SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U5S
ANNUAL REPORT
For the year ended December 31, 1998
Filed pursuant to the
Public Utility Holding Company Act of 1935 by
ALLEGHENY ENERGY, INC.
10435 Downsville Pike
Hagerstown, Maryland 21740-1766
<PAGE>
FORM U5S - ANNUAL REPORT
For the Calendar Year 1998
ITEMS
ITEM 1. SYSTEM COMPANIES AND INVESTMENT THEREIN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Number of % of Issuer's Owner's
Type of Common Voting Book Book
Name of Company Company Shares Owned Power Value Value
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Allegheny Energy, Inc. (AYE) Holding
Allegheny Power Service Corporation(APSC) Service 5,000 100 $ 50 $ 50
Monongahela Power Company (MP) Electric 5,891,000 100 570,189 570,189
The Potomac Edison Company (PE) Electric 22,385,000 100 762,912 764,378
West Penn Power Company (1) (WPP) Electric 24,361,586 100 732,161 745,773
West Virginia Power and
Transmission Company* (2) 30,000 100 3,509 3,504
West Penn West Virginia
Water Power Company* (3) 5 100 (5) 1
Unsecured debt 14 14
AYP Capital, Inc. (AYP) (4) 100 100 19,715 19,715
AYP Energy, Inc. (5) 100 100 3,932 3,932
Allegheny Communications Connect, Inc. (6) 100 100 6,526 6,526
Allegheny Energy Solutions, Inc. (7) 100 100 63 63
Ohio Valley Electric Corporation (OVEC) (1) (8) 12,500 12-1/2 1,505 1,250
Indiana-Kentucky Electric Corporation (IKEC) (8) 17,000 100 3,400 3,400
Subsidiaries of More Than One
System Company
Allegheny Generating Company (AGC) Generating
Owners:
Monongahela Power Company 270 27 44,626 44,626
The Potomac Edison Company 280 28 46,279 46,279
West Penn Power Company 450 45 74,374 74,374
Allegheny Pittsburgh Coal Company* (APC) (9)
Owners:
Monongahela Power Company 2,500 25 (3,264) (3,264)
Unsecured debt 3,495 3,495
The Potomac Edison Company 2,500 25 (3,264) (3,264)
Unsecured debt 3,617 3,617
West Penn Power Company 5,000 50 (6,528) (6,528)
Unsecured debt 7,061 7,061
</TABLE>
*Inactive
(1) Exempt from registration as a holding company under Section 3(a) pursuant
to Rule 2.
(2) Owns land for power development.
(3) Owns land for water power development.
(4) Unregulated nonutility
(5) Bulk power marketer. See paragraph below.
(6) Exempt telecommunications company. See paragraph below.
(7) Unregulated marketer of electric energy and other energy related services.
See paragraph below
(8) Allegheny Energy, Inc. owns 12-1/2% of the capital stock of Ohio Valley
Electric Corporation, the balance owned by unaffiliated companies. Ohio
Valley Electric Corporation owns 100% of the capital stock of Indiana-
Kentucky Electric Corporation. These companies were formed October 1,
1952, to build electric generating facilities to supply power under a
long-term contract to the Energy Research and Development Administration's
(formerly Atomic Energy Commission) uranium diffusion project at Portsmouth,
Ohio. See Holding Company Act Release No. 11578.
(9) Owns coal reserves as a long-term resource.
****************
In 1994, AYE formed a new subsidiary AYP Capital, Inc. (AYP). AYP,
incorporated in Delaware, is an unregulated, wholly owned nonutility. AYP
was formed in an effort to meet the challenges of the new competitive
environment in the industry. AYP Capital has two wholly owned subsidiaries
which were formed in 1996, AYP Energy, Inc. (AYP Energy) and Allegheny
Communications Connect, Inc. (ACC). AYP Energy is a bulk power marketer.
ACC is an exempt telecommunications company under the Public Utility
Holding Company Act of 1935 (PUHCA) ACC's purpose is to develop nonutility
opportunities in the deregulated communications market.
In 1997 AYP Capital, Inc. formed Allegheny Energy Solutions, Inc.
(Allegheny Energy Solutions), a new unregulated company to market electric
energy to retail customers in deregulated retail markets and to participate
in the Pennsylvania pilot program as an alternate supplier to customers
within and outside the West Penn Power Company service are, using
electricity it purchased from the competitive wholesale market. Because
of organizational efficiencies available in an alternate corporate
structure, Allegheny Energy Solutions no longer competes in deregulated
energy markets as of January 1999. The limited liability company formed
between Allegheny Energy Solutions and DQEnergy Partners, Inc., a
subsidiary of DQE, Inc. will no longer participate in the Pennsylvania pilot
program.
1
<PAGE>
ITEM 2. ACQUISITIONS OR SALES OF UTILITY ASSETS.
None.
ITEM 3. ISSUE, SALE, PLEDGE, GUARANTEE OR ASSUMPTION OF SYSTEM
SECURITIES.
None, except as reported in certificates filed pursuant
to Rule 24, Form U-6B-2, Form 10-K 1998, and Schedules
IX for Monongahela Power Company, The Potomac Edison
Company, and West Penn Power Company.
2
<PAGE>
ITEM 4. ACQUISITION, REDEMPTION, OR RETIREMENT OF SYSTEM SECURITIES
Calendar Year 1998
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Name of
Company
Acquiring,
Redeeming,
or Retiring Number of Shares or Principal Amount Commission
Name of Issuer and Title of Issue Securities Acquired Redeemed Retired Consideration Authorization
<S> <C> <C> <C> <C> <C>
The Potomac Edison Company:
6.30% Greene County Pollution
Control Bonds PE $4,000 $4,000 $4,000 Rule 42
6.30% Pleasants County Pollution
Control Bonds PE $30,000 $30,000 $30,000 Rule 42
8-7/8% First Mortgage Bonds PE $50,000 $50,000 $52,655 Rule 42
Monongahela Power Company:
6-7/8% Three-County Pollution
Control Bonds MP $19,100 $19,100 $19,100 Rule 42
6.30% Greene County Pollution
Control Bonds MP $2,560 $2,560 $2,560 Rule 42
6.40% Greene County Pollution
Control Bonds MP $4,000 $4,000 $4,000 Rule 42
6-3/8% Pleasants County Pollution
Control Bonds MP $17,500 $17,500 $17,500 Rule 42
8-1/2% First Mortgage Bonds MP $65,000 $65,000 $68,530 Rule 42
West Penn Power Company
6.10% Greene County Pollution
Control Bonds WP $14,435 $14,435 $14,435 Rule 42
6-1/8% Pleasants County Pollution
Control Bonds WP $45,000 $45,000 $45,000 Rule 42
5-1/2% First Mortgage Bonds WP $102,000 $102,000 $102,000 Rule 42
Allegheny Generating Company
7.89% Medium-Term Notes AGC $2,000 $2,000 $2,000 Rule 42
7.92% Medium-Term Notes AGC $3,000 $3,000 $3,000 Rule 42
7.93% Medium-Term Notes AGC $5,000 $5,000 $5,000 Rule 42
5.75% Medium-Term Notes AGC $50,000 $50,000 $50,000 Rule 42
</TABLE>
3
<PAGE>
ITEM 5. INVESTMENTS IN SECURITIES OF NON-SYSTEM COMPANIES.
1. Eight investments aggregating $112,685, one of which at
$82,000 is related to industrial development.
2. None
ITEM 6. OFFICERS AND DIRECTORS
Part 1. Names, principal business addresses, and positions of
executives, officers and directors of all system
companies as of December 31, 1998.
The following symbols are used in the tabulation:
CH Chairman X Member of Executive Committee
P President A Member of Audit Committee
SVP Senior Vice President F Member of Finance Committee
VP Vice President O Member of Operating Committee
T Treasurer M Member of Management Review and
Director Affairs Committee
S Secretary NB Member of New Business Committee
S Member of Strategic Affairs
Committee
C Controller df Director's fees
D Director s Salary
4
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS - continued
PART I Continued
<TABLE>
<CAPTION>
Allegheny The West
Allegheny Power Monongahela Potomac Penn
Energy, Service AYP Capital Power Edison Power
Inc. Corporation Inc. Company Company Company
<S> <C> <C> <C> <C> <C> <C>
Charles S. Ault s VP
800 Cabin Hill Drive
Greensburg, PA
Eileen M. Beck S s S S S S S
10435 Downsville Pike
Hagerstown, MD
David C. Benson VP s
800 Cabin Hill Drive
Greensburg, PA
Regis F. Binder VP T(1) s VP T(1) VP T(2) T(1) T(1) T(1)
10435 Downsville Pike
Hagerstown, MD
Nancy L. Campbell (3) VP T s VP T VP T T T T
10435 Downsville Pike
Hagerstown, MD
Donald F. Feenstra VP s
800 Cabin Hill Drive
Greensburg, PA
Richard J. Gagliardi VP s VP VP D
10435 Downsville Pike
Hagerstown, MD
Thomas K. Henderson VP s VP D VP VP VP VP
10435 Downsville Pike
Hagerstown, MD
Kenneth M. Jones VP C(4) s VP VP D(5)
10435 Downsville Pike
Hagerstown, MD
Thomas J. Kloc VP(1) C(1) VP(1) C s D(2) C VP(6) C C C
10435 Downsville Pike
Hagerstown, MD
James D. Latimer s VP VP VP
10435 Downsville Pike
Hagerstown, MD
Michael P. Morrell SVP SVP s D VP D VP D VP D VP
10435 Downsville Pike O O O O
Hagerstown, MD
Alan J. Noia P D X F NB s CH P D X CH D P D CH X D CH X D CH X
10435 Downsville Pike CH O O O O
Hagerstown, MD
</TABLE>
(1) Elected 12-1-98
(2) Elected 2-1-99
(3) Retired 12-1-98
(4) Resigned as Controller 12-1-98
(5) Resigned 2-8-99
(6) Elected 2-23-99
5
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS - continued
PART I Continued
<TABLE>
<CAPTION>
Allegheny The West
Allegheny Power Monongahela Potomac Penn
Energy, Service AYP Capital Power Edison Power
Inc. Corporation Inc. Company Company Company
<S> <C> <C> <C> <C> <C> <C>
Karl V. Pfirrmann s VP
800 Cabin Hill Drive
Greensburg, PA
Jay S. Pifer SVP s SVP D VP O P D O P D O P D O
800 Cabin Hill Drive
Greensburg, PA
Victoria V. Schaff VP s VP
10435 Downsville Pike
Hagerstown, MD
Peter J. Skrgic SVP s SVP VP D O D O VP VP D O D O VP
800 Cabin Hill Drive
Greensburg, PA
Robert R. Winter s VP VP VP
800 Cabin Hill Drive
Greensburg, PA
</TABLE>
6
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS - continued
PART I Continued
<TABLE>
<CAPTION>
Allegheny The West
Allegheny Power Monongahela Potomac Penn
Energy, Service AYP Capital Power Edison Power
Inc. Corporation Inc. Company Company Company
<S> <C> <C> <C> <C> <C> <C>
Eleanor Baum df D F M D df D df D df D
51 Astor Pl.
NY, NY
William L. Bennett df D A NB S D df D df D df D
3501 Frontage Road
Tampa, FL
Wendell F. Holland df D A NB D df D df D df D
1025 Laurel Oak Road
Voorhees, NJ
Phillip E. Lint df D a F NB D dfD df D df D
19 High Point Road S
Westport, Ct
Frank A. Metz, Jr. df D F M X D X df D X df D X df D X
P. O. Box 26 S
Sloatsburg, NY
Steven H. Rice df D X F M D X df D X df D X df D X
999 Bedford Street S
Stamford, CT 06905
Gunnar E. Sarsten df D NB M D df D df D df D
11436 Scarborough's S
Neck Road
P.O. Box 459
Belle Haven, VA
</TABLE>
7
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS - continued
PART I Continued
<TABLE>
<CAPTION>
Allegheny The West
Allegheny Power Monongahela Potomac Penn
Energy, Service AYP Capital Power Edison Power
Inc. Corporation Inc. Company Company Company
<S> <C> <C> <C> <C> <C> <C>
Coulter R. Boyle, III
110 E. Wayne Street
Fort Wayne, IN
John D. Brodt
P.O. Box 468
Piketon, OH
E. Linn Draper, Jr.
1 Riverside Plaza
Columbus, OH
Donald R. Feenstra
800 Cabin Hill Drive
Greensburg, PA
Arthur R. Garfield
76 S. Main Street
Akron, OH
David L. Hart
1 Riverside Plaza
Columbus, OH
Chris Hermann
200 W. Main Street
Louisville, KY
Allen M. Hill
1065 Woodman Dr.
Dayton, OH
Willard R. Holland
76 S. Main Street
Akron, OH
J. Gordon Hurst
20 NW Fourth Street
Evansville, IN
David E. Jones
P.O. Box 468
Piketon, OH
John R. Jones, III
1 Riverside Plaza
Columbus, OH
William J. Lhota
1 Riverside Plaza
Columbus, OH
Wayne T. Lucas
220 W. Main Street
Louisville, KY
</TABLE>
8
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS - continued
PART I Continued
<TABLE>
<CAPTION>
Allegheny The West
Allegheny Power Monongahela Potomac Penn
Energy, Service AYP Capital Power Edison Power
Inc. Corporation Inc. Company Company Company
<S> <C> <C> <C> <C> <C> <C>
James J. Markowsky
1 Riverside Plaza
Columbus, OH
Alan J. Noia
10435 Downsville Pike
Hagerstown, MD
Armando A. Pena
1 Riverside Plaza
Columbus, OH
Guy L. Pipitone
76 S. Main Street
Akron, OH
Jackson H. Randolph
P.O. Box 960
Cincinnati, OH
Ronald G. Reherman
20 NW Fourth Street
Evansville, IN
Peter J. Skrgic
800 Cabin Hill Drive
Greensburg, PA
William E. Walters
110 E. Wayne Street
South Bend, IN
</TABLE>
9
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS - continued
PART I Continued
<TABLE>
<CAPTION>
West Virginia West Penn Ohio Indiana
Allegheny Allegheny Power and West Virginia Valley Kentucky
Generating Pittsburgh Transmission Water Power Electric Electric
Company Coal Company Inc. Company Corporation Corporation
<S> <C> <C> <C> <C> <C> <C>
Charles S. Ault
800 Cabin Hill Drive
Greensbrg, PA
Eileen M. Beck S S S S
10435 Downsville Pike
Hagerstown, MD
David C. Benson
800 Cabin Hill Drive
Greensburg, PA
Regis F. Binder (1) T T T T
10435 Downsville Pike
Hagerstown, MD
Nancy L. Campbell (2) T T T T
10435 Downsville Pike
Hagerstown, MD
Donald R. Feenstra D
800 Cabin Hill Drive
Greensburg, PA
Richard J. Gagliardi
10435 Downsville Pike
Hagerstown, MD
Thomas K. Henderson D VP VP D D VP
10435 Downsville Pike
Hagerstown, MD
Kenneth M. Jones (3) VP D D VP D D VP
10435 Downsville Pike
Hagerstown, MD
Thomas J. Kloc (4) VP D D VP D D VP
10435 Downsville Pike
Hagerstown, MD
James D. Latimer D(5) VP
10435 Downsville Pike
Hagerstown, MD
Michael P. Morrell D VP D
10435 Downsville Pike
Hagerstown, MD
Alan J. Noia D CH P P D P D D(1) D X
10435 Downsville Pike
Hagerstown, MD
</TABLE>
(1) Elected 2-1-99
(2) Retired 12-1-98
(3) Resigned 2-8-99
(4) Elected 2-23-99
(5) Resigned 2-23-99
10
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS - continued
PART I Continued
<TABLE>
<CAPTION>
West Virginia West Penn Ohio Indiana
Allegheny Allegheny Power and West Virginia Valley Kentucky
Generating Pittsburgh Transmission Water Power Electric Electric
Company Coal Company Inc. Company Corporation Corporation
<S> <C> <C> <C> <C> <C> <C>
Karl V. Pfirrmann
800 Cabin Hill Drive
Greensburg, PA
Jay S. Pifer VP D D VP P D
800 Cabin Hill Drive
Greensburg, PA
Victoria V. Schaff
10435 Downsville Pike
Hagerstown, MD
Peter J. Skrgic VP D D D VP D D X
800 Cabin Hill Drive
Greensburg, PA
Robert R. Winter VP
800 Cabin Hill Drive
Greensburg, PA
</TABLE>
11
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS - continued
PART I Continued
<TABLE>
<CAPTION>
West Virginia West Penn Ohio Indiana
Allegheny Allegheny Power and West Virginia Valley Kentucky
Generating Pittsburgh Transmission Water Power Electric Electric
Company Coal Company Inc. Company Corporation Corporation
<S> <C> <C> <C> <C> <C> <C>
Eleanor Baum
51 Astor Place
NY, NY
William L. Bennett
3501 Frontage Road
Tampa, FL
Wendell F. Holland
1025 Laurel Oak Road
Voorhees, NJ
Phillip E. Lint
19 High Point Road
Westport, CT
Frank A. Metz, Jr.
