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File No. 70-7888
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
POST-EFFECTIVE AMENDMENT NO. 17
TO
FORM U-1
APPLICATION OR DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Allegheny Energy, Inc. Monongahela Power Company
10435 Downsville Pike 1310 Fairmont Avenue
Hagerstown, MD 21740 Fairmont, WV 26554
Allegheny Power Service Corporation The Potomac Edison
Company
800 Cabin Hill Drive 10435 Downsville Pike
Greensburg, PA 15601 Hagerstown, MD 21740
Allegheny Generating Company West Penn Power Company
10435 Downsville Pike 800 Cabin Hill Drive
Hagerstown, MD 21740 Greensburg, PA 15601
(Name of company or companies filing this statement
and addresses of principal executive offices)
Allegheny Energy, Inc.
10435 Downsville Pike
Hagerstown, MD 21740
(Name of top registered holding company parent of
each applicant or declarant)
Thomas K. Henderson, Esquire
Vice President and General Counsel
Allegheny Energy, Inc.
10435 Downsville Pike
Hagerstown, MD 21740
________________________________________________________________
(Name and address of agent for service)
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Applicants hereby amend Item 1. Description of Proposed
Transaction by adding the following to the end thereof:
A. Short Term Debt
West Penn Power Company ("West Penn") requests the
Commission to raise its aggregate limit on short-term debt
financing from $182 million to $500 million, subject to the same
terms and conditions as are contained in the original
Application. In support thereof, West Penn submits the
following.
West Penn was authorized by the Commission to issue up to
$182 million in short-term debt through December 31, 2001,
subject to certain conditions and parameters, by prior orders
dated January 29, 1992, February 28, 1992, July 14, 1992,
November 5, 1993, November 28, 1995, April 18, 1996 and December
23, 1997, (HCAR Nos. 25462, 25481, 25581, 25919, 26418, 26506,
and 26804, respectively) ("Prior Orders") in File No. 70-7888.
Subject to the terms and conditions set forth in the Prior
Orders, West Penn requests authority to increase the limit of its
short term debt by $318 million and be authorized to issue up to
$500 million in short-term debt through December 31, 2007.
West Penn has not sought an increase in the amount of its
short-term debt financing authority since it was approved to
borrow up to $182 million in 1997 by HCAR No. 26804. On December
23, 1997 , the Commission issued an order (HCAR No. 26804)
authorizing Allegheny Energy, Inc. (formerly Allegheny Power
System, Inc.), Monongahela Power Company ("Monongahela"), The
Potomac Edison Company ("Potomac Edison"), West Penn Power
Company ("West Penn"), and Allegheny Generating Company ("AGC")
to continue their short-term debt
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financing authority from
December 31, 1997 through December 31, 2001, and to continue the
Allegheny Power System Money Pool from December 31, 1997 through
December 31, 2001. On May 19, 1999, Allegheny Energy, Inc.
("Allegheny") received an order (HCAR No. 27030) increasing its
short-term debt limit from $400 million to $750 million, and
extending its participation in the money pool through December
31`, 2007. Since the time that West Penn received its order in
1997, however, several events have occurred which require West
Penn to request additional financing authority.
B. Background of Competition and Regulatory
Environment in Pennsylvania
As the Commission is aware, deregulation of generation
has begun and competition at the retail level is now a reality in
Pennsylvania. Pennsylvania is the state in which West Penn is
incorporated and where its entire service territory is located.
The Electricity Generation Customer Choice and Competition Act,
66 Pa. C.S. Section 2801 et seq. (together with regulatory
interpretations, the "Competition Act"), was enacted in December
1996, and provided for the restructuring of the electric utility
industry in Pennsylvania. The Competition Act required the
unbundling of electric services into separate supply,
transmission, and distribution services with open retail
competition for supply. Electric distribution services remain
regulated by the Pennsylvania Public Utility Commission ("PUC").
Transmission services will be provided pursuant to a FERC-filed
Open Access Transmission Tariff. The Competition Act required
utilities to submit restructuring plans to the PUC.
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In August 1997, West Penn filed its restructuring plan
with the PUC, which, among other things, unbundled generation
from transmission and distribution. The restructuring plan was
contested and became the subject of hearings, which finally
resulted in a settlement that was approved by the PUC on November
19, 1998. The PUC's Order authorized and provided state
regulatory pre-approval for the transfer of West Penn's
generation assets to an affiliate company at net book value.
West Penn has applied to the SEC (File No. 70-9483), among other
things, for approval to transfer its generation assets to a new
generation company ("GENCO").
