ANTITRUST
Section 105c of the Atomic Energy Act of 1954, as amended
(the Act), which requires the NRC to conduct antitrust
reviews, applies to an application for a license to
construct or operate a facility licensed under Section 103
of the Act. BVPS-1 was licensed under Section 104b and, as a
result, is not subject to an antitrust review by the NRC
staff in connection with consideration of the application
regarding the
<PAGE>
proposed merger. Furthermore, although Allegheny Energy
may become the second- tier holding company of a licensee
for BVPS-2, i.e., may indirectly acquire control of the
BVPS-2 license, the application does not indicate that
Allegheny Energy will be performing activities for which a
license is needed. Since approval of the application would
not involve the issuance of a license, the procedures under
Section 105c do not apply, including the making of any
"significant changes" determination.
American Municipal Power-Ohio, Inc. (AMP-Ohio) filed
comments dated November 7, 1997, relating to the proposed
merger, but that are specific to the antitrust license
conditions contained in the license for the Perry Nuclear
Power Plant, Unit 1 (PNPP). These comments will be addressed
in the safety evaluation for PNPP concerning the subject
merger and indirect transfer of the PNPP license.
5.0 FOREIGN OWNERSHIP, CONTROL OR DOMINATION
The licensee indicated in its application that after the
proposed merger, DLC will not be owned, controlled, or
dominated by an alien, foreign corporation or foreign
government. The NRC staff does not know or have reason to
believe that consummation of the proposed merger will result
in DLC being owned, controlled, or dominated by foreign
interests.
6.0 CONCLUSIONS
In view of the foregoing, the NRC staff concludes that the
proposed merger of Allegheny Power System, Inc. and DQE,
Inc. will not adversely affect the financial or technical
qualifications of DLC with respect to the operation and
decommissioning of theBVPS-1 and BVPS-2 facilities. Also,
there do not appear to be any problematic antitrust or
foreign ownership considerations related to the BVPS-1 and
BVPS-2 licenses that would result from the proposed merger.
Thus, the proposed merger will not affect the qualifications
of DLC as a holder of the licenses, and the transfer of
control of the licenses, to the extent effected by the
proposed merger, is otherwise consistent with applicable
provisions of law, regulations, and orders issued by the
Commission. Accordingly, with the condition discussed above
relating to significant asset transfers the NRC should
approve the application regarding the proposed merger.
Principal Contributor: M. A. Dusaniwskyj
Date: January 23, 1998
U:\LEGAL\HSR Filing\NRC ORDER.doc