P.O. Box 26
Sloatsburg, NY
Steven H. Rice
999 Bedford Street
Stamford, CT 06905
Gunnar E. Sarsten
11436 Scarborough's
Neck Road
P.O. Box 459
Belle Haven, VA
</TABLE>
12
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS - continued
PART I Continued
<TABLE>
<CAPTION>
West Virginia West Penn Ohio Indiana
Allegheny Allegheny Power and West Virginia Valley Kentucky
Generating Pittsburgh Transmission Water Power Electric Electric
Company Coal Company Inc. Company Corporation Corporation
<S> <C> <C> <C> <C> <C> <C>
Coulter R. Boyle, III D
110 E. Wayne Street
Fort Wayne, IN
John D. Brodt s S T S T
P.O. Box 468
Piketon, OH
E. Linn Draper, Jr. P D X P D X
1 Riverside Plaza
Columbus, OH
Donald R. Feenstra D
800 Cabin Hill Drive
Greensburg, PA
Arthur R. Garfield D
76 S. Main Street
Akron, OH
David L. Hart VP VP
1 Riverside Plaza
Columbus, OH
Chris Hermann D X
200 W. Main Street
Louisville, KY
Allen M. Hill D
1065 Woodman Dr.
Dayton, OH
Willard R. Holland D X D X
76 S. Main Street
Akron, OH
J. Gordon Hurst D
20 NW Fourth Street
Evansville, IN
David E. Jones s VP VP
P.O. Box 468
Piketon, OH
John R. Jones, III D
1 Riverside Plaza
Columbus, OH
William J. Lhota D
1 Riverside Plaza
Columbus, OH
Wayne T. Lucas D
220 W. Main Street
Louisville, KY
</TABLE>
13
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS - continued
PART I Continued
<TABLE>
<CAPTION>
West Virginia West Penn Ohio Indiana
Allegheny Allegheny Power and West Virginia Valley Kentucky
Generating Pittsburgh Transmission Water Power Electric Electric
Company Coal Company Inc. Company Corporation Corporation
<S> <C> <C> <C> <C> <C> <C>
James J. Markowsky D
1 Riverside Plaza
Columbus, OH
Alan J. Noia D X
10435 Downsville Pike
Hagerstown, MD
Armando A. Pena VP VP
1 Riverside Plaza
Columbus, OH
Guy L. Pipitone D
76 S. Main Street
Akron, OH
Jackson H. Randolph D X
P.O. Box 960
Cincinnati, OH
Ronald G. Reherman D D
20 NW Fourth Street
Evansville, IN
Peter J. Skrgic D D X
800 Cabin Hill Drive
Greensburg, PA
William E. Walters D
110 E. Wayne Street
South Bend, IN
</TABLE>
14
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS - continued
PART II Financial connections of officers and directors as of
December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name of Officer Name and Location of Positions Held in Applicable
or Director Financial Institution Financial Institution Exemption Rule
A. M. Hill Fifth Third Bancorp Director No interlocking
Cincinnati, OH authority required
William J. Lhota Huntington Director Rule 70(c) & (f)
Bancshares, Inc.
41 S. High Street
Columbus, OH
J. H. Randolph PNC Bank Corporation Director Reg. 250.70 (e)
Pittsburgh, PA
R. G. Reherman National City Director No. interlocking
Bancshares, Inc. authority required
Evansville, IN
</TABLE>
15
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS (continued)
PART III. Disclosures for Allegheny companies are as follows:
(1) Allegheny Energy, Inc. (AE), Allegheny Power Service
Corporation (APSC), Monongahela Power Company (Monongahela
and M), The Potomac Edison Company (Potomac Edison and PE),
West Penn Power Company (West Penn and WP), and Allegheny
Generating Company (AGC) sections of the combined Annual
Report on Form 10-K for 1998 of AE, M, PE, WP, and AGC on
pages 56 through 62 and of the AE Proxy Statement on pages
11 through 13. The executive officers of AE are also
executive officers of APSC and receive their compensation
from APSC as shown on page 5 and together with the directors
owned beneficially 122,459 shares of common stock of AE.
APSC does not file a proxy statement or Form 10-K.
(2) Allegheny Pittsburgh Coal Company, West Virginia Power and
Transmission Company, and West Penn West Virginia Water
Power Company do not file proxy statements or Form 10-K's.
Their directors and executive officers do not receive any
compensation from these companies, but receive compensation
as employees of certain of the companies as reported in (1)
above.
(3) Ohio Valley Electric Corporation and Indiana-Kentucky
Electric Corporation do not file proxy statements or Form 10-
K's. These companies are not wholly owned by Allegheny
Energy, Inc., or its subsidiaries (see page 1 of this Form
U5S) and none of their executive officers are employees of
the Allegheny Energy companies. Except for two executive
officers whose aggregated compensation was $232,049, directors
and executive officers do not receive any compensation from
these companies. The compensation and interest in system
securities of directors who are employees of the Allegheny
Energy companies are reported in (1) above.
16
<PAGE>
ITEM 6. PART III (continued)
(1) AE, AGC, M, PE, WPP
(from 1998 Form 10-K)
ITEM 11. EXECUTIVE COMPENSATION
During 1998, and for 1997 and 1996, the annual
compensation paid by AE, Monongahela, Potomac Edison, West Penn
and AGC directly or indirectly for services in all capacities to
such companies to their Chief Executive Officer and each of the
four most highly paid executive officers of the System whose cash
compensation exceeded $100,000 was as follows:
Summary Compensation Tables (a)
AE(b), Monongahela(c), Potomac Edison (c), West Penn (c) and AGC(c)
Annual Compensation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
All
Name Other
and Long-Term Compen-
Principal Annual Performance sation
Position(d) Year Salary($) Incentive($)(e) Plan($)(f) ($)(g)
Alan J. Noia, 1998 525,000 180,500 286,655 184,788
Chief Executive Officer 1997 460,000 253,000 250,657 124,495
1996 360,000 253,750 131,071 92,769
Peter J. Skrgic, 1998 280,008 123,000 204,753 50,757
Senior Vice President 1997 265,000 155,400 150,394 91,409
Supply 1996 245,000 176,300 96,119 24,830
Michael P. Morrell (h) 1998 255,000 117,000 114,870 28,599
Senior Vice President & 1997 240,000 95,200 (h) 26,068
Chief Financial Officer 1996 183,336 72,500 (h) (h)
Jay S. Pifer, 1998 250,008 66,500 131,042 41,542
Senior Vice President 1997 240,000 95,200 150,394 67,810
Delivery 1996 230,000 112,000 87,381 30,949
Richard J. Gagliardi 1998 200,016 60,400 114,662 25,345
Vice President 1997 190,000 75,600 100,263 25,340
Administration 1996 175,000 100,800 52,429 17,898
</TABLE>
(a) The individuals appearing in this chart perform
policy-making functions for each of the
Registrants. The compensation shown is for all
services in all capacities to AE and its
subsidiaries. All salaries and bonuses of these
executives are paid by APSC.
(b) AE has no paid employees.
(c) Monongahela, Potomac Edison, West Penn, and AGC
have no paid employees.
(d) See Executive Officers of the Registrants for all
positions held.
(e) Incentive awards are based upon performance in the
year in which the figure appears but are paid in
the following year. The incentive award plan will
be continued for 1999.
17
<PAGE>
ITEM 6. Part III (continued)
(1) AE, AGC, M, PE, WPP
(from 1998 Form 10-K)
(f) In 1994, the Board of Directors of the Company
implemented a Performance Share Plan (the "Plan")
for senior officers of the Company and its
subsidiaries which was approved by the
shareholders of AE at the annual meeting in May
1994. The first Plan cycle began on January 1,
1994 and ended on December 31, 1996. A second
cycle began on January 1, 1995 and ended on
December 31, 1997. The figure shown for 1996
represents the dollar value paid in 1997 to each
of the named executive officers who participated
in Cycle I. The figure shown for 1997 represents
the dollar value paid in 1998 to each of the named
executive officers who participated in Cycle II.
A third cycle began on January 1, 1996 and ended
on December 31, 1998. The figure shown for 1998
represents the dollar value paid in 1999 to each
of the named executives who participated in Cycle
III. A fourth cycle began on January 1, 1997 and
will end on December 31, 1999. In 1998, the Board
of Directors of AE implemented a new Long-Term
Incentive Plan, which was approved by the
shareholders of AE at the AE annual meeting in May
1998. A fifth cycle (the first three-year
performance period of this Plan) began on January
1, 1998 and will end on December 31, 2000. After
completion of each cycle, AE stock, stock options
(for Cycle V), cash, or a combination may be paid
if performance criteria have been met.
(g) The figures in this column include the present
value of the executives' cash value at retirement
attributable to the current year's premium payment
for both the Executive Life Insurance and Secured
Benefit Plans (based upon the premium, future
valued to retirement, using the policy internal
rate of return minus the corporation's premium
payment), as well as the premium paid for the
basic group life insurance program plan and the
contribution for the Employee Stock Ownership and
Savings Plan (ESOSP) established as a non-
contributory stock ownership plan for all eligible
employees effective January 1, 1976, and amended
in 1984 to include a savings program.
Effective January 1, 1992, the basic group life
insurance provided employees was reduced from two
times salary during employment, which reduced to
one times salary after five years in retirement,
to a new plan which provides one times salary
until retirement and $25,000 thereafter. Some
executive officers and other senior managers
remain under the prior plan. In order to pay for
this insurance for these executives, during 1992
insurance was purchased on the lives of each of
them, except Mr. Morrell, who is not covered by
this plan. Effective January 1, 1993, Allegheny
18
<PAGE>
ITEM 6. Part III (continued)
(1) AE, AGC, M, PE, WPP
(from 1998 Form 10-K)
started to provide funds to pay for the future
benefits due under the supplemental retirement
plan (Secured Benefit Plan). To do this,
Allegheny purchased, during 1993, life insurance
on the lives of the covered executives. The
premium costs of both policies plus a factor for
the use of the money are returned to Allegheny at
the earlier of (a) death of the insured or (b) the
later of age 65 or 10 years from the date of the
policy's inception. Under the ESOSP for 1998, all
eligible employees may elect to have from 2% to
10% of their compensation contributed to the Plan
as pre-tax contributions and an additional 1% to
6% as post-tax contributions. Employees direct
the investment of these contributions into one or
more of nine available funds. Fifty percent of
the pre-tax contributions up to 6% of compensation
are matched with common stock of AE. Effective
January 1 1997, the maximum amount of any
employee's compensation that may be used in these
computations is $160,000. Employees' interests in
the ESOSP vest immediately. Their pre-tax
contributions may be withdrawn only upon meeting
certain financial hardship requirements or upon
termination of employment. For 1998, the figure
shown includes amounts representing (a) the
aggregate of life insurance premiums and dollar
value of the benefit to the executive officer of
the remainder of the premium paid on the Group
Life Insurance program and the Executive Life
Insurance and Secured Benefit Plans, and (b) ESOSP
contributions, respectively, as follows: Mr. Noia
$179,988 and $4,800; Mr. Skrgic $45,957 and
$4,800; Mr. Morrell $25,399 and $3,200; Mr. Pifer
$36,742 and $4,800; and Mr. Gagliardi $20,545 and
$4,800.
(h) Michael P. Morrell joined Allegheny on May 1,
1996, and did not receive a payment from the Long-
Term Performance Plan for the first or second Plan
cycles. His Cycle III payout is prorated for the
period May 1, 1996 - December 31, 1998.
19
<PAGE>
ITEM 6. Part III (continued)
(1) AE, AGC, M, PE, WPP
(from 1998 Form 10-K)
ALLEGHENY ENERGY, INC. LONG-TERM INCENTIVE PLAN
SHARES AWARDED IN LAST FISCAL YEAR (CYCLE V)
<TABLE>
<CAPTION>
Estimated Future Payout
Number of Performance Threshold Target Maximum
Shares Period Until Number of Number of Number of
Name Payout Shares Shares Shares
<S> <C> <C> <C> <C> <C>
Alan J. Noia
Chief Executive Officer 8,077 1998-2000 4,846 8,077 16,154
Peter J. Skrgic
Senior Vice President 4,308 1998-2000 2,585 4,308 8,615
Michael P. Morrell
Senior Vice President 3,077 1998-2000 1,846 3,077 6,154
Jay S. Pifer
Senior Vice President 2,923 1998-2000 1,754 2,923 5,846
Richard J. Gagliardi
Vice President 2,462 1998-2000 1,477 2,462 4,923
</TABLE>
The named executives were awarded the above number of
performance shares for the 1998-2000 period. Such number of
shares are only targets. As described below, no payouts will be
made unless certain criteria are met. Each executive's 1998-2000
target long-term incentive opportunity was converted into
performance shares equal to an equivalent number of shares of AE
common stock based on the price of such stock on December 31,
1997. At the end of this three-year performance period, the
performance shares attributed to the calculated award will be
valued based on the price of AE common stock on December 31, 2000
and will reflect dividends that would have been paid on such
stock during the performance period as if they were reinvested on
the date paid. If an executive retires, dies or otherwise leaves
the employment of Allegheny prior to the end of the three-year
period, the executive may still receive an award based on the
number of months worked during the period. The final value of an
executive's account, if any, will be paid to the executive in
early 2001.
The actual payout of an executive's award may range from 0
to 200% of the target amount, before dividend reinvestment. The
Management Review and Director Affairs Committee of the Board of
Directors may decide to convert the value of such performance
shares to stock options at that time or deliver cash or shares of
common stock. The payout is based upon stockholder performance
versus the peer group. The stockholder rating is then compared
to a pre-established percentile ranking chart to determine the
payout percentage of target. A ranking below 30% results in a 0%
payout. The minimum payout begins at the 30% ranking, which
results in a payout of 60% of target, ranging up to a payout of
200% if there is a 90% or higher ranking.
20
<PAGE>
ITEM 6. Part III (continued)
(1) AE, AGC, M, PE, WPP
(from 1998 Form 10-K)
Retirement Plan
The Company maintains a Retirement Plan covering
substantially all employees. The Retirement Plan is a
noncontributory, trusteed pension plan designed to meet the
requirements of Section 401(a) of the Internal Revenue Code of
1986, as amended (the Code). Each covered employee is eligible
for retirement at normal retirement date (age 65), with early
retirement permitted. In addition, executive officers and other
senior managers participate in a supplemental executive
retirement plan (Secured Benefit Plan).
Pursuant to the Secured Benefit Plan, senior executives of
Allegheny companies who retire at age 60 or over with 40 or more
years of service are entitled to a supplemental retirement
benefit in an amount that, together with the benefits under the
basic plan and from other employment, will equal 60% of the
executive's highest average monthly earnings for any 36
consecutive months. The earnings include 50% of the actual
annual incentive award paid beginning February 1, 1996 and 100%
beginning February 1, 1999. The supplemental benefit is reduced
for less than 40 years service and for retirement age from 60 to
55. It is included in the amounts shown where applicable. To
provide funds to pay such benefits, beginning January 1, 1993,
the Company purchased insurance on the lives of the participants
in the Secured Benefit Plan. If the assumptions made as to
mortality experience, policy dividends, and other factors are
realized, the Company will recover all premium payments, plus a
factor for the use of the Company's money. The portion of the
premiums for this insurance required to be deemed "compensation"
by the Securities and Exchange Commission is included in the "All
Other Compensation" column on page 56 of this Form 10-K. All
executive officers are participants in the Secured Benefit Plan.
It also provides for use of Average Compensation in excess of
Code maximums.
The following table shows estimated maximum annual benefits
payable following retirement (assuming payments on a normal life
annuity basis and not including any survivor benefit) to an
employee in specified remuneration and years of credited service
classifications. These amounts are based on an estimated Average
Compensation (defined as average total earnings during the
highest-paid 36 consecutive calendar months or, if smaller, the
member's highest rate of pay as of any July 1st), retirement at
age 65 and without consideration of any effect of various options
which may be elected prior to retirement. The benefits listed in
the Pension Plan Table are not subject to any deduction for
Social Security or any other offset amounts.