In Pennsylvania, full electric generation competition
is being phased in. For West Penn, its settlement called for one-
third of each customer class to have direct retail access on
January 1, 1999, and for an additional one-third to have direct
retail access on January 2, 1999. Retail access for the
remaining one-third will occur on January 2, 2000.
West Penn is evaluating its current capital structure,
and determining the best capital structure for it and the new
GENCO, in light of competition, its restructuring case, and the
intent of the Competition Act that companies use the proceeds of
securitization to primarily reduce their capital structure. West
Penn is anticipating that it will need the additional borrowing
authority for the transition to competition in Pennsylvania. It
may also use the borrowing authority as a stop-gap measure, while
other financing transactions are being contemplated.
Additionally, West Penn may need the borrowing authority to
support its restructuring debt. West Penn may also use its short-
term borrowing authority to support its
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capital expenditure
program, and to take advantage of growth opportunities through
acquisitions. In addition, regulated investment opportunities
may arise from time to time. While West Penn would seek such
additional regulatory approval as may be required in connection
with such acquisitions, the requested increase in short-term
financing authority will enhance its ability to participate
effectively in the evolving energy markets.
In order to better position West Penn in this competitive
environment, West Penn needs to have access to cash through short-
term borrowings in order to take advantage of opportunities that
arise.
C. Application of Proceeds
West Penn may use the proceeds of its proposed short-term
borrowings for general corporate purposes, including effecting
the transition to the competitive status contemplated by
Pennsylvania law, assisting in the restructuring of West Penn's
capital structure, the financing of construction and also
property acquisitions.
Other than Allegheny's 9.9% limited partnership interest in
The Latin America Energy and Electricity Fund I, L.P., and
Allegheny's ownership of Allegheny Energy Unit No. 1 and Unit No.
2, LLC, an EWG that was incorporated on May 12, 1999, neither
Allegheny nor any subsidiary thereof currently has an ownership
interest in an EWG or foreign utility company ("FUCO") as defined
in Sections 32 or 33 of the Act. Neither Allegheny nor any
subsidiary thereof currently or as a consequence of the
transactions proposed
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herein will be a party to, or have any
rights under, a service, sales, or construction agreement with an
EWG or a FUCO.
Except as described herein, no associate company or
affiliate of the Applicants or any affiliate of any such
associate company has any material interest, directly or
indirectly, in the proposed transactions.
D. Analysis Under Rule 53
Rule 54 provides that in determining whether to approve
certain transactions other than those involving exempt wholesale
generators ("EWGs") or foreign utility companies ("FUCOs"), as
defined in the 1935 Act, the Commission will not consider the
effect of the capitalization or earnings of any subsidiary which
is an EWG or FUCO if Rule 53(a), (b) and (c) are satisfied. The
requirements of Rule 53(a), (b) and (c) are satisfied.
Rule 53(a)(1). Allegheny has $45,000,000 invested, or
committed to be invested, in EWGs. Allegheny has committed to
invest up to $5 million in partnerships that may invest in FUCOs.
These investments represent less than 6% of $847,761,000, the
average of the consolidated retained earnings of Allegheny
reported on Form 10-K or Form 10-Q, as applicable, for the four
consecutive quarters ended March 31, 1999.
Rule 53(a)(2). Allegheny will maintain books and records
for any EWG and FUCO in which it holds an interest and will make
those books and records available as required by Rule 53(a)(2).
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Rule 53(a)(3). No more than 2% of the employees of
Allegheny's domestic public utility companies will, at any one
time, directly or indirectly, render services to EWGs or FUCOs in
which Allegheny holds an interest.
Rule 53(a)(4). Allegheny will submit a copy of Item 9 and
Exhibits G and H of Allegheny's Form U5S to each of the public
service commissions having jurisdiction over the retail rates of
any of Allegheny's affected public utility companies.
Rule 53(b):
(i) Neither Allegheny nor any subsidiary of Allegheny is the
subject of any pending bankruptcy or similar proceeding;
(ii) Allegheny's average consolidated retained earnings for the
four most recent quarterly periods($847,761,000) represented a
decrease of approximately $200,581,000 (or 19%) in the average
consolidated retained earnings from the previous four quarterly
periods ($1,048,342,000); however, Allegheny's aggregate
investment in EWGs and FUCOs does not exceed three percent of
total capital invested in utility operations. The decrease in
consolidated retained earnings resulted primarily from West Penn,
one of the Company's regulated subsidiaries, recording an
extraordinary charge of $466.9 million ($275.4 million after
taxes) in 1998. West Penn determined that under the provisions
of SFAS No. 101 an extraordinary charge was required to reflect a
write-off of certain disallowances in the Pennsylvania Public
Utility Commission's (Pennsylvania PUC) May 29, 1998, Order, as
revised by the Pennsylvania PUC-approved November 19, 1998,
settlement agreement. The write-off reflects adverse power
purchase commitments and deferred costs that are not recoverable
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from customers under the Pennsylvania PUC's Order and settlement
agreement.