21
<PAGE>
ITEM 6. Part III (continued)
(1) AE, AGC, M, PE, WPP
(from 1998 Form 10-K)
<TABLE>
<CAPTION>
PENSION PLAN TABLE
________________________Years of Credited Service______________
Average Compensation(a) 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
<S> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 60,000 $ 80,000 $100,000 $110,000 $115,000 $120,000
250,000 75,000 100,000 125,000 137,500 143,750 150,000
300,000 90,000 120,000 150,000 165,000 172,500 180,000
350,000 105,000 140,000 175,000 192,500 201,250 210,000
400,000 120,000 160,000 200,000 220,000 230,000 240,000
450,000 135,000 180,000 225,000 247.500 258,750 270,000
500,000 150,000 200,000 250,000 275,000 287,500 300,000
550,000 165,000 220,000 275,000 302,500 316,250 330,000
600,000 180,000 240,000 300,000 330,000 345,000 360,000
650,000 195,000 260,000 325,000 357,500 373,750 390,000
700,000 210,000 280,000 350,000 385,000 402,500 420,000
750,000 225,000 300,000 375,000 412,500 431,250 450,000
800,000 240,000 320,000 400,000 440,000 460,000 480,000
</TABLE>
(a) The earnings of Messrs. Noia, Skrgic, Pifer, Morrell and
Gagliardi covered by the plan correspond substantially to such
amounts shown for them in the summary compensation table. As of
December 31, 1998, they had accrued 29, 34, 34, 2-1/2 and 20
years of credited service, respectively, under the Retirement
Plan. Pursuant to an agreement with Mr. Morrell, at the end of
ten years of employment with the Company, Mr. Morrell will be
credited with an additional eight years of service.
Change In Control Contracts
AE has entered into Change in Control contracts with the named
and certain other Allegheny executive officers (Agreements). Each
Agreement sets forth (i) the severance benefits that will be
provided to the employee in the event the employee is terminated
subsequent to a Change in Control of AE (as defined in the
Agreements), and (ii) the employee's obligation to continue his or
her employment after the occurrence of certain circumstances that
could lead to a Change in Control. The Agreements provide generally
that if there is a Change in Control, unless employment is
terminated by AE for Cause, Disability or Retirement or by the
employee for Good Reason (each as defined in the Agreements),
severance benefits payable to the employee will consist of a cash
payment equal to 2.99 times the employee's base annual salary and
target short-term incentive together with AE maintaining existing
benefits for the employee and the employee's dependents for a period
of three years. Each Agreement expires on December 31, 2001, but is
automatically extended for one year periods thereafter unless either
AE or the employee gives notice otherwise. Notwithstanding the
delivery of such notice, the Agreements will continue in effect for
thirty-six months after a Change in Control.
22
<PAGE>
ITEM 6. Part III (continued)
(1) AE, AGC, M, PE, WPP
(from 1998 Form 10-K)
Compensation of Directors
In 1998, AE directors who were not officers or employees of
System companies received for all services to System companies (a)
$16,000 in retainer fees, (b) $800 for each committee meeting
attended, except Executive Committee meetings, for which fees are
$200, (c) $250 for each Board meeting of each company attended, and
(d) 200 shares of AE common stock pursuant to the Restricted Stock
Plan for Outside Directors. Under an unfunded deferred compensation
plan, a director may elect to defer receipt of all or part of his or
her director's fees for succeeding calendar years to be payable with
accumulated interest when the director ceases to be such, in equal
annual installments, or, upon authorization by the Board of
Directors, in a lump sum. In addition to the fees mentioned above,
the Chairperson of each of the Audit, Finance, Management Review and
Director Affairs, New Business, and Strategic Affairs Committees
receives a further fee of $4,000 per year.
In addition, a Deferred Stock Unit Plan for Outside Directors
provides for a lump sum payment (payable at the director's election
in one or more installments, including interest thereon equivalent
to the dividend yield) to directors calculated by reference to AE's
common stock. Directors who serve at least five years on the Board
and leave at or after age 65, or upon death or disability, or as
otherwise directed by the Board will receive such payments. Each
year, AE credits each Outside Director's account with 275 deferred
stock units.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The table below shows the number of shares of AE common
stock that are beneficially owned, directly or indirectly, by
each director and named executive officer of AE, Monongahela,
Potomac Edison, West Penn, and AGC and by all directors and
executive officers of each such company as a group as of December
31, 1998. To the best of the knowledge of AE, there is no person
who is a beneficial owner of more than 5% of the voting
securities of AE other than the one shareholder shown in the
chart below.
23
<PAGE>
ITEM 6. Part III (continued)
(1) AE, AGC, M, PE, WPP
(from 1998 Form 10-K)
Executive Shares of
Officer or APS Percent
Name Director of Common Stock of Class
Eleanor Baum AE,MP,PE,WP 2,800* .02% or less
William L. Bennett AE,MP,PE,WP 3,570* "
Richard J. Gagliardi AE 10,541 "
Thomas K. Henderson AE,MP,PE,WP,AGC 5,761 "
Wendell F. Holland AE,MP,PE,WP 1,057* "
Kenneth M. Jones AE,AGC 11,541 "
Phillip E. Lint AE,MP,PE,WP 1,517* "
Frank A. Metz, Jr. AE,MP,PE,WP 3,355* "
Michael P. Morrell AE,MP,PE,WP,AGC 252 "
Alan J. Noia AE,MP,PE,WP,AGC 27,947 "
Jay S. Pifer AE,MP,PE,WP 14,547 "
Steven H. Rice AE,MP,PE,WP 3,640* "
Gunnar E. Sarsten AE,MP,PE,WP 6,800* "
Peter J. Skrgic AE,MP,PE,WP,AGC 16,101 "
Sanford C. Bernstein & Co., Inc. 7,948,382 6.49%
767 Fifth Avenue
New York, NY 10153
All directors and executive officers
of AE as a group (18 persons) 122,459 Less than .10%
All directors and executive officers
of MP as a group (18 persons) 115,334 "
All directors and executive officers
of PE as a group (18 persons) 115,334 "
All directors and executive officers
of WP as a group (19 persons) 121,352 .10%
All directors and executive officers
of AGC as a group (8 persons) 74,378 .06%
*Excludes the outside directors' accounts in the Deferred Stock
Unit Plan which, at March 1, 1999, were valued at the number of
shares shown: Baum 3,463; Bennett 1,720; Holland 1,578; Lint
5,084; Metz 3,732; Rice 2,270; and Sarsten 3,159.
All of the shares of common stock of Monongahela (5,891,000),
Potomac Edison (22,385,000), and West Penn (24,361,586) are owned
by AE. All of the common stock of AGC is owned by Monongahela
(270 shares), Potomac Edison (280 shares), and West Penn (450
shares).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
24
<PAGE>
ITEM 6. PART III (continued)
(1) AE
(from 1998 Proxy Statement)
MANAGEMENT REVIEW AND DIRECTOR AFFAIRS COMMITTEE REPORT
GENERAL
The compensation program for executive officers of the Company and its
subsidiaries is directed by the Management Review and Director Affairs
Committee (the Committee) of the Company's Board of Directors. The
Committee recommends the annual compensation program for each year to the
Board of Directors of the Company and of each subsidiary for its approval.
The Committee continues to believe that with the advent of competition
to this industry a larger portion of compensation should be included in
incentive plans. For 1999, a substantial portion of total compensation
will continue to be linked to corporate and business performance.
The executive compensation program is intended to meet three
objectives:
Create a strong link between executive compensation and
total return to stockholders.
Offer compensation opportunities that are competitive with
the median level of opportunity in the marketplace, at expected
levels of performance, but exceed median levels for performance
exceeding expectations.
Ensure internal compensation equity--maintaining a
reasonable relationship between compensation and the duties and
responsibilities of each executive position.
In a further effort to tie the executive compensation program to the
overall success of Allegheny, stock ownership guidelines were adopted for
the executive officers. The guidelines require the Chief Executive Officer
(CEO) to own stock valued at 3.5 times his base salary; the Senior Vice
Presidents at 1.75 times base salary; and the Vice Presidents at one times
base salary. They have until December 31, 2003 to meet the guidelines.
EXECUTIVE COMPENSATION PROGRAM
The Company's executive compensation program has three components:
base salary, and short-term and long-term incentive awards.
The Company's executive compensation is both market- and performance-
based. The Committee believes that it is necessary to use both market- and
performance-based compensation to meet the challenges of intensifying
competitive, economic, and regulatory pressures.
25
<PAGE>
ITEM 6. PART III (continued)
(1) AE
(from 1998 Proxy Statement)
To ensure that the Company's salary structure and total compensation
continue to be competitive, they are compared each year through an annual
compensation survey, prepared by a leading consulting firm, with those of
comparable electric utilities--16 or more in recent years. The survey
companies are either similar in type and size to the Company, contiguous to
our geographic territory, or have a similar fuel mix.
In 1998, over 80% of these survey companies are included in the Dow
Jones Electric Index to which the Company's performance is compared on page
18 of this proxy statement. This comparison, conducted by a national
compensation consulting firm, involves matching Company positions,
including the CEO, with those in the survey companies that have comparable
duties and responsibilities. For 1998, the survey indicated that the
Company's executive salary structure was below the median. This survey
data became the basis for the consulting firm's recommendations as to
market prices for each position and total compensation in line with the
survey average for comparable positions.
Base salary:
The base salaries of all executive officers, including the
CEO, are reviewed annually by the Committee, which makes
recommendations to the Board of Directors. In recommending base
salary levels, the Committee gives most weight to the performance
of each executive. The Committee receives a report from the CEO
including (a) a performance assessment of each executive (other
than himself) based on that executive's position-specific
responsibilities and a performance evaluation by his or her
supervisor and (b) a specific salary recommendation for each. In
determining its recommendations to the Board, the Committee also
takes into consideration operating performance, including such
factors as safety, efficiency, competitive position, customer
satisfaction, and financial results, including such things as
total return, earnings per share, quality of earnings, dividends
paid, and dividend payout ratio.
Short-term Incentive Awards:
The Allegheny Energy Annual Incentive Plan (the Annual
Incentive Plan) is designed to supplement base salaries and
provide cash incentive compensation opportunities to attract,
retain, and motivate a senior group of managers, including
executive officers selected by the Committee. The Annual
Incentive Plan provides for establishment of individual incentive
awards based on meeting specific predetermined corporate
performance targets. The performance targets are based on net
income available to common shareholders, achieved shareholder
return, overall corporate financial results (changes in earnings
per share, dividends paid per share and dividend payout ratios),
cost of service to customers and Company performance, including
competitive position. In addition, individual performance goals
are set on a position specific basis for participants.
26
<PAGE>
ITEM 6. PART III (continued)
(1) AE
(from 1998 Proxy Statement)
Specific operating, management, or financial areas to be
emphasized, as well as performance targets, are determined each
year by the Committee with the recommendations of the CEO. The
target awards under the 1998 Incentive Plan were determined by
the Committee, and participants could earn from zero to 1-1/2
times the target award. For the 1998 Incentive Plan the targets
were $262,500 for Mr. Noia and from $80,000 to $140,000 for the
other named officers. Targets for other participants ranged from
$70,000 and lower, which is approximately 35% or less of 1998
base salary. Annual Incentive Plan awards earned are paid in the
year after the year for which they are earned. Awards earned for
performance in 1996, 1997, and 1998 are included in the Annual
Compensation Table for those years under the column "Incentive
Award" for the individuals named therein.
Long-term Incentive Awards:
The Allegheny Energy, Inc. Long-term Incentive Plan (the
Incentive Plan) replaced the Allegheny Power System Performance
Share Plan (the Performance Plan Share) in 1998. Both plans were
designed as an aid in attracting and retaining individuals of
outstanding ability. Awards earned under both plans are based on
performance over three-year "cycles." Eleven executive officers
of the Company and its subsidiaries were selected by the
Committee to participate in Cycle III (1996-1998); eleven in
Cycle IV (1997-1999); and eleven in Cycle V (1998-2000). Cycles
III and IV provide for the establishment of corporate incentive
awards based on meeting specific stockholder and customer
performance rankings (total stockholder return ranking in the Dow
Jones Electric Utility Index and cost of customer service versus
nine other utilities). Cycle V is based solely on total
stockholder return ranking in the Dow Jones Electric Utility
Index.
The Cycle III target awards under the Performance Share Plan
range from $70,000 for the named officers to $175,000 for Mr.
Noia. These amounts equate to 2,445 to 6,114 targeted shares of
stock as of January 1, 1996, the start of the performance cycle.
The actual award calculated under the Plan equaled 115% of the
target amount. The dollar value of such shares calculated as of
December 31, 1998, including reinvested dividends, is included in
the compensation table on page 14.
The Cycle IV target awards under the Performance Share Plan
range from $70,000 for the named officers to $230,000 for Mr.
Noia, which equate to 2,300 to 7,570 shares of stock as of
January 1, 1997, the start of the performance cycle.
The Cycle V target awards under the Incentive Plan range
from $80,000 for the named officers to $262,500 for Mr. Noia,
which equate to 2,462 to 8,077 shares of stock as of January 1,
1998, the start of the performance cycle. The target opportunity
and the corresponding number of equivalent performance shares
allocated to each named executive officer for Cycle V are listed
in the Long-term Incentive Plan Table on page 16.
27
<PAGE>
ITEM 6. PART III (continued)
(1) AE
(from 1998 Proxy Statement)
The actual payouts will be determined in 2000 for Cycle IV
and in 2001 for Cycle V, after completion of each cycle and
determination of the actual stockholder and customer rankings.
The actual awards may be paid in Company stock or cash (Cycle IV)
or Company stock, stock options, or cash (for Cycle V) and can
range from 0 to 200% of the targeted shares noted above.
For Mr. Noia, the Committee developed salary and Annual Incentive Plan
award recommendations for the Board's consideration. The base salary
recommendation was based upon the Committee's evaluation of his performance
as CEO and of his responsibilities in the context of the Company's overall
financial and operating performance, including the factors described in the
next sentence. The Annual Incentive Plan award recommendation was based
primarily on 1998 corporate financial results, including total shareholder
return, changes in earnings per share, dividends paid per share, and
dividend payout ratios; the overall quality and cost of service rendered to
customers; and overall Allegheny Energy performance, including competitive
position. Mr. Noia's 1998 total compensation reflected the Committee's
evaluation of his performance as CEO and the described overall results.
Section 162(m) of the Internal Revenue Code generally limits to $1
million the corporate deduction for compensation paid to executive officers
named in the Proxy Statement, unless certain requirements are met. This
Committee has carefully considered the effect of this tax code provision on
the current executive compensation program. At this time, Allegheny's
deduction for officer compensation is not limited by the provisions of
Section 162(m). The Committee intends to take such actions with respect to
the executive compensation program, if necessary, to preserve the corporate
tax deduction for executive compensation paid.
No current member of the Management Review and Director Affairs
Committee is or ever was an employee of the Company or any of its
subsidiaries.
Frank A. Metz, Jr., Chairman
Eleanor Baum
Steven H. Rice
Gunnar E. Sarsten
28
<PAGE>
ITEM 7. CONTRIBUTIONS AND PUBLIC RELATIONS
(a) Expenditures, disbursements, or payments during the year, in money,
goods or services, directly or indirectly to or for the account of any
political party, candidate for public office or holder of such office, or
any committee or agent therefor (or any officer or employee acting as
such).
None.
(b) Expenditures, disbursements, or payments during the year, in money,
goods or services, directly or indirectly to or for the account of any
citizens' group, taxpayers' group, or public relations counsel (or any
officer or employee acting as such).
None.
29
<PAGE>
ITEM 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS
<TABLE>
<CAPTION>
Calendar Year 1998
Part I. Between System Companies In effect
Date of on Dec.31
Transaction Serving Company Receiving Company Compensation Contract Yes or No)
<S> <C> <C> <C> <C> <C>
Operating, maintenance, Monongahela Power The Potomac Edison $96,246 5/29/73 Yes
accounting, supervisory, Company Company effective
and other administrative 5/31/74
or other services
</TABLE>
West Penn Power Company has an Operational Service Contract with The
Potomac Edison Company (effective 12/23/77) for which the compensation was
$169,094 in 1998.
West Penn Power Company tests meters for The Potomac Edison Company. The
compensation for this service was $43,375 in 1998.
Part II. Between System Companies and others
<TABLE>
<CAPTION>
Calendar Year 1998
In effect
Date of on Dec.31
Transaction Serving Company Receiving Company Compensation Contract Yes or No)
<S> <C> <C> <C> <C> <C>
Engineering, drafting and American Electric Ohio Valley Electric $1,360,978 12/27/56 Yes
other technical and Power Service Corporation
administrative Corporation
Engineering, drafting and American Electric Indiana-Kentucky $1,098,811 12/27/56 Yes
other technical and Power Service Electric Corporation
administrative Corporation
Maintenance Services Appalachian Power Ohio Valley Electric $ 297,755 1/1/79 Yes
Company Corporation
Maintenance Services Appalachian Power Indiana-Kentucky $ 233,035 1/1/79 Yes
Company Electric Corporation
</TABLE>
Part III.