(iii) for the year ended December 31, 1998, there were no
losses attributable to Allegheny's investments in the
partnerships that invest in FUCOs.
Rule 53(c). Rule 53(c) is inapplicable because the
requirements of Rule 53(a) and (b) have been satisfied.
2. Applicants hereby add the following to the end of Item 2.
Fees, Commissions and Expenses:
None, other than ordinary expenses not over $500 in
connection with the preparation of this Post-Effective Amendment.
None of such fees, commissions or expenses are to be paid to any
associate company or affiliate of Allegheny or any affiliate of
any such associate company except for legal, financial and other
services to be performed at cost by Allegheny Power Service
Corporation.
3. Applicants hereby add the following to the end of Item 3.
Applicable Statutory Provisions:
Short-term borrowings by West Penn are subject to
Sections 6 and 7 of the Public Utility Holding Company Act of
1935 (the "Act").
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4. Applicants hereby add the following to the end of Item 4.
Regulatory Approval:
No commission, other than the Securities and Exchange
Commission, has jurisdiction over the proposed transactions.
5. Applicants hereby add the following to the end of Item 5.
Procedure:
It is requested, pursuant to Rule 23(c) of the Rules
and Regulations of the Commission, that the Commissions' Order
permitting this application or declaration to become effective be
issued on or before August 20, 1999. Allegheny waives any
recommended decision by hearing officer or by any other
responsible officer of the Commission and waives the 30-day
waiting period between the issuance of the Commission's Order and
the date it is to become effective since it is desired that the
Commission's Order, when issued, become effective forthwith.
Allegheny consents to the office of Public Utility Regulation
assisting in the preparation of the Commission's decision and/or
Order in this matter unless the Office opposes the matter covered
by this application or declaration.
6. Applicants hereby add the following to the end of Item 6.
Exhibits and Financial Statements:
(a) Exhibits
H-2 Form of Notice.
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7. Applicants hereby add the following to the end of Item 7.
Information as to Environmental Effects:
(a) For the reasons set forth in Item 1
above, the authorization applied for herein does
not require major federal action significantly
affecting the quality of the human environment for
purposes of Section 102(2)(C) of the National
Environmental Policy Act (42 U.S.C. 4232(2)(C)).
(b) Not applicable.
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SIGNATURE
Pursuant to the requirements of the Public Utility
Holding Company Act of 1935, the undersigned Applicants have duly
caused this statement to be signed on their behalf by the
undersigned thereunto duly authorized.
ALLEGHENY ENERGY, INC.
BY /s/ Carol G. Russ
CAROL G. RUSS
COUNSEL
MONONGAHELA POWER COMPANY
BY /s/ Carol G. Russ
CAROL G. RUSS
COUNSEL
THE POTOMAC EDISON COMPANY
BY /s/ Carol G. Russ
CAROL G. RUSS
COUNSEL
WEST PENN POWER COMPANY
BY /s/ Carol G. Russ
CAROL G. RUSS
COUNSEL
Dated: June 30, 1999
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EXHIBIT H-2
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- : )
Allegheny Energy, Inc.
Notice Requesting Increase in West Penn Power Company's Short-
Term Borrowing Authority
West Penn Power Company ("West Penn"), 800 Cabin Hill
Drive, Greensburg, PA 15601, requests the Commission to raise its
aggregate limit on short-term debt financing from $182 million to
$500 million, subject to the same terms and conditions as are
contained in its original Application.
West Penn was authorized by the Commission to issue up
to $182 million in short-term debt through December 31, 2001,
subject to certain conditions and parameters, by prior orders
dated January 29, 1992, February 28, 1992, July 14, 1992,
November 5, 1993, November 28, 1995, April 18, 1996 and December
23, 1997, (HCAR Nos. 25462, 25481, 25581, 25919, 26418, 26506,
and 26804, respectively) ("Prior Orders") in File No. 70-7888.