None.
30
<PAGE>
ITEM 9. Wholesale Generators & Foreign Utility Companies
I. AYP ENERGY, INC.
Part I.
(a) AYP Energy, Inc.
One Stuart Plaza
RR 12 Box 40
Greensburg PA 15601
In October 1996, AYP Energy, Inc. (AYP Energy) purchased Duquesne
Light Company's 50% interest (276 MW) in Unit No. 1 of the Fort
Martin Power Station. The remainder of the station is owned by
Allegheny Energy, Inc.'s (AYE, Inc.) regulated subsidiaries.
AYP Energy is a wholly-owned subsidiary of AYP Capital, Inc., a
wholly-owned, nonutility subsidiary of AYE, Inc.
(b) AYP Capital owns 100% of AYP Energy common stock, 100 shares
with a total book value of $1,000.
AYP Capital has made additional capital contributions of
$35,658,925 as of December 31, 1998.
AYP Capital's Equity in Undistributed Earnings of AYP Energy
totaled ($31,726,208) as of December 31, 1998.
AYP Energy's $160,000,000 of five year debt financing issued in
1996 and maturing in 2001 is supported by AYE, Inc.
No assets have been transferred from other system companies
to AYP Energy.
(c) Ratio of Debt to Common Equity as of December 31, 1998:
Long-term Debt 160,000,000
Common Equity 3,933,717 = 40.67
(d) A copy of the Service Agreement between the Allegheny Power
Service Corporation and AYP Energy, Inc. is already on file.
Fort Martin Common facilities Operating Agreement and Fort Martin
Construction and Operating Agreement between Duquesne Light,
Monongahela Power Company, The Potomac Edison Company, and
West Penn Power Company were previously filed. When AYP Energy
purchased Duquesne's 50% interest in Unit 1, it agreed to replace
Duquesne as a party to these agreements.
Part II. Allegheny Energy Corporate Structure
AYE, Inc.
(NONUTILITY SUBSIDIARY) Regulated Business
AYP Capital Units
(Wholly-owned subsidiary of AYE, Inc.) (Wholly-owned subsidiaries of AYE,Inc.)
<PAGE>
AYP Energy
(Wholly-owned subsidiary of AYP Capital, Inc.)
Part III.Total Investment in AYP Energy 3,933,717
<PAGE>
ITEM 9. Wholesale Generators & Foreign Utility Companies
II. LATIN AMERICA ENERGY AND ELECTRICITY FUND I, L.P.
Part I.
(a) Latin America Energy and Electricity Fund I, L.P.
P. O. Box 309
Ugland House
George Town, Grand Cayman
Cayman Islands, British West Indies
Latin America Energy and Electricity Fund I, L.P. (LAEEP)
is a limited partnership which invests in entities involved
in new or existing electric power projects in Latin America
and the Caribbean.
AYP Capital, Inc., the nonutility subsidiary of AYE, Inc.
owns a 8.25% interest in LAEEP.
(b) AYP Capital has invested $4,765,705 in LAEEP as of
December 31, 1998.
AYP Capital's Equity in Undistributed Earnings of LAEEP
totaled ($146,254) as of December 31, 1998.
None.
No assets have been transferred from other system
companies to LAEEP.
(c) Not applicable.
(d) None.
Part II. LAEEP is simply an investment on the books of AYP Capital, Inc.
Part III.Total Investment in LAEEP 4,619,451
<PAGE>
ITEM 9. Wholesale Generators & Foreign Utility Companies
III. FONDELEC GENERAL PARTNER, LP
Part I.
(a) FondElec General Partner, LP
P. O. Box 309
Ugland House, South Church Street
George Town, Grand Cayman
Cayman Islands, British West Indies
Fondelec General Partner, LP is a limited partnership
organized for the purpose of acting as the general partner
of the Latin America Energy and Electricity Fund I, LP.
AYP Capital, Inc., the nonutility subsidiary of AYE,Inc.
owns a 4.15% interest in Fondelec.
(b) AYP Capital has invested $23,851 in Fondelec as of
December 31, 1998.
AYP Capital's Equity in Undistributed Earnings of Fondelec
totaled ($702) as of December 31, 1998.
None.
No assets have been transferred from other system
companies to LAEEP.
(c) Not applicable.
(d) None.
Part II. Fondelec is simply an investment on the books of AYP Capital, Inc.
Part III.Total Investment in Fondelec 23,149
<PAGE>
ITEM 10 - EXHIBIT B F-1
CONSTITUENT INSTRUMENTS DEFINING THE RIGHTS OF HOLDERS
OF EQUITY SECURITIES OF SYSTEM COMPANIES.
INCORPORATED BY REFERENCE
ALLEGHENY ENERGY, INC.:
Charter, as amended Form 10-K of the Company (1-267),
December 31, 1997, exh. 3.1
By-laws, as amended Form 10-Q of the Company (1-267),
June 30, 1998, exh. 3.2
ALLEGHENY POWER SERVICE CORPORATION:
Charter, effective November 22, 1963 Form U5S, 1964, exh. B-2
By-laws, as amended November 1, 1996 Form U5S, 1983, exh. B-1
Form U5S, 1990, exh. B-2
MONONGAHELA POWER COMPANY:
Charter, as amended Form 10-Q, September 1995
exh. (a)(3)(i)
Code of Regulations, as amended Form 10-Q, September 1995,
exh. (a)(3)(ii)
THE POTOMAC EDISON COMPANY:
Charter, as amended Form 10-Q, September 1995,
exh. (a)(3)(i)
By-laws, as amended Form 10-Q, September 1995,
exh. (a)(3)(ii)
WEST PENN POWER COMPANY:
Charter, as amended Form 10-Q, September 1995,
exh. (a)(3)(i)
By-laws, as amended Form 10-Q, September 1995,
exh. (a)(3)(ii)
ALLEGHENY PITTSBURGH COAL COMPANY:
Charter, effective October 1, 1918 Form U5B, File 30-75, exh. B-2
Amendment to Charter, effective
October 5, 1918 Form U5B, File 30-75, exh. B-2
January 21, 1956 Form U5S, 1964, exh. B-7
By-laws, as amended Form U5S, 1996, exh. B-1
ALLEGHENY GENERATING COMPANY:
Charter, as amended Form 10, 1986,exh.3(1)
Form 10-Q, June 1989, exh.(a)
By-laws, as amended Form 10-K,of the Company (0-14688),
December 31, 1996, exh. 3.2
31
<PAGE>
ITEM 10 - EXHIBIT B (continued)
Incorporated by Reference
WEST VIRGINIA POWER & TRANSMISSION COMPANY:
Charter, effective April 3, 1912 and
Amendments to March 22, 1934 Form U5B, File 30-75, exh. B-38
Amendments to Charter, effective
January 28, 1956 Form U5S, 1964, exh. B-10
February 7, 1961 Form U5S, 1964, exh. B-11
By-laws, as amended Form U5S, 1996, exh. B-2
WEST PENN WEST VIRGINIA
WATER POWER COMPANY:
Charter, effective January 25, 1924 Form U5B, File 30-75, exh. B-39
Amendment to Charter, effective
January 21, 1956 Form U5S, 1964, exh. B-12
By-laws, as amended Form U5S, 1996, exh. B-3
32
<PAGE>
ITEM 10 - EXHIBIT C F-2
CONSTITUENT INSTRUMENTS DEFINING THE RIGHTS OF HOLDERS
OF DEBT SECURITIES OF SYSTEM COMPANIES
Monongahela Power Company Incorporation
Documents by Reference
4 Indenture, dated as of S 2-5819,exh. 7(f)
August 1, 1945, and S 2-8782, exh. 7(f) (1)
certain Supplemental S 2-8881, exh. 7(b)
Indentures of the Company S 2-9355, exh. 4(h) (1)
defining rights of S 2-9979, exh. 4(h) (1)
security holders.* S 2-10548, exh. 4(b)
S 2-14763, exh. 2(b) (i)
S 2-24404, exh. 2(c)
S 2-26806, exh. 4(d);
Forms 8-K of the Company (1-268-2)
dated November 21, 1991, July 15,
1992, September 1, 1992, April 29,
1993, and May 23, 1995
The Potomac Edison Company Incorporation
Documents by Reference
4 Indenture, dated as of S 2-5473, exh. 7(b); Form
October 1, 1944, and S-3, 33-51305, exh. 4(d)
certain Supplemental Forms 8-K of the Company (1-3376-2)
Indentures of the December 11, 1991, December 15,
Company defining rights 1992, February 17, 1993,
of Security holders.* March 30, 1993, June 22, 1994,
May 12, 1995, and May 17, 1995
* There are omitted the Supplemental Indentures which do no
more than subject property to the lien of the above
Indentures since they are not considered constituent
instruments defining the rights of the holders of the
securities. The Company agrees to furnish the Commission on
its request with copies of such Supplemental Indentures.
33
<PAGE>
ITEM 10 - EXHIBIT C (continued)
West Penn Power Company Incorporation
Documents by Reference
4 Indenture, dated as of S-3, 33-51303, exh. 4(d)
March 1, 1916, and certain S 2-1835, exh. B(1), B(6)
Supplemental Indentures of S 2-4099, exh. B(6), B(7)
the Company defining rights S 2-4322, exh. B(5)
of security holders.* S 2-5362, exh. B(2), B(5)
S 2-7422, exh. 7(c), 7(i)
S 2-7840, exh. 7(d), 7(k)
S 2-8782, exh. 7(e) (1)
S 2-9477, exh. 4(c), 4(d)
S 2-10802, exh. 4(b), 4(c)
S 2-13400, exh. 2(c), 2(d)
Form 10-Q of the Company (1-255-2),
June 1980, exh. D Forms 8-K of the
Company (1-255-2) dated February
1991, December 1991, August
13, 1992, September 15, 1992,
June 9, 1993, August 2, 1994,
and May 19, 1995
* There are omitted the Supplemental Indentures which
do no more than subject property to the lien of the above
Indentures since they are not considered constituent
instruments defining the rights of the holders of the
securities. The Company agrees to furnish the Commission
on its request with copies of such Supplemental
Indentures.
Allegheny Generating Company
Documents
4 Indenture, dated as of December 1, Incorporated by reference to
1986, and Supplemental Indenture, the designated exhibits to
dated as of December 15, 1988, of Form 10-K for the year ended
the Company defining rights of December 31, 1998.
security holders.
34
<PAGE>
ITEM 10. FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS
Financial statements are filed as listed on Page A of
Appendix 1.
EXHIBITS
EXHIBIT A. Financial Statements incorporated herein by
reference are as follows:
The financial statements of Allegheny Energy, Inc. and
its subsidiaries, and of Monongahela Power Company, The
Potomac Edison Company, West Penn Power Company and its
subsidiaries, and Allegheny Generating Company, listed
under ITEM 8 of their combined Annual Report on Form 10-
K for the year ended December 31, 1998, together with
the reports of PricewaterhouseCoopers LLP with respect
thereto, all dated February 4, 1999, are incorporated
in this Annual Report by reference to such Annual
Reports on Form 10-K.
*******************************************
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the foregoing incorporation by
reference in this Annual Report on Form U5S of our reports
dated February 4, 1999, appearing on pages 50 - 54 in the
above-mentioned Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
April 30, 1999
EXHIBIT B. Constituent instruments
defining the rights of holders of equity
securities of system companies are
incorporated herein by reference as listed
on pages F-1 and F-2 of Appendix 2.
EXHIBIT C. Constituent instruments
defining the rights of holders of debt
securities of System companies are
incorporated herein by reference as listed
on pages F-3 and F-4 of Appendix 2.
EXHIBIT D. Amendment No. 2 dated September 3,
1997, to Tax Allocation Agreement. (Tax Allocation
Agreement dated June 13, 1963, as amended November 3,
1993, and as further amended on December 1, 1994,
incorporated by reference to the Form U5S for 1994,
Appendix 2, Exhibit D.)
EXHIBIT E. None
EXHIBIT F. None
35
<PAGE>
SIGNATURE
The undersigned system company has duly caused this annual report to
be signed on its behalf by the undersigned thereunto duly authorized
pursuant to the requirements of the Public Utility Holding Company Act of
1935.
ALLEGHENY ENERGY, INC.
By /s/ Thomas K. Henderson
Thomas K. Henderson
Counsel for
Allegheny Energy, Inc.
Dated: April 30, 1999
36
<PAGE>
APPENDIX 1
CONSOLIDATING AND OTHER FINANCIAL STATEMENTS
(See Index on Page A)
<PAGE>
ALLEGHENY ENERGY, INC. AND SUBSIDIARY COMPANIES
INDEX TO APPENDIX 1--CONSOLIDATING AND OTHER FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Consolidating Statements Other Statements
Allegheny West Penn AYP Capital,
Energy, Inc. Power Company Inc. Indiana-Kentucky Ohio Valley
and Subsidiary and Subsidiary and Subsidiary Electric Electric
Companies Companies Companies Corporation Corporation
<S> <C> <C> <C> <C> <C>
Balance Sheets -
December 31, 1998 A-1, 2 B-1, 2 C-1, 2 D-1 D-4
Statements of Income -
Year ended December 31, 1998 A-3 B-3 C-3 D-2 D-5
Statements of Retained Earnings
and Other Paid-in Capital -
Year ended December 31, 1998 A-4 B-4 C-4 - -
Statements of Cash Flows
Year ended December 31, 1998 A-5 B-5 C-5 D-3 D-6
Long-Term Debt of Subsidiaries -
December 31, 1998 A-6, 7, 8 - - - -
</TABLE>
<PAGE>
A-1
ALLEGHENY ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEET - DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
ASSETS AYE APSC MP PE WPP Subtotal
<S> <C> <C> <C> <C> <C> <C>
(See page B-1)
Property, plant and equipment:
At original cost - 2,713 2,007,876 2,249,716 3,365,784 7,626,089
Accumulated depreciation - (900) (883,915) (926,840) (1,362,413) (3,174,068)
Investments and other assets:
Securities of subsidiaries consolidated:
Common stock, at equity 2,085,024 - - - - 2,085,024
Excess of cost over book equity at acquisition 15,077 - - - - 15,077
Investment in APC:
Common stock, at equity - - (3,264) (3,264) (6,528) (13,056)
Advances - - 3,495 3,617 7,061 14,173
AGC - common stock, at equity - - 44,626 46,279 74,374 165,279
Securities of associated company 1,250 - - - - 1,250
Nonutility investment - - - - - -
Benefit plans' investments 87,468 - - - - 87,468
Other - 82 - 121 113 316
Current assets:
Cash and temporary cash investments 122 101 1,835 1,805 4,523 8,386
Accounts receivable:
Electric service - - 70,809 79,374 132,386 282,569
Allowance for uncollectible accounts - - (2,516) (2,202) (14,760) (19,478)
Affiliated and other 3,458 49,129 19,674 7,089 26,381 105,731
Notes receivable from affiliates 2,907 - - 76,050 - 78,957
Materials and supplies - at average cost:
Operating and construction - - 21,942 29,921 43,167 95,030
Fuel - - 16,588 14,099 24,363 55,050
Prepaid taxes - - 19,627 15,727 14,534 49,888
Transition costs recovery - - - - 17,372 17,372
Deferred power costs - - 6,878 333 - 7,211
Other 139 38 2,774 759 2,261 5,971
Deferred charges:
Regulatory assets - - 154,882 66,792 475,776 697,450
Unamortized loss on reacquired debt - - 17,826 19,012 4,065 40,903
Other 8 14,396 19,893 23,741 34,610 92,648
Total assets 2,195,453 65,559 1,519,030 1,702,129 2,843,069 8,325,240
</TABLE>
<PAGE>
A-1a
ALLEGHENY ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEET - DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
AYE Inc.