West Penn requests authority to increase the limit of its short
term debt by $318 million and be authorized to issue up to $500
million in short-term debt through December 31, 2007.
West Penn has not sought an increase in the amount of
its short-term debt financing authority since it was approved to
borrow up to $182 million in 1997 by HCAR No. 26804. Since the
time that West Penn received its order in 1997, however, several
events have occurred which require West Penn to request
additional financing authority.
Deregulation of generation has begun and competition at
the retail level is now a reality in Pennsylvania. Pennsylvania
is the state in which West Penn is incorporated and where its
entire service territory is located. The Electricity Generation
Customer Choice and Competition Act, 66 Pa. C.S. Section 2801 et
seq. (together with regulatory interpretations, the "Competition
Act"), was enacted in December 1996, and provided for the
restructuring of the electric utility industry in Pennsylvania.
The Competition Act required the unbundling of electric services
into separate supply, transmission, and distribution services
with open retail competition for supply.
In August 1997, West Penn filed its restructuring plan
with the PUC, which, among other things, unbundled generation
from transmission and distribution. The restructuring plan was
contested and became the subject of hearings, which finally
resulted in a settlement that was approved by the PUC on November
19, 1998. The PUC's Order authorized and provided state
<PAGE>
regulatory pre-approval for the transfer of West Penn's
generation assets to an affiliate company at net book value.
West Penn has applied to the SEC (File No. 70-9483), among other
things, for approval to transfer its generation assets to a new
generation company ("GENCO").
In Pennsylvania, full electric generation competition
is being phased in. For West Penn, its settlement called for one-
third of each customer class to have direct retail access on
January 1, 1999, and for an additional one-third to have direct
retail access on January 2, 1999. Retail access for the
remaining one-third will occur on January 2, 2000.
West Penn is evaluating its current capital structure,
and determining the best capital structure for it and the new
GENCO, in light of competition, its restructuring case, and the
intent of the Competition Act that companies use the proceeds of
securitization to primarily reduce their capital structure. West
Penn is anticipating that it will need the additional borrowing
authority for the transition to competition in Pennsylvania. It
may also use the borrowing authority as a stop-gap measure, while
other financing transactions are being contemplated.
Additionally, West Penn may need the borrowing authority to
support its restructuring debt. West Penn may also use its short-
term borrowing authority to support its capital expenditure
program, and to take advantage of growth opportunities through
acquisitions. In addition, regulated investment opportunities
may arise from time to time. While West Penn would seek such
additional regulatory approval as may be required in connection
with such acquisitions, the requested increase in short-term
financing authority will enhance its ability to participate
effectively in the evolving energy markets.
In order to better position West Penn in this
competitive environment, West Penn needs to have access to cash
through short-term borrowings in order to take advantage of
opportunities that arise.
West Penn may use the proceeds of its proposed short-
term borrowings for general corporate purposes, including
effecting the transition to the competitive status contemplated
by Pennsylvania law, assisting in the restructuring of West
Penn's capital structure, the financing of construction and also
property acquisitions.
Other than Allegheny's 9.9% limited partnership
interest in The Latin America Energy and Electricity Fund I,
L.P., and Allegheny's ownership of Allegheny Energy Unit No. 1
and Unit No. 2, LLC, an EWG that was incorporated on May 12,
1999, neither Allegheny nor any subsidiary thereof currently has
an ownership interest in an EWG or foreign utility company
("FUCO") as defined in Sections 32 or 33 of the Act. Neither
Allegheny nor any subsidiary thereof currently or as a
consequence of the transactions proposed herein will be a party
to, or have any rights under, a service, sales, or construction
agreement with an EWG or a FUCO.
Except as described herein, no associate company or
affiliate of the Applicants or any affiliate of any such
associate company has any material interest, directly or
indirectly, in the proposed transactions.
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The application and any amendments thereto are
available for public inspection through the Commission's Office
of Public Reference. Interested persons wishing to comment or
request a hearing should submit their views in writing
by_______________, 1999, to the Secretary, Securities and
Exchange Commission, Washington, DC 20549, and serve a copy of
the Applicant at the address specified above. Proof of service
(by affidavit or, in case of an attorney at law, by certificate)
should be filed with the request. Any request for a hearing
shall identify specifically the issues of fact or law that are
disputed. A person who so requests will be notified of any
hearing, if ordered, and will receive a copy of any notice or
order issued in this matter. After said date, the application,
as filed or as it may be amended, may be granted.
For the Commission, by the Division of Investment
Management, pursuant to delegated authority.