Combined Eliminations Consolidated
ASSETS Subtotal APC AGC AYP Totals etc. Totals
(See page C-1)
<S> <C> <C> <C> <C> <C> <C> <C>
Property, plant and equipment:
At original cost 7,626,089 4,040 828,806 170,798 8,629,733 - 8,629,733
Accumulated depreciation (3,174,068) (15) (210,198) (11,322) (3,395,603) - (3,395,603)
Investments and other assets:
Securities of subsidiaries consolidated:
Common stock, at equity 2,085,024 - - - 2,085,024 (2,085,024)(1) -
Excess of cost over book equity 15,077 - - - 15,077 - 15,077
at acquisition
Investment in APC:
Common stock, at equity (13,056) - - - (13,056) 13,056 (1) -
Advances 14,173 - - - 14,173 (14,173)(2) -
AGC - common stock, at equity 165,279 - - - 165,279 (165,279)(1) -
Securities of associated company 1,250 - - - 1,250 - 1,250
Nonutility investment - - - 9,361 9,361 - 9,361
Benefit plans' investments 87,468 - - - 87,468 - 87,468
Other 316 - - - 316 - 316
Current assets:
Cash and temporary cash investments 8,386 35 30 9,108 17,559 - 17,559
Accounts receivable:
Electric service 282,569 - - 12,308 294,877 - 294,877
Allowance for uncollectible accounts (19,478) - - (82) (19,560) - (19,560)
Affiliated and other 105,731 - - 2,756 108,487 (90,775) (3) 17,712
Notes receivable from affiliates 78,957 - - - 78,957 (78,957) (2) -
Materials and supplies - at average cost:
Operating and construction 95,030 - 2,093 2,316 99,439 - 99,439
Fuel 55,050 - - 2,560 57,610 - 57,610
Prepaid taxes 49,888 48 3,572 3,150 56,658 - 56,658
Transition costs recovery 17,372 - - - 17,372 - 17,372
Deferred power costs 7,211 - - - 7,211 - 7,211
Other 5,971 - 162 72 6,205 - 6,205
Deferred charges:
Regulatory assets 697,450 - 7,056 - 704,506 - 704,506
Unamortized loss on reacquired debt 40,903 - 7,768 - 48,671 - 48,671
Other 92,648 - 169 12,394 105,211 (13,280)(11) 91,931
Total assets 8,325,240 4,108 639,458 213,419 9,182,225 (2,434,432) 6,747,793
</TABLE>
<PAGE>
A-2
ALLEGHENY ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEET - DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
CAPITALIZATION AND LIABILITIES AYE APSC MP PE WPP Subtotal
(see page B-2)
<S> <C> <C> <C> <C> <C> <C>
Capitalization:
Common stock of Allegheny Energy, Inc. 153,045 - - - - 153,045
Common stock of affiliate consolidated - - - - - -
Common stock of subsidiaries consolidated - 50 294,550 447,700 465,994 1,208,294
Other paid-in capital 1,044,085 - 2,441 2,690 55,475 1,104,691
Retained earnings 836,759 - 273,198 312,522 210,692 1,633,171
Preferred stock of subsidiaries:
Not subject to mandatory redemption - - 74,000 16,378 79,708 170,086
Long-term debt and QUIDS - - 453,917 578,817 837,725 1,870,459
(see pages A-6, A-7, A-8)
Notes and advances payable to affiliates - - - - - -
Current liabilities:
Short-term debt 153,071 - 49,000 - 65,066 267,137
Notes payable to affiliates - - - - - -
Accounts payable to affiliates 2,473 53 13,958 31,011 33,859 81,354
Accounts payable - others 5,128 13,193 13,080 35,572 77,815 144,788
Deferred income taxes - - 3,924 11,311 3,483 18,718
Taxes accrued:
Federal and state income - 602 6,277 6,430 1,002 14,311
Other - 888 23,192 18,922 16,711 59,713
Interest accrued 447 - 7,692 7,193 15,681 31,013
Adverse power purchase commitments - - - - 47,173 47,173
Other 64 41,916 9,438 8,770 40,061 100,249
Deferred credits and other liabilities:
Unamortized investment credit - - 16,155 19,591 42,630 78,376
Deferred income taxes - - 242,806 170,349 260,477 673,632
Regulatory liabilities - - 15,477 11,234 28,325 55,036
Adverse power purchase commitments - - - - 538,745 538,745
Other 381 8,857 19,925 23,639 22,447 75,249
Total capitalization and liabilities 2,195,453 65,559 1,519,030 1,702,129 2,843,069 8,325,240
</TABLE>
<PAGE>
A-2a
ALLEGHENY ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEET - DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
AYE Inc.
Combined Eliminations, Consolidated
CAPITALIZATION AND LIABILITIES Subtotal APC AGC AYP Totals etc. Totals
(see pg C-2)
<S> <C> <C> <C> <C> <C> <C> <C>
Capitalization:
Common stock of Allegheny Energy, Inc. 153,045 - - - 153,045 - 153,045
Common stock of affiliate consolidated - 1 1 - 2 (2)(1) -
Common stock of subsidiaries consolidated 1,208,294 - - 1 1,208,295 (1,208,295)(1) -
Other paid-in capital 1,104,691 555 165,275 57,823 1,328,344 (284,259)(1) 1,044,085
Retained earnings 1,633,171 (13,612) - (38,109) 1,581,450 (744,691)(1) 836,759
Preferred stock of subsidiaries:
Not subject to mandatory redemption 170,086 - - - 170,086 - 170,086
Long-term debt and QUIDS 1,870,459 - 148,829 160,000 2,179,288 - 2,179,288
(see pages A-6, A-7, A-8)
Notes and advances payable to affiliates - 14,173 - - 14,173 (14,173)(2) -
Current liabilities:
Short-term debt 267,137 - 66,750 1,000 334,887 (76,050)(2) 258,837
Notes payable to affiliates - 2,907 - - 2,907 (2,907)(2) -
Accounts payable to affiliates 81,354 3 5,795 1,153 88,305 (88,305)(3) -
Accounts payable - others 144,788 - - 10,789 155,577 (2,470)(3) 153,107
Deferred income taxes 18,718 - - - 18,718 - 18,718
Taxes accrued:
Federal and state income 14,311 81 - 3,050 17,442 - 17,442
Other 59,713 - 75 2,963 62,751 - 62,751
Interest accrued 31,013 - 3,229 1,703 35,945 - 35,945
Adverse power purchase commitments 47,173 - - - 47,173 - 47,173
Other 100,249 - - 990 101,239 - 101,239
Deferred credits and other liabilities:
Unamortized investment credit 78,376 - 47,020 - 125,396 - 125,396
Deferred income taxes 673,632 - 177,166 4,675 855,473 (13,280)(11) 842,193
Regulatory liabilities 55,036 - 25,318 - 80,354 - 80,354
Adverse power purchase commitments 538,745 - - - 538,745 - 538,745
Other 75,249 - - 7,381 82,630 - 82,630
Total capitalization and liabilities 8,325,240 4,108 639,458 213,419 9,182,225 (2,434,432) 6,747,793
</TABLE>
<PAGE>
A-3
ALLEGHENY ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME FOR YEAR ENDED DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
AYE APSC MP PE WPP Subtotal
<S> <C> <C> <C> <C> <C> <C>
Operating revenues: (see page B-3)
Residential - - 200,896 309,059 370,636 880,591
Commercial - - 126,464 156,974 217,954 501,392
Industrial 208,613 206,639 338,254 753,506
Wholesale and other,
including affiliates - 421,088 89,399 38,426 82,982 631,895
Bulk power transactions, net - - 19,753 26,399 68,901 115,053
Total operating revenues - 421,088 645,125 737,497 1,078,727 2,882,437
Operating expenses:
Operation:
Fuel - - 143,993 143,124 258,199 545,316
Purchased power and exchanges, net - - 95,618 138,278 121,286 355,182
Deferred power costs, net - - (8,451) 1,812 - (6,639)
Other 2,746 403,209 82,644 86,792 173,029 748,420
Maintenance - 3,939 67,032 52,186 91,724 214,881
Depreciation - - 58,610 74,341 114,709 247,660
Taxes other than income taxes 12 12,680 44,741 49,566 88,722 195,721
Federal and state income taxes - 266 49,455 52,602 64,526 166,849
Total operating expenses 2,758 420,094 533,642 598,701 912,195 2,467,390
Operating income (2,758) 994 111,483 138,796 166,532 415,047
Other income and deductions:
Allowance for other than borrowed funds used
during construction - - 375 597 581 1,553
Other, net (2,448) (820) 6,052 9,297 11,325 23,406
Total other income and deductions (2,448) (820) 6,427 9,894 11,906 24,959
Income before interest charges and
preferred dividends (5,206) 174 117,910 148,690 178,438 440,006
Interest charges and preferred dividends:
Interest on long-term debt - - 32,367 46,010 61,727 140,104
Other interest 7,212 174 3,788 2,177 5,913 19,264
Allowance for borrowed funds used during construction
and interest capitalized - - (670) (979) (1,822) (3,471)
Dividends on preferred stock of subsidiaries - - - - - -
Total interest charges and preferred dividends 7,212 174 35,485 47,208 65,818 155,897
Income (loss) before extraordinary charge (12,418) - 82,425 101,482 112,620 284,109
Extraordinary charge, net - - - - (275,426) (275,426)
Net income (loss) (12,418) - 82,425 101,482 (162,806) 8,683
</TABLE>
<PAGE>
A-3a
ALLEGHENY ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME FOR YEAR ENDED DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
AYE Inc.
Combined Eliminations, Consolidated
Subtotal APC AGC AYP Totals etc. Totals
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues: (see pg C-3)
Residential 880,591 - - 6,040 886,631 - 886,631
Commercial 501,392 - - 11,712 513,104 - 513,104
Industrial 753,506 - - 7,176 760,682 - 760,682
Wholesale and other, (205,713)(4)
including affiliates 631,895 - 73,816 6,786 712,497 (421,088)(5) 85,696
Bulk power transactions, net 115,053 - - 215,270 330,323 - 330,323
Total operating revenues 2,882,437 - 73,816 246,984 3,203,237 (626,801) 2,576,436
Operating expenses:
Operation:
Fuel 545,316 - - 21,137 566,453 - 566,453
Purchased power and exchanges, net 355,182 - - 210,559 565,741 (176,983)(4) 388,758
Deferred power costs, net (6,639) - - - (6,639) - (6,639)
Other 748,420 - 3,240 18,159 769,819 ( 28,730)(4) 337,440
(403,649)(5)
Maintenance 214,881 - 1,352 5,265 221,498 (3,939)(5) 217,559
Depreciation 247,660 - 16,949 5,770 270,379 - 270,379
Taxes other than income taxes 195,721 - 4,662 6,880 207,263 (12,680)(5) 194,583
Federal and state income taxes 166,849 - 10,959 (10,533) 167,275 1,121 (8) 168,396
Total operating expenses 2,467,390 - 37,162 257,237 2,761,789 (624,860) 2,136,929
Operating income 415,047 - 36,654 (10,253) 441,448 (1,941) 439,507
Other income and deductions:
Allowance for other than borrowed funds
used during construction 1,553 - - - 1,553 - 1,553
Other, net 23,406 5 86 99 23,596 1,121 (8) 8,180
217,185 (1)
(3,061)(7)
(155)(6)
820 (5)
(231,326)(9)
Total other income and deductions 24,959 5 86 99 25,149 (15,416) 9,733
Income before interest charges and
preferred dividends 440,006 5 36,740 (10,154) 466,597 (17,357) 449,240
Interest charges and preferred dividends:
Interest on long-term debt 140,104 - 10,848 10,105 161,057 - 161,057
Other interest 19,264 155 3,139 53 22,611 (3,061)(7) 19,395
(155)(6)
Allowance for borrowed funds used during construction
and interest capitalized (3,471) - - - (3,471) - (3,471)
Dividends on preferred stock of subsidiaries - - - - - 9,251 (10) 9,251
Total interest charges and preferred
dividends 155,897 155 13,987 10,158 180,197 6,035 186,232
Income (loss) before extraordinary charge 284,109 (150) 22,753 (20,312) 286,400 (23,392) 263,008
Extraordinary charge, net (275,426) - - - (275,426) - (275,426)
Net income (loss) 8,683 (150) 22,753 (20,312) 10,974 (23,392) (12,418)
</TABLE>
<PAGE>
A-4
ALLEGHENY ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL
FOR YEAR ENDED DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
AYE MP PE WPP Subtotal
RETAINED EARNINGS (see page B-4)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1998 1,059,768 243,939 239,391 475,558 2,018,656
Add:
Net income (loss) (12,418) 82,425 101,482 (162,806) 8,683
Total 1,047,350 326,364 340,873 312,752 2,027,339
Deduct:
Dividends on common stock of Allegheny
Energy, Inc. 210,591 - - - 210,591
Dividends on capital stock of subsidiary companies:
Preferred - 5,037 818 3,396 9,251
Common - 48,129 27,533 98,664 174,326
Total deductions 210,591 53,166 28,351 102,060 394,168
Balance at December 31, 1998 836,759 273,198 312,522 210,692 1,633,171
OTHER PAID-IN CAPITAL
Balance at January 1, 1998 1,044,085 2,441 2,690 55,475 1,104,691
Add (Deduct):
Common stock dividends paid out of
other paid-in capital - - - - -
Other paid-in capital from
Allegheny Energy, Inc. - - - - -
Balance at December 31, 1998 1,044,085 2,441 2,690 55,475 1,104,691
</TABLE>
<PAGE>
A-4a
ALLEGHENY ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL
FOR YEAR ENDED DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
AYE Inc.
Combined Eliminations, Consolidated
Subtotal APC AGC AYP Totals etc. Totals
RETAINED EARNINGS (See pg C-4)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998 2,018,656 (13,462) - (17,797) 1,987,397 (927,629) 1,059,768
Add:
Net income (loss) 8,683 (150) 22,753 (20,312) 10,974 (23,392) (12,418)
Total 2,027,339 (13,612) 22,753 (38,109) 1,998,371 (951,021) 1,047,350
Deduct:
Dividends on common stock of
Allegheny Energy, Inc. 210,591 - - - 210,591 - 210,591
Dividends on capital stock of
subsidiary companies:
Preferred 9,251 - - - 9,251 (9,251)(10 -
Common 174,326 - 22,753 - 197,079 (197,079)(9) -
Total deductions 394,168 - 22,753 - 416,921 (206,330) 210,591
Balance at December 31, 1998 1,633,171 (13,612) - (38,109) 1,581,450 (744,691) 836,759
OTHER PAID-IN CAPITAL
Balance at January 1, 1998 1,104,691 555 199,522 43,869 1,348,637 (304,552) 1,044,085
Add (Deduct):
Common stock dividends paid out of
other paid-in capital - - (34,247) - (34,247) 34,247 (1) -
Other paid-in capital from
Allegheny Energy, Inc. - - - 13,954 13,954 (13,954)(1) -
Balance at December 31, 1998 1,104,691 555 165,275 57,823 1,328,344 (284,259) 1,044,085
</TABLE>
<PAGE>
A-5
ALLEGHENY ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR YEAR ENDED DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
AYE APSC MP PE WPP Subtotal
(see page B-5)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash Flows from Operations:
Net income (loss) (12,418) * 82,425 101,482 (162,806) 8,683
Extraordinary charge, net of taxes - - - - 275,426 275,426
Income before extraordinary charge (12,418) - 82,425 101,482 112,620 284,109
Depreciation - - 58,610 74,341 114,709 247,660
Deferred investment credit and income
taxes, net - (7,890) 14,827 8,683 (1,511) 14,109
Deferred power costs, net - - (8,451) 1,812 - (6,639)
Unconsolidated subsidiaries' dividends
in excess of earnings - - 9,301 9,607 15,484 34,392
Allowance for other than borrowed funds used
during construction (AOFDC) - - (375) (597) (581) (1,553)
Internal restructuring liability - - (236) (1,186) (4,082) (5,504)
Changes in certain current assets and liabilities:
Accounts receivable, net 3,825 (25,504) (8,907) 4,472 5,866 (20,248)
Materials and supplies - - (3,930) (4,462) (3,851) (12,243)
Accounts payable 2,899 3,659 15,324 17,529 21,953 61,364
Taxes accrued - 778 5,488 11,784 (6,619) 11,431
Other, net (7,925) 28,548 (3,291) (7,645) (486) 9,201
Total Cash Flows from Operations (13,619) (409) 160,785 215,820 253,502 616,079
Cash Flows from Investing:
Utility construction expenditures (less
allowance for other than borrowed funds
used during construction) - - (72,419) (59,927) (95,394) (227,740)
Nonutility investments 168,837 - - - - 168,837
Total Cash Flows from Investing 168,837 - (72,419) (59,927) (95,394) (58,903)
Cash Flows from Financing:
Issuance of long-term debt - - 85,918 33,200 92,834 211,952
Retirement of long-term debt - - (111,690) (86,655) (161,435) (359,780)
Short-term debt, net 55,545 - (7,829) - 3,720 51,436
Notes receivable from affiliates (155) - - (7,850) - (8,005)
Notes receivable from subsidiary - - - (66,750) - (66,750)
Notes payable to affiliates - - (1,450) - 9,300 7,850
Notes payable to parents
Parent Company contribution
Dividends on capital stock:
Preferred stock - - (5,037) (818) (3,396) (9,251)
Common stock (210,590) - (48,129) (27,534) (98,664) (384,917)
Total Cash Flows from Financing (155,200) - (88,217) (156,407) (157,641) (557,465)
Net Change in Cash and Temporary
Cash Investments** 18 (409) 149 (514) 467 (289)
Cash and Temporary Cash Investments at
January 1 104 510 1,686 2,319 4,056 8,675
Cash and Temporary Cash Investments at
December 31 122 101 1,835 1,805 4,523 8,386
Supplemental cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized) 7,320 174 33,041 46,770 62,711 150,016
Income taxes 1 6,498 33,361 41,132 73,653 154,645
</TABLE>
*Pursuant to service contracts, Allegheny Power Service Corporation's expenses
($420,268) have been apportioned to System companies.
**Temporary cash investments with original maturities of three months or less,
generally in the form of commercial paper, certificates of deposit,
and repurchase agreements, are considered to be the equivalent of cash.
<PAGE>
A-5a
ALLEGHENY ENERGY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR YEAR ENDED DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
AYE Inc.
Combined Eliminations, Consolidated
Subtotal APC AGC AYP Totals etc. Totals
(see pg B-5)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Flows from Operations:
net income (loss) 8,683 (150) 22,753 (20,312) 10,974 (23,392) (12,418)
Extraordinary charge,
net of taxes 275,426 - - - 275,426 - 275,426
Income before extraordinary
charge 284,109 (150) 22,753 (20,312) 286,400 (23,392) 263,008
Depreciation 247,660 - 16,949 5,770 270,379 - 270,379
Deferred investment credit
and income taxes, net 14,109 4 5,305 1,580 20,998 - 20,998
Deferred power costs, net (6,639) - - - (6,639) - (6,639)
Unconsolidated subsidiaries'
dividends in excess of earnings 34,392 - - - 34,392 (34,392) -
Allowance for other than borrowed
funds used during construction
(AOFDC) (1,553) - - - (1,553) - (1,553)
Internal restructuring liability (5,504) - - - (5,504) - (5,504)
Changes in certain current assets
and liabilities:
Accounts receivable, net (20,248) - 6 2,379 (17,863) 33,228 15,365
Materials and supplies (12,243) - (261) (348) (12,852) - (12,852)
Accounts payable 61,364 (5) (340) (4,669) 56,350 (33,232) 23,118
Taxes accrued 11,431 42 74 2,765 14,312 - 14,312
Other, net 9,201 (50) 503 896 10,550 - 10,550
Total Cash Flows from Operations 616,079 (159) 44,989 (11,939) 648,970 (57,788) 591,182
Cash Flows from Investing:
Utility construction expenditures
(less allowance for other than
borrowed funds used during
construction) (227,740) - (69) - (227,809) - (227,809)
Nonutility investments 168,837 - - (6,206) 162,631 (168,836) (6,205)
Total Cash Flows from Investing (58,903) - (69) (6,206) (65,178) (168,836) (234,014)
Cash Flows from Financing:
Issuance of long-term debt 211,952 - - - 211,952 - 211,952
Retirement of long-term debt (359,780) - (60,000) - (419,780) - (419,780)
Short-term debt, net 51,436 - - 1,000 52,436 - 52,436
Notes receivable from affiliates (8,005) - - - (8,005) 8,005 -
Notes receivable from subsidiary (66,750) - - - (66,750) 66,750 -
Notes payable to affiliates 7,850 155 - - 8,005 (8,005) -
Notes payable to parents - - 66,750 - 66,750 (66,750) -
Parent Company contribution - - - 13,954 13,954 (13,954) -
Dividends on capital stock:
Preferred stock (9,251) - - - (9,251) 9,251 (10 -
Common stock (384,917) - (57,001) - (441,918) 231,327 (9) (210,591)
Total Cash Flows from
Financing (557,465) 155 (50,251) 14,954 (592,607) 226,624 (365,983)
Net Change in Cash and Temporary
Cash Investments** (289) (4) (5,331) (3,191) (8,815) - (8,815)
Cash and Temporary Cash Investments
at January 1 8,675 39 5,361 12,299 26,374 - 26,374
Cash and Temporary Cash Investments
at December 31 8,386 35 30 9,108 17,559 - 17,559
Supplemental cash flow information:
Cash paid during the year for:
Interest (net of amount
capitalized) 150,016 - 14,490 10,274 174,780 (3,061) 171,719
Income taxes 154,645 (127) 4,828 (14,293) 145,053 - 145,053
</TABLE>
*Pursuant to service contracts, Allegheny Power Service Corporation's expenses
($420,268) have been apportioned to System companies.
**Temporary cash investments with original maturities of three months or less,
generally in the form of commercial paper, certificates of deposit,
and repurchase agreements, are considered to be the equivalent of cash.
<PAGE>
ALLEGHENY ENERGY, INC. A-6
Long-Term Debt of Subsidiaries at December 31, 1998
(000's)
Date of Principal
First mortgage bonds: Issue Amount
Monongahela Power Company:
5-5/8% Series Due 2000 1993 65,000
7-3/8% Series Due 2002 1992 25,000
7-1/4% Series Due 2007 1992 25,000
8-5/8% Series Due 2021 1991 50,000
8-3/8% Series Due 2022 1992 40,000
7-5/8% Series Due 2025 1995 70,000
Total 275,000
The Potomac Edison Company:
5-7/8% Series Due 2000 1993 75,000
8% Series Due 2006 1991 50,000
8% Series Due 2022 1992 55,000
7-3/4% Series Due 2023 1993 45,000
8% Series Due 2024 1994 75,000
7-5/8% Series Due 2025 1995 80,000
7-3/4% Series Due 2025 1995 65,000
Total 445,000
West Penn Power Company:
6-3/8% Series KK, Due 2003 1993 80,000
7-7/8% Series GG, Due 2004 1991 70,000
7-3/8% Series HH, Due 2007 1992 45,000
8-7/8% Series FF, Due 2021 1991 100,000
7-7/8% Series II, Due 2022 1992 135,000
8-1/8% Series LL, Due 2024 1994 65,000
7-3/4% Series MM, Due 2025 1995 30,000
Total 525,000
Total first mortgage bonds 1,245,000
Less current maturities 0
1,245,000
<PAGE>
ALLEGHENY ENERGY, INC. A-7
Long-Term Debt of Subsidiaries at December 31, 1998 (Cont'd)
(000's)
<TABLE>
<CAPTION>
Liability
Date of Date of Interest Due Within
Issue Maturity Rate One Year Long-Term
Debentures:
<S> <C> <C> <C> <C> <C>
Allegheny Generating Company 9- 1-93 9- 1- 23 6.875% - 100,000
9- 1-93 9- 1- 03 5.625% - 50,000
- 150,000
Quarterly Income Debt Securities:
Monongahela Power Company 6-19-95 6-30-25 8.00 % - 40,000
The Potomac Edison Company 6-30-95 9-30-25 8.00 % - 45,457
West Penn Power Company 6-12-95 6-30-25 8.00 % - 70,000
155,457
Secured notes:
Pleasants pollution control facilities:
Monongahela Power Company 2- 1-98 11- 1-07 4.700% - 14,500
2- 1-98 11- 1-12 5.050% - 3,000
5-15-95 5- 1-15 6.150% - 25,000
- 42,500
The Potomac Edison Company 2- 1-98 11- 1-07 4.700% - 30,000
5-15-95 5- 1-15 6.150% - 21,000
- 51,000
West Penn Power Company 2- 1-98 11- 1-07 4.700% - 45,000
5-15-95 5- 1-15 6.150% - 31,500
- 76,500
Mitchell pollution control facilities:
West Penn Power Company 3- 1-93 3- 1-03 4.950% - 61,500
5-15-95 4- 1-14 6.050% - 15,400
- 76,900
Fort Martin pollution control facilities:
Monongahela Power Company 4- 1-93 4- 1-13 5.950 % - 7,050
The Potomac Edison Company 4- 1-93 4- 1-13 5.950 % - 8,600
West Penn Power Company 4- 1-93 4- 1-13 5.950 % - 7,750
- 23,400
Harrison pollution control facilities:
Monongahela Power Company 4-15-92 4-15-22 6.875% - 5,000
5-1-93 5- 1-23 6.250% - 10,675
7-15-94 8- 1-24 6.750% - 8,825
- 24,500
The Potomac Edison Company 4-15-92 4-15-22 6.875% - 6,550
5-1-93 5- 1-23 6.250% - 13,990
7-15-94 8- 1-24 6.750% - 11,560
- 32,100
West Penn Power Company 4-15-92 4-15-22 6.875% - 8,450
5-1-93 5- 1-23 6.300% - 18,040
7-15-94 8- 1-24 6.750% - 14,910
- 41,400
Total secured notes - 368,300
</TABLE>
<PAGE>
ALLEGHENY ENERGY, INC. A-8
Long-Term Debt of Subsidiaries at December 31, 1998 (Cont'd)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Liability
Date of Date of Interest Due Within
Issue Maturity Rate One Year Long-Term
Unsecured notes:
Hatfield's Ferry pollution control
facilities:
Monongahela Power Company 3- 1-98 2- 1-02 4.35 % - 2,060
3- 1-98 2- 1-07 4.75 % - 1,000
3- 1-98 2- 1-12 5.10 % - 3,000
- 6,060
The Potomac Edison Company 3- 1-98 2- 1-02 4.35 % - 3,200
West Penn Power Company 3- 1-98 2- 1-07 4.75 % - 14,435
Total unsecured notes - 23,695
Installment purchase obligations:
Monongahela Power Company -
Pleasants County pollution cntl facilities 3- 1-98 3- 1-03 4.500% - 10,145
Preston County pollution cntl facilities 3- 1-98 3- 1-03 4.500% - 5,900
Marion County pollution cntl facilities 3- 1-98 3- 1-03 4.500% - 3,055
- 19,100
Medium-term notes:
Monongahela Power Company 9-24-98 9-24-03 5.66 % - 5,000
9-25-98 9-25-03 5.71 % - 1,975
9-29-98 9-29-03 5.57 % - 1,000
9-29-98 9-29-03 5.63 % - 20,500
9-30-98 9-30-03 5.56 % - 15,000
- 43,475
West Penn Power Company 9-21-98 9-23-02 5.66 % - 32,050
9-22-98 9-23-02 5.56 % - 1,500
- 33,550
AYP Energy, Inc. 10-31-96 10-31-01 6.180 % - 160,000
Total medium-term notes - 237,025
Unamortized debt discount and premium, net:
Monongahela Power Company - (3,768)
The Potomac Edison Company - (6,541)
West Penn Power Company - (7,809)
Allegheny Generating Company - (1,171)
Total unamortized debt discount and premium, net - (19,289)
</TABLE>
<PAGE>
B-1
WEST PENN POWER COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEET - DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
West Virginia Power
and Transmission
Company and Subsidiary
West Virginia West Penn Consolidated
West Penn Power and West Virginia Totals
Power Transmission Water Combined Eliminations, (Carried to
ASSETS Company Company Power Company Totals etc. page A-1)
Property, plant and equipment:
<S> <C> <C> <C> <C> <C> <C>
At original cost 3,363,460 2,314 10 3,365,784 - 3,365,784
Accumulated depreciation (1,362,413) - - (1,362,413) - (1,362,413)
Investments and other assets:
Securities of subsidiaries consolidated 2,445 1 - 2,446 (2,446)(1) -
Equity in undistributed earnings
of subsidiaries 1,059 - - 1,059 (1,059)(2) -
Indebtedness of subsidiary
consolidated-not current - 14 - 14 (14)(3) -
Investment in Allegheny Pittsburgh Coal Company:
Common stock, at equity (6,528) - - (6,528) - (6,528)
Advances 7,061 - - 7,061 - 7,061
Investment in Allegheny Generating Company
Common stock, at equity 74,374 - - 74,374 - 74,374
Other 113 - - 113 - 113
Current assets:
Cash and temporary cash investments 2,864 1,659 - 4,523 - 4,523
Accounts receivable:
Electric service 132,386 - - 132,386 - 132,386
Allowance for uncollectible accounts (14,760) - - (14,760) - (14,760)
Affiliated and other 26,381 - - 26,381 - 26,381
Materials and supplies - at average cost:
Operating and construction 43,167 - - 43,167 - 43,167
Fuel 24,363 - - 24,363 - 24,363
Prepaid taxes 14,534 - - 14,534 - 14,534
Transition costs recovery 17,372 - - 17,372 - 17,372
Other 2,261 - - 2,261 - 2,261
Deferred charges:
Regulatory assets 475,776 - - 475,776 - 475,776
Unamortized loss on reacquired debt 4,065 - - 4,065 - 4,065
Other 34,609 1 - 34,610 - 34,610
Total assets 2,842,589 3,989 10 2,846,588 (3,519) 2,843,069
</TABLE>
<PAGE>
B-2
WEST PENN POWER COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEET - DECEMBER 31, 1998
(000's)
West Virginia Power
and Transmission
Company and Subsidiary
<TABLE>
<CAPTION>
West Virginia Power
and Transmission
Company and Subsidiary
West Virginia West Penn Consolidated
West Penn Power and West Virginia Totals
Power Transmission Water Combined Eliminations, (Carried to
CAPITALIZATION AND LIABILITIES Company Company Power Company Totals etc. page A-2)
Capitalization:
<S> <C> <C> <C> <C> <C> <C>
Common stock of West Penn Power Company 465,994 - - 465,994 - 465,994
Common stock of subsidiaries consolidated - 3,000 1 3,001 (3,001)(1) -
Other paid-in capital 55,475 (555) - 54,920 555 (1) 55,475
Retained earnings 210,692 1,064 (5) 211,751 (1,059)(2) 210,692
Preferred stock:
Not subject to mandatory redemption 79,708 - - 79,708 - 79,708
Long-term debt and QUIDS 837,725 - - 837,725 - 837,725
Indebtedness to affiliated consolidated-not current - - 14 14 (14)(3) -
Current liabilities:
Short-term debt 65,066 - - 65,066 - 65,066
Accounts payable to affiliates 33,859 - - 33,859 - 33,859
Accounts payable - others 77,815 - - 77,815 - 77,815
Deferred income taxes 3,483 - - 3,483 - 3,483
Taxes accrued:
Federal and state income 1,002 - - 1,002 - 1,002
Other 16,231 480 - 16,711 - 16,711
Interest accrued 15,681 - - 15,681 - 15,681
Adverse power purchase commitments 47,173 - - 47,173 - 47,173
Other 40,061 - - 40,061 - 40,061
Deferred credits and other liabilities:
Unamortized investment credit 42,630 - - 42,630 - 42,630
Deferred income taxes 260,477 - - 260,477 - 260,477
Regulatory liabilities 28,325 - - 28,325 - 28,325
Adverse power purchase commitments 538,745 - - 538,745 - 538,745
Other 22,447 - - 22,447 - 22,447
Total capitalization and liabilities 2,842,589 3,989 10 2,846,588 (3,519) 2,843,069
</TABLE>
<PAGE>
B-3
WEST PENN POWER COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME FOR YEAR ENDED DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
West Virginia Power
and Transmission
Company and Subsidiary
West Virginia West Penn Consolidated
West Penn Power and West Virginia Totals
Power Transmission Water Combined Eliminations, (Carried to
Company Company Power Company Totals etc. page A-3)
<S> <C> <C> <C> <C> <C> <C>
Electric operating revenues:
Residential 370,636 - - 370,636 - 370,636
Commercial 217,954 - - 217,954 - 217,954
Industrial 338,254 - - 338,254 - 338,254
Wholesale and other, including affiliates 82,982 - - 82,982 - 82,982
Bulk power transactions, net 68,901 - - 68,901 - 68,901
Total operating revenues 1,078,727 - - 1,078,727 - 1,078,727
Operating expenses:
Operation:
Fuel 258,199 - - 258,199 - 258,199
Purchased power and exchanges, net 121,286 - - 121,286 - 121,286
Other 173,029 - - 173,029 - 173,029
Maintenance 91,724 - - 91,724 - 91,724
Depreciation 114,709 - - 114,709 - 114,709
Taxes other than income taxes 88,722 - - 88,722 - 88,722
Federal and state income taxes 64,526 - - 64,526 - 64,526
Total operating expenses 912,195 - - 912,195 - 912,195
Operating income 166,532 - - 166,532 - 166,532
Other income and deductions:
Allowance for other than borrowed funds used
during construction 581 - - 581 - 581
Other, net 11,325 1,004 (1) 12,328 (1,003)(2) 11,325
Total other income and deductions 11,906 1,004 (1) 12,909 (1,003) 11,906
Income before interest charges 178,438 1,004 (1) 179,441 (1,003) 178,438
Interest charges:
Interest on long-term debt 61,727 - - 61,727 - 61,727
Other interest 5,913 - - 5,913 - 5,913
Allowance for borrowed funds used during
construction and interest capitalized (1,822) - - (1,822) - (1,822)
Total interest charges 65,818 - - 65,818 - 65,818
Income (loss) before extraordinary charge 112,620 1,004 (1) 113,623 (1,003) 112,620
Extraordinary charge, net (275,426) - - (275,426) - (275,426)
Net income (loss) (162,806) 1,004 (1) (161,803) (1,003) (162,806)
</TABLE>
<PAGE>
B-4
WEST PENN POWER COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL
FOR YEAR ENDED DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
West Virginia Power
and Transmission
Company and Subsidiary
West Virginia West Penn Consolidated
West Penn Power and West Virginia Totals
Power Transmission Water Combined Eliminations, (Carried to
Company Company Power Company Totals etc. page A-4)
RETAINED EARNINGS
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998 475,558 60 (4) 475,614 (56)(2) 475,558
Add:
Net income (loss) (162,806) 1,004 (1) (161,803) (1,003)(2) (162,806)
Total 312,752 1,064 (5) 313,811 (1,059) 312,752
Deduct:
Dividends on capital stock of West Penn Power Co.:
Preferred stock
4-1/2% 1,337 - - 1,337 - 1,337
4.20% Series B 210 - - 210 - 210
4.10% Series C 205 - - 205 - 205
Auction 1,644 - - 1,644 - 1,644
Common stock 98,664 - - 98,664 - 98,664
Total deductions 102,060 - - 102,060 - 102,060
Balance at December 31, 1998 210,692 1,064 (5) 211,751 (1,059) 210,692
OTHER PAID-IN CAPITAL
Balance at January 1 and December 31, 1998 55,475 (555) - 54,920 555 (1) 55,475
</TABLE>
<PAGE>
B-5
WEST PENN POWER COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR YEAR ENDED DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
West Virginia Power
and Transmission
Company and Subsidiary
West Virginia West Penn Consolidated
West Penn Power and West Virginia Totals
Power Transmission Water Combined Eliminations, (Carried to
Company Company Power Company Totals etc. page A-5)
<S> <C> <C> <C> <C> <C> <C>
Cash Flows from Operations:
Net income (loss) (162,806) 1,004 (1) (161,803) (1,003)(2) (162,806)
Extraordinary charge, net of taxes 275,426 - - 275,426 - 275,426
Net income before extraordinary charge 112,620 1,004 (1) 113,623 (1,003) 112,620
Depreciation 114,709 - - 114,709 - 114,709
Deferred investment credit and
income taxes, net (1,511) - - (1,511) - (1,511)
Unconsolidated subsidiaries' dividends
in excess of earnings 15,484 - - 15,484 - 15,484
Allowance for other than borrowed funds used
during construction (AOFDC) (581) - - (581) - (581)
Internal restructuring liability (4,082) - - (4,082) - (4,082)
Changes in certain current assets and liabilities:
Accounts receivable, net 5,866 - - 5,866 - 5,866
Materials and supplies (3,851) - - (3,851) - (3,851)
Accounts payable 21,966 (13) - 21,953 - 21,953
Taxes accrued (6,632) 13 - (6,619) - (6,619)
Other, net (1,490) - 1 (1,489) 1,003 (486)
Total Cash Flows from Operations 252,498 1,004 - 253,502 - 253,502
Cash Flows from Investing:
Construction expenditures (less allowance
for other than borrowed funds used during
construction) (95,394) - - (95,394) - (95,394)
Cash Flows from Financing:
Issuance of long-term debt 92,834 - - 92,834 - 92,834
Retirement of long-term debt (161,435) - - (161,435) - (161,435)
Short-term debt 3,720 - - 3,720 - 3,720
Notes payable to affiliates 9,300 - - 9,300 - 9,300
Dividends on capital stock:
Preferred stock (3,396) - - (3,396) - (3,396)
Common stock (98,664) - - (98,664) - (98,664)
Total Cash Flows from Financing (157,641) - - (157,641) - (157,641)
Net Change in Cash and
Temporary Cash Investments* (537) 1,004 - 467 - 467
Cash and Temporary Cash Investments
at January 1 3,401 655 - 4,056 - 4,056
Cash and Temporary Cash Investments
at December 31 2,864 1,659 - 4,523 - 4,523
Supplemental cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized) 62,711 - - 62,711 - 62,711
Income taxes 72,956 697 - 73,653 - 73,653
</TABLE>
*Temporary cash investments with original maturities of three months or less,
generally in the form of commercial paper, certificates of deposit, and
repurchase agreements, are considered to be the equivalent of cash.
<PAGE>
C-1
AYP CAPITAL, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEET - DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
Allegheny Allegheny Totals
AYP Communications AYP Energy Combined Eliminations, (Carried to
ASSETS Capital Connect Energy Solutions Totals etc. page A-1a)
Property, plant and equipment:
<S> <C> <C> <C>> <C> <C> <C> <C>
At original cost 479 1,194 169,105 20 170,798 - 170,798
Accumulated depreciation (124) (13) (11,185) - (11,322) - (11,322)
Investments and other assets:
Securities of subsidiaries
consolidated 10,521 - - - 10,521 (10,521)(1) -
Nonutility Investment 7,311 2,050 - - 9,361 - 9,361
Current assets:
Cash 1,883 241 6,787 197 9,108 - 9,108
Accounts receivable:
Electric service 493 54 8,412 3,349 12,308 - 12,308
Allowance for uncollectible
accounts - - - (82) (82) - (82)
Affiliated and other 3 251 168 2,337 2,759 (3)(3) 2,756
Materials and supplies
- at average cost:
Operating and construction - - 2,316 - 2,316 - 2,316
Fuel - - 2,560 - 2,560 - 2,560
Prepaid taxes 7 81 3,062 - 3,150 - 3,150
Other 26 - 46 - 72 - 72
Deferred charges:
Other 119 2,956 9,289 30 12,394 - 12,394
Total assets 20,718 6,814 190,560 5,851 223,943 (10,524) 213,419
</TABLE>
<PAGE>
C-2
AYP CAPITAL, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATING BALANCE SHEET - DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
Allegheny Allegheny Totals
AYP Communication AYP Energy Combined Eliminations, (Carried to
CAPITALIZATION AND LIABILITIES Capital Connect Energy Solutions Totals etc. page A-2A)
Capitalization:
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock owned by Allegheny
Energy, Inc. 1 - - - 1 - 1
Common stock of subsidiaries
consolidated - 1 1 1 3 (3)(1) -
Other paid-in capital 57,823 6,901 35,659 3,243 103,626 (45,803)(1) 57,823
Retained earnings (38,109) (376) (31,728) (3,181) (73,394) 35,285 (2) (38,109)
Long-term debt - - 160,000 - 160,000 - 160,000
Current liabilities:
Short-term debt - - - 1,000 1,000 - 1,000
Accounts payable to affiliates 236 190 546 184 1,156 (3)(3) 1,153
Accounts payable - others 13 98 8,233 2,445 10,789 - 10,789
Taxes accrued:
Federal and state income 721 - 2,194 135 3,050 - 3,050
Other 33 - 1,779 1,151 2,963 - 2,963
Interest accrued - - 1,703 - 1,703 - 1,703
Other - - 133 857 990 - 990
Deferred credits and other liabilities:
Deferred income taxes - - 4,659 16 4,675 - 4,675
Other - - 7,381 - 7,381 - 7,381
Total capitalization and
liabilities 20,718 6,814 190,560 5,851 223,943 (10,524) 213,419
</TABLE>
<PAGE>
C-3
AYP CAPITAL, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME FOR YEAR ENDED DECEMBER 31,1998
(000's)
<TABLE>
<CAPTION>
Consolidated
Allegheny Allegheny Totals
AYP Communication AYP Energy Combined Eliminations, (Carried to
Capital Connect Energy Solutions Totals etc. page A-3a)
Operating revenues:
<S> <C> <C> <C> <C> <C> <C> <C>
Residential - - - 6,040 6,040 - 6,040
Commercial - - - 11,712 11,712 - 11,712
Industrial - - - 7,176 7,176 - 7,176
Wholesale and other,
including affiliates 6,462 246 23,217 - 29,925 (23,139) (4) 6 786
Bulk power transactions, net - - 215,270 - 215,270 - 215,270
Total operating revenues 6,462 246 238,487 24,928 270,123 (23,139) 246,984
Operating expenses:
Operation:
Fuel - - 21,137 - 21,137 - 21,137
Purchased power and
exchanges, net - - 210,394 23,304 233,698 (23,139) (4) 210,559
Other 7,322 349 6,359 4,129 18,159 - 18,159
Maintenance 1 1 5,250 13 5,265 - 5,265
Depreciation 96 13 5,649 12 5,770 - 5,770
Taxes other than income taxes 256 3 5,354 1,267 6,880 - 6,880
Federal and state income taxes (343) (39) (9,128) (1,023) (10,533) - (10,533)
Total operating expenses 7,332 327 245,015 27,702 280,376 (23,139) 257,237
Operating income (870) (81) (6,528) (2,774) (10,253) - (10,253)
Other income and deductions:
Other, net (19,439) 10 (1,208) 1,060 (19,577) 19,676 (2) 99
Total other income
and deductions (19,439) 10 (1,208) 1,060 (19,577) 19,676 99
Income before interest
charges (20,309) (71) (7,736) (1,714) (29,830) 19,676 (10,154)
Interest charges:
Interest on long-term debt - - 10,105 - 10,105 - 10,105
Other interest 3 - 23 27 53 - 53
Total interest charges 3 - 10,128 27 10,158 - 10,158
Net income (loss) (20,312) (71) (17,864) (1,741) (39,988) 19,676 (20,312)
</TABLE>
<PAGE>
C-4
AYP CAPITAL, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF RETAINED EARNINGS AND OTHER PAID-IN CAPITAL
FOR YEAR ENDED DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
Allegheny Allegheny Totals
AYP Communication AYP Energy Combined Eliminations, (Carried to
Capital Connect Energy Solutions Totals etc. page A-4a)
RETAINED EARNINGS
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998 (17,797) (305) (13,864) (1,440) (33,406) 15,609 (17,797)
Add:
Net income (loss) (20,312) (71) (17,864) (1,741) (39,988) 19,676 (2) (20,312)
Total (38,109) (376) (31,728) (3,181) (73,394) 35,285 (38,109)
Deduct:
Dividends on common stock of Allegheny Power
System, Inc. - - - - - - -
Dividends on capital stock of subsidiary companies:
Preferred - - - - - - -
Common - - - - - - -
Total deductions - - - - - - -
Balance at December 31, 1998 (38,109) (376) (31,728) (3,181) (73,394) 35,285 (38,109)
OTHER PAID-IN CAPITAL
Balance at January 1, 1998 43,869 890 29,488 3,243 77,490 (33,621) 43,869
Add:
Capital Contributions from Parent 13,954 6,011 6,171 - 26,136 (12,182)(1) 13,954
Balance at December 31, 1998 57,823 6,901 35,659 3,243 103,626 (45,803) 57,823
</TABLE>
<PAGE>
C-5
AYP CAPITAL, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR YEAR ENDED DECEMBER 31, 1998
(000's)
<TABLE>
<CAPTION>
Allegheny Allegheny Totals
Communication AYP Energy Combined Eliminations, (Carried to
AYP Capital Connect Energy Solutions Totals etc. page A-5a)
Cash Flows from Operations:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) (20,312) (71) (17,864) (1,741) (39,988) 19,676 (2) (20,312)
Depreciation 96 13 5,649 12 5,770 - 5,770
Deferred investment credit
and income taxes,net - - 1,564 16 1,580 - 1,580
Changes in certain current
assets and liabilities:
Accounts receivable, net 360 (170) 5,503 (3,300) 2,393 (14) 2,379
Materials and supplies - - (348) - (348) - (348)
Accounts payable (1,242) 72 (4,694) 1,181 (4,683) 14 (4,669)
Taxes accrued 416 (19) 1,705 663 2,765 - 2,765
Other, net 7,377 (3,037) 3,063 987 8,390 (7,494) 896
Total Cash Flows from Operations (13,305) (3,212) (5,422) (2,182) (24,121) 12,182 (11,939)
Cash Flows from Investing:
Nonutility Investments (2,315) (3,016) (855) (20) (6,206) - (6,206)
Cash Flows from Financing:
Issuance of long-term debt - - - - - - -
Retirement of long-term debt - - - - - - -
Short-term debt - - - 1,000 1,000 - 1,000
Notes receivable from affiliates - - - - - - -
Parent company contribution 13,954 6,011 6,171 - 26,136 (12,182) 13,954
Dividends on capital stock:
Preferred stock - - - - - - -
Common stock - - - - - - -
Total Cash Flows from Financing 13,954 6,011 6,171 1,000 27,136 (12,182) 14,954
Net Change in Cash (1,666) (217) (106) (1,202) (3,191) - (3,191)
Cash at January 1 3,549 458 6,893 1,399 12,299 - 12,299
Cash at December 31 1,883 241 6,787 197 9,108 - 9,108
Supplemental cash flow information:
Cash paid during the year for:
Interest 3 - 10,241 30 10,274 - 10,274
Income taxes (753) 53 (13,042) (551) (14,293) - (14,293)
<PAGE>
D-1
INDIANA-KENTUCKY ELECTRIC CORPORATION
BALANCE SHEET--DECEMBER 31, 1998
UNAUDITED
(000's)
Assets
Electric plant - at original cost, including $7,914
construction work in progress 409,670
Less - Accumulated provisions for depreciation and
amortization 346,984
62,686
Current assets:
Cash and cash equivalents 11
Accounts receivable 682
Coal in storage, at average cost 18,052
Coal sold under agreement to be repurchased 4,000
Materials and supplies, at average cost 8,721
Interest receivable 1
Prepaid expenses and other 1,100
32,567
Deferred charges and other:
Future federal income tax benefits 50,028
Unrecognized postemployment benefits 570
Unrecognized pension expense 4,247
Unrecognized postretirement benefits 18,211
Deferred depreciation - coal switch 6,502
Prepaids and other 291
79,849
TOTAL ASSETS 175,102
Capitalization and Liabilities
Capitalization:
Common stock, without par value, stated at $200
per share -
Authorized - 100,000 shares
Outstanding - 17,000 shares 3,400
Current liabilities:
Accounts payable 21,903
Coal purchase obligation 4,000
Accrued taxes 2,594
Accrued interest and other 2,522
31,019
Deferred credits:
Accrued pension liability 4,247
Customer advances for construction 4,740
Advances from parent - construction 58,022
Antitrust settlement 2,594
Postretirement benefits obligation 18,211
Postemployment benefits obligation 570
Accumulated deferred income taxes 50,028
Deferred credit - other 2,271
140,683
TOTAL CAPITALIZATION AND LIABILITIES 175,102
<PAGE>
D-2
INDIANA-KENTUCKY ELECTRIC CORPORATION
STATEMENT OF INCOME
FOR YEAR ENDED DECEMBER 31, 1998
UNAUDITED
(000's)
Operating revenues:
Sale of electric energy 152,861
Other operating revenues 67
Total operating revenues 152,928
Operating expenses:
Fuel consumed in operation 106,630
Other operation 17,416
Maintenance 17,433
Depreciation 6,465
Taxes, other than federal income taxes 4,977
Total operating expenses 152,921
Operating income 7
Interest income and other (7)
Net income -
<PAGE>
D-3
INDIANA-KENTUCKY ELECTRIC CORPORATION
STATEMENT OF CASH FLOWS
FOR YEAR ENDED DECEMBER 31, 1998
UNAUDITED
(000's)
Cash From Operations:
Net Income -
Adjustments to reconcile net income to net
cash (used) provided by operating activities:
Depreciation 6,465
Changes in assets and liabilities:
Accounts receivable (655)
Coal in storage and coal sold under agreement to be repurchased (3,103)
Materials and supplies 424
Prepaid expenses and other (14)
Accounts payable 6,421
Accrued taxes 616
Accrued interest and other 419
Other 2,188
Net cash provided by operating activities 12,761
Investing Activities:
Reimbursement for plant replacements and
additional facilities 8,005
Net electric plant additions (10,348)
Advances from parent (6,465)
Net cash used by investing activities (8,808)
Financing Activities:
Coal purchase obligation (4,000)
Net cash used by financing activities (4,000)
Net decrease in cash and cash equivalents (47)
Cash and cash equivalents, beginning of year 58
Cash and cash equivalents, end of year 11
Supplemental Disclosures
Interest paid 510
Federal income taxes paid -
For purposes of this statement, the company considers temporary cash investments
to be cash equivalents since they are readily convertible into cash and have
maturities of less than three months.
<PAGE>
D-4
OHIO VALLEY ELECTRIC CORPORATION
BALANCE SHEET--DECEMBER 31, 1998
UNAUDITED
(000's)
Assets
Electric plant - at original cost, including $4,828
construction work in progress 297,003
Less - Accumulated provisions for depreciation and amortization 288,376
8,627
Investments and other:
Investment in subsidiary company 3,400
Advances to subsidiary - construction 58,022
61,422
Current assets:
Cash and cash equivalents 1,045
Accounts receivable 29,322
Coal in storage, at average cost 2,085
Coal sold under agreement to be repurchased 8,000
Materials and supplies, at average cost 10,641
Property taxes applicable to subsequent years 4,000
SO2 Allowances 2,373
Prepaid expenses and other 871
58,337
Deferred charges and Other:
Unamortized debt expense 277
Future federal income tax benefits 18,867
Unrecognized postemployment benefits expense 323
Unrecognized pension expense 4,664
Unrecognized postretirement benefits expense 19,502
SO2 Allowances 5,779
Prepaids and other 1,546
50,958
TOTAL ASSETS 179,344
Capitalization and Liabilities
Capitalization:
Common stock, $100 par value -
Authorized - 300,000 shares
Outstanding - 100,000 shares 10,000
Senior secured notes 51,305
Retained earnings 2,041
63,346
Current liabilities:
Short-Term Borrowings 20,000
Note payable maturing in one year 7,100
Current portion - long term debt 6,896
Accounts payable 7,839
Coal purchase obligation 8,000
Accrued taxes 8,140
Accrued Federal income taxes 2,549
Accrued interest and other 2,088
62,612
Deferred credits:
Investment tax credits 10,610
Accrued pension liability 4,664
Customer advances for construction 915
Antitrust settlement 1,517
Accumulated deferred income taxes 15,505
Postretirement benefits obligation 19,502
Postemployment benefits obligation 323
Deferred credit - other 350
53,386
TOTAL CAPITALIZATION AND LIABILITIES 179,344
<PAGE>
D-5
OHIO VALLEY ELECTRIC CORPORATION
STATEMENT OF INCOME
FOR YEAR ENDED DECEMBER 31, 1998
UNAUDITED
(000's)
Operating revenues:
Sale of electric energy 305,785
Other operating revenues 810
Total operating revenues 306,595
Operating expenses:
Fuel consumed in operation 92,503
Purchased power 155,519
Other operation 23,088
Maintenance 15,736
Taxes, other than federal income taxes 5,382
Federal income taxes 7,018
Total operating expenses 299,246
Operating income 7,349
Interest income and other 497
Income before interest charges 7,846
Interest charges
Interest expense, net 5,669
Amortization of debt expense and discount 40
Total interest charges 5,709
Net income 2,137
Retained earnings, beginning of year 2,064
Cash dividends on common stock 2,160
Retained earnings, end of year 2,041
<PAGE>
D-6
OHIO VALLEY ELECTRIC CORPORATION
STATEMENT OF CASH FLOWS
FOR YEAR ENDED DECEMBER 31, 1998
UNAUDITED
(000's)
Cash From Operations:
Net Income 2,137
Adjustments to reconcile net income to net
cash (used) provided by operating activities:
Debt expense amortization 40
Future federal income and deferred credit tax benefits 1,059
Changes in assets and liabilities:
Accounts receivable (3,135)
Coal in storage and coal sold under agreement to be repurchased 1,784
Materials and supplies (327)
SO2 allowances 3,213
Property taxes applicable to subsequent years 86
Prepaid expenses and other (36)
Accounts payable (710)
Accrued taxes (4,103)
Accrued interest and other (268)
Other 2,487
Net cash provided by operating activities 2,227
Investing Activities:
Reimbursement for plant replacements and
additional facilities 1,993
Net electric plant additions (5,840)
Advances in subsidiary 6,465
Net cash provided by investing activities 2,618
Financing Activities:
Notes payable maturing in one year (500)
Senior secured notes (6,465)
Dividends on common stock (2,160)
Net cash used by financing activities (9,125)
Net decrease in cash and cash equivalents (4,280)
Cash and cash equivalents, beginning of year 5,325
Cash and cash equivalents, end of year 1,045
Supplemental Disclosures
Interest paid 6,271
Federal income taxes paid during the year 10,300
For purposes of this statement, the company considers temporary cash investments
to be cash equivalents since they are readily convertible into cash and have
maturities of less than three months.
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 5,234,130
<OTHER-PROPERTY-AND-INVEST> 113,156
<TOTAL-CURRENT-ASSETS> 555,083
<TOTAL-DEFERRED-CHARGES> 845,108
<OTHER-ASSETS> 316
<TOTAL-ASSETS> 6,747,793
<COMMON> 153,045
<CAPITAL-SURPLUS-PAID-IN> 1,044,085
<RETAINED-EARNINGS> 836,759
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,033,889
0
170,086
<LONG-TERM-DEBT-NET> 2,179,288
<SHORT-TERM-NOTES> 50,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 208,837
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 1,050
<LEASES-CURRENT> 2,282
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,102,361
<TOT-CAPITALIZATION-AND-LIAB> 6,747,793
<GROSS-OPERATING-REVENUE> 2,576,436
<INCOME-TAX-EXPENSE> 168,396
<OTHER-OPERATING-EXPENSES> 1,968,533
<TOTAL-OPERATING-EXPENSES> 2,136,929
<OPERATING-INCOME-LOSS> 439,507
<OTHER-INCOME-NET> 9,733
<INCOME-BEFORE-INTEREST-EXPEN> 449,240
<TOTAL-INTEREST-EXPENSE> 176,981
<NET-INCOME> (3,167)<F2>
9,251
<EARNINGS-AVAILABLE-FOR-COMM> (12,418)<F2>
<COMMON-STOCK-DIVIDENDS> 210,591
<TOTAL-INTEREST-ON-BONDS> 103,072
<CASH-FLOW-OPERATIONS> 591,182
<EPS-PRIMARY> (0.10)<F3>
<EPS-DILUTED> (0.10)<F3>
<FN>
<F2>**Includes an extraordinary charge of 275,426
<F3>***Includes an extraordinary charge of 2.25
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,123,961
<OTHER-PROPERTY-AND-INVEST> 44,857
<TOTAL-CURRENT-ASSETS> 157,611
<TOTAL-DEFERRED-CHARGES> 192,601
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,519,030
<COMMON> 294,550
<CAPITAL-SURPLUS-PAID-IN> 2,441
<RETAINED-EARNINGS> 273,198
<TOTAL-COMMON-STOCKHOLDERS-EQ> 570,189
0
74,000
<LONG-TERM-DEBT-NET> 453,917
<SHORT-TERM-NOTES> 49,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 717
<LEASES-CURRENT> 118
<OTHER-ITEMS-CAPITAL-AND-LIAB> 371,089
<TOT-CAPITALIZATION-AND-LIAB> 1,519,030
<GROSS-OPERATING-REVENUE> 645,125
<INCOME-TAX-EXPENSE> 49,455
<OTHER-OPERATING-EXPENSES> 484,187
<TOTAL-OPERATING-EXPENSES> 533,642
<OPERATING-INCOME-LOSS> 111,483
<OTHER-INCOME-NET> 6,427
<INCOME-BEFORE-INTEREST-EXPEN> 117,910
<TOTAL-INTEREST-EXPENSE> 35,485
<NET-INCOME> 82,425
5,037
<EARNINGS-AVAILABLE-FOR-COMM> 77,388
<COMMON-STOCK-DIVIDENDS> 48,129
<TOTAL-INTEREST-ON-BONDS> 22,831
<CASH-FLOW-OPERATIONS> 160,785
<EPS-PRIMARY> 0.00<F1>
<EPS-DILUTED> 0.00<F1>
<FN>
<F1>*All common stock is owned by parent, no EPS required.
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,322,876
<OTHER-PROPERTY-AND-INVEST> 46,632
<TOTAL-CURRENT-ASSETS> 222,955
<TOTAL-DEFERRED-CHARGES> 109,545
<OTHER-ASSETS> 121
<TOTAL-ASSETS> 1,702,129
<COMMON> 447,700
<CAPITAL-SURPLUS-PAID-IN> 2,690
<RETAINED-EARNINGS> 312,522
<TOTAL-COMMON-STOCKHOLDERS-EQ> 762,912
0
16,378
<LONG-TERM-DEBT-NET> 578,817
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 344,022
<TOT-CAPITALIZATION-AND-LIAB> 1,702,129
<GROSS-OPERATING-REVENUE> 737,497
<INCOME-TAX-EXPENSE> 52,602
<OTHER-OPERATING-EXPENSES> 546,099
<TOTAL-OPERATING-EXPENSES> 598,701
<OPERATING-INCOME-LOSS> 138,796
<OTHER-INCOME-NET> 9,894
<INCOME-BEFORE-INTEREST-EXPEN> 148,690
<TOTAL-INTEREST-EXPENSE> 47,208
<NET-INCOME> 101,482
818
<EARNINGS-AVAILABLE-FOR-COMM> 100,664
<COMMON-STOCK-DIVIDENDS> 27,533
<TOTAL-INTEREST-ON-BONDS> 36,861
<CASH-FLOW-OPERATIONS> 215,820
<EPS-PRIMARY> 0.00<F1>
<EPS-DILUTED> 0.00<F1>
<FN>
<F1>*All common stock is owned by parent, no EPS required.
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,003,371
<OTHER-PROPERTY-AND-INVEST> 74,907
<TOTAL-CURRENT-ASSETS> 250,227
<TOTAL-DEFERRED-CHARGES> 514,451
<OTHER-ASSETS> 113
<TOTAL-ASSETS> 2,843,069
<COMMON> 465,994
<CAPITAL-SURPLUS-PAID-IN> 55,475
<RETAINED-EARNINGS> 210,692
<TOTAL-COMMON-STOCKHOLDERS-EQ> 732,161
0
79,708
<LONG-TERM-DEBT-NET> 837,725
<SHORT-TERM-NOTES> 9,300
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 55,766
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 181
<LEASES-CURRENT> 503
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,127,725
<TOT-CAPITALIZATION-AND-LIAB> 2,843,069
<GROSS-OPERATING-REVENUE> 1,078,727
<INCOME-TAX-EXPENSE> 64,526
<OTHER-OPERATING-EXPENSES> 847,669
<TOTAL-OPERATING-EXPENSES> 912,195
<OPERATING-INCOME-LOSS> 166,532
<OTHER-INCOME-NET> 11,906
<INCOME-BEFORE-INTEREST-EXPEN> 178,438
<TOTAL-INTEREST-EXPENSE> 65,818
<NET-INCOME> (162,806)<F2>
3,396
<EARNINGS-AVAILABLE-FOR-COMM> (166,202)
<COMMON-STOCK-DIVIDENDS> 98,664
<TOTAL-INTEREST-ON-BONDS> 43,380
<CASH-FLOW-OPERATIONS> 253,502
<EPS-PRIMARY> 0.00<F1>
<EPS-DILUTED> 0.00<F1>
<FN>
<F2>**Includes an extraordinary charge of 275,426.
<F1>*All common stock is owned by parent, no EPS required.
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 618,608
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 5,857
<TOTAL-DEFERRED-CHARGES> 14,993
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 639,458
<COMMON> 1
<CAPITAL-SURPLUS-PAID-IN> 165,275
<RETAINED-EARNINGS> 0
<TOTAL-COMMON-STOCKHOLDERS-EQ> 165,276
0
0
<LONG-TERM-DEBT-NET> 148,829
<SHORT-TERM-NOTES> 66,750
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 258,603
<TOT-CAPITALIZATION-AND-LIAB> 639,458
<GROSS-OPERATING-REVENUE> 73,816
<INCOME-TAX-EXPENSE> 10,959
<OTHER-OPERATING-EXPENSES> 26,203
<TOTAL-OPERATING-EXPENSES> 37,162
<OPERATING-INCOME-LOSS> 36,654
<OTHER-INCOME-NET> 86
<INCOME-BEFORE-INTEREST-EXPEN> 36,740
<TOTAL-INTEREST-EXPENSE> 13,987
<NET-INCOME> 22,753
0
<EARNINGS-AVAILABLE-FOR-COMM> 22,753
<COMMON-STOCK-DIVIDENDS> 22,753
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 44,989
<EPS-PRIMARY> 0.00<F1>
<EPS-DILUTED> 0.00<F1>
<FN>
<F1>All common stock is owned by parent, no EPS required.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 159,476
<OTHER-PROPERTY-AND-INVEST> 9,361
<TOTAL-CURRENT-ASSETS> 32,188
<TOTAL-DEFERRED-CHARGES> 12,394
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 213,419
<COMMON> 1
<CAPITAL-SURPLUS-PAID-IN> 57,823
<RETAINED-EARNINGS> (38,109)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 19,715
0
0
<LONG-TERM-DEBT-NET> 160,000
<SHORT-TERM-NOTES> 1,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 32,704
<TOT-CAPITALIZATION-AND-LIAB> 213,419
<GROSS-OPERATING-REVENUE> 246,984
<INCOME-TAX-EXPENSE> (10,533)
<OTHER-OPERATING-EXPENSES> 267,770
<TOTAL-OPERATING-EXPENSES> 257,237
<OPERATING-INCOME-LOSS> (10,253)
<OTHER-INCOME-NET> 99
<INCOME-BEFORE-INTEREST-EXPEN> (10,154)
<TOTAL-INTEREST-EXPENSE> 10,158
<NET-INCOME> (20,312)
0
<EARNINGS-AVAILABLE-FOR-COMM> (20,312)
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> (11,939)
<EPS-PRIMARY> 0.00<F1>
<EPS-DILUTED> 0.00<F1>
<FN>
<F1>*All common stock is owned by parent, no EPS required.
</FN>
</TABLE>
<PAGE>
AMENDMENT NO. 2 TO
TAX ALLOCATION AGREEMENT
By and Between
ALLEGHENY POWER SYSTEM INC.
and its Subsidiaries
Amending the Agreement dated as of December 1, 1994
<PAGE>
AMENDMENT NO. 2 dated as of September 3, 1997, among
ALLEGHENY POWER SYSTEM, INC. (hereinafter called the "Parent
Company") and the direct and indirect subsidiaries of the Parent
Company (hereinafter called the "Subsidiary Companies"),
collectively referred to hereinafter as "the parties hereto."
WHEREAS, the Parent Company and the Subsidiaries are parties
to an agreement dated as of December 1, 1994 concerning their
federal income tax allocation (the "Tax Allocation Agreement");
and
WHEREAS, one new indirect subsidiary company has been formed
and is joining in the consolidated group for federal income tax
purposes;
NOW THEREFORE, the parties hereto hereby mutually agree
that:
1. Allegheny Energy Solutions, Inc. is included as a party
to the Tax Allocation Agreement as of the date hereof.
2. With the addition of the subsidiary above-named, the
Agreement dated as of December 1, 1994 remains in full force and
effect, as amended.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed.
ALLEGHENY GENERATING COMPANY
By: /s/ A. J. Noia
President
ALLEGHENY PITTSBURGH COAL COMPANY
By /s/ A. J. Noia
President
ALLEGHENY POWER SERVICE CORPORATION
By: /s/ A. J. Noia
President
<PAGE>
ALLEGHENY POWER SYSTEM, INC.
By: /s/ A. J. Noia
President
AYP CAPITAL, INC.
By: /s/ A. J. Noia
President
MONONGAHELA POWER COMPANY
By: /s/ J. D. Latimer
Vice President
THE POTOMAC EDISON COMPANY
By: /s/ J. D. Latimer
Vice President
WEST PENN POWER COMPANY
By: /s/ J. D. Latimer
Vice Presdient
WEST PENN WEST VIRGINIA WATER
POWER COMPANY
By: /s/ J. D. Latimer
Vice President
2
<PAGE>
WEST VIRGINIA POWER AND
TRANSMISSION COMPANY
By: /s/ A. J. Noia
President
ALLEGHENY COMMUNICATIONS CONNECT,
INC.
By: /s/ A. J. Noia
President
AYP ENERGY, INC.
By: /s/ A. J. Noia
President
ALLEGHENY ENERGY SOLUTIONS, INC.
By: /s/ A. J. Noia
President
3
