File No. 70-9483
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM U-1
APPLICATION OR DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Allegheny Energy, Inc.
10435 Downsville Pike
Hagerstown, Maryland 21740
West Penn Power Company
800 Cabin Hill Drive
Greensburg, Pennsylvania 15601
AYP Energy, Inc.
10435 Downsville Pike
Hagerstown, Maryland 21740
(Name of companies filing this statement
and addresses of principal executive offices)
_____________________
Allegheny Energy, Inc.
(Name of top registered holding company parent of applicants)
Thomas K. Henderson, Esq.
Vice President
Allegheny Energy, Inc.
10435 Downsville Pike
Hagerstown, Maryland 21740
(Name and address of agent for service)
The Commission is requested to send copies of all notices, orders
and communications in connection with this Application-
Declaration to:
Thomas K. Henderson, Esq.
Vice President
Allegheny Energy, Inc
10435 Downsville Pike
Hagerstown, Maryland 21740-1766
<PAGE>
1. Applicants hereby amend Item No. 6. Exhibits and
Financial Statements by deleting it in its entirety and
substituting the following, including exhibits filed
herewith, therefor:
Item 6. EXHIBITS AND FINANCIAL STATEMENTS
A. Exhibits
A-1 Form of Certificate of Formation and Limited
Liability Company Operating Agreement for
Energy Subsidiary.
A-2 Form of Certificate of Formation and Limited
Liability Company Agreement for GENCO.
B-1 Fort Martin Unit No. 2 Construction and
Operating Agreement, dated December 30, 1965,
among Monongahela, Potomac Edison, and West Penn.
B-2 Pleasants Power Station Construction and Operating
Agreement, dated as of September 15, 1977, among
Monongahela, Potomac Edison and West Penn.
B-3 Hatfield's Ferry Power Station Construction and
Operating Agreement, dated April 20, 1968, among
Monongahela, Potomac Edison and West Penn.
B-4 Harrison Power Station Construction and Operating
Agreement, dated as of March 31, 1971, among
Monongahela, Potomac Edison and West Penn.
B-5 Form of Assignment for each Joint-Owner Operating
Agreement.
B-6 Form of Proposed Operating Agreement between
West Penn and GENCO.
B-7 Form of Proposed Lease of Certain Generating Assets
between GENCO, as Lessor, and West Penn, as Lessee.
B-8 Inter-Company Power Agreement among Ohio Valley
Electric Corporation, West Penn and the other
parties thereto, dated July 10, 1953, as modified,
filed in paper pursuant to a Hardship Exemption.
B-9 Equity Agreement among Monongahela, Potomac Edison
and West Penn, dated June 17, 1981, as amended.
B-10 APS Power Agreement among, Monongahela, Potomac
Edison, West Penn and AGC, dated August 24, 1981.
B-11 Form of Service Agreement to be entered into between
Allegheny Energy Service Corporation and
Energy Subsidiary and AESC and GENCO.
D-1 Application of West Penn for Approval of its
Restructuring Plan under Section 2806 of the Public
Utility Code, dated November 3, 1998 (West Penn's
Settlement Agreement approved by the
Pennsylvania Public Utility Commission,
incorporated by reference to SEC File No. 70-
9147).
<PAGE>
D-2 Final Opinion and Order of Pennsylvania Public
Utility Commission Approving West Penn's
Restructuring Plan, dated November 19, 1998
(incorporated by reference to SEC File No. 70-9147)
D-3 Acceptance by the FERC of Market Rate Tariff
for GENCO. Filing made at Docket No. ER99-
4020-000 on August 6, 1999 (noticed on August
13, 1999). Currently under review by FERC;
acceptance to be filed by amendment.
D-4 Approval of FERC regarding Transfer of Lake Lynn
Generating Facility. Filing made at Project Number
2459-093 on September 17, 1999. Currently
under review by FERC; approval to be filed by
amendment.
D-5 Approval by FERC regarding Transfer of Shares
of AGC from West Penn to Energy Subsidiary. This
Exhibit, along with D-6 and D-7 are all part of the
filing at Docket No. EC99-112-000 made on
September 2, 1999 noticed by the FERC on
September 9, 1999, and now under review by
FERC. Approval to be filed by amendment.
D-6 Approval by FERC regarding transfer of shares of AGC from
Energy Subsidiary to GENCO.
D-7 Approval by FERC of transfer of West Penn's rights
under the OVEC Agreement to Energy Sub and from Energy Sub
to GENCO.
F Opinion of Counsel.
G-2 Allegheny Energy, Inc.'s Financial Data Schedule (actual).
B. Financial Statements as of June 30, 1999
FS-1 Allegheny Energy, Inc. and subsidiaries consolidated balance
sheet, per books.
FS-2 Allegheny Energy, Inc. and subsidiaries consolidated statement
of income, per books.
FS-3 Allegheny Energy, Inc. and subsidiaries consolidated statement
of retained earnings, per books.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Public Utility
Holding Company Act of 1935, the Undersigned Company has
duly caused this statement to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLEGHENY ENERGY, INC.
By /S/ THOMAS K HENDERSON
Thomas K. Henderson, Esq.
Vice President
WEST PENN POWER COMPANY
By /S/ THOMAS K HENDERSON
Thomas K. Henderson, Esq.
Vice President
AYP ENERGY, INC.
By /S/ THOMAS K HENDERSON
Thomas K. Henderson, Esq.
Vice President
Dated: September 22, 1999
EXHIBIT A-1
Microfilm Number________ Filed with the Department of State on_________
Entity Number________________________________________________
Secretary of the Commonwealth
PROPOSED FORM OF
CERTIFICATE OF ORGANIZATION-DOMESTIC LIMITED LIABILITY
COMPANY
DSCB:15-8913 (Rev 95)
In compliance with the requirements of 15 Pa.C.S. ' 8913
(relating to
certificate of organization), the undersigned, desiring to
organize a
limited liability company, hereby state(s) that:
1. The name of the limited liability company is: [Energy Sub,
LLC]
________________________________________________________________
2. The (a) address of this limited liability company's initial
registered
office in this Commonwealth or (b) name of its commercial
registered
office provider and the county of venue is:
(a) 1635 Market St Philadelphia, PA 19101 Philadelphia
Number and Street City State Zip County
(b) c/o: C T Corporation System Philadelphia
Name of Commercial Registered Office Provider County
For a limited liability company represented by a commercial
registered office provider, the county in (b) shall be deemed
the county in which the limited liability company is located for
venue and official publication purposes.
3. The name and address, including street and number, if any,
of each organizer are:
NAME ADDRESS
Carol Russ
800 Cabin Hill Drive
Greensburg, PA 15601
4. The specified effective date, if any
is:__________________________________
month day year hour, if any
5. For additional provisions of the certificate, if any,
attach an 8 1/2 x
11 sheet.
<PAGE>
IN TESTIMONY WHEREOF, the organizer(s) has (have) signed
this
Certificate of Organization this day of , 19 .
____________________________
(Signature)
____________________________
(Signature)
____________________________
(Signature)
<PAGE>
FORM OF
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
ENERGY SUB, L.L.C.
This Limited Liability Company Agreement (this
"Agreement") entered into as of this ______ day of
______________, 1999 by West Penn Power Company("West Penn"), a
Pennsylvania corporation, as member (the "Member"), which
Member does hereby form a limited liability company pursuant
to the Pennsylvania Limited Liability Company Act of 1994, as amended
(the "Act") upon the following terms and conditions.
1. Name. The name of the limited liability
company formed hereby is ENERGY SUB, L.L.C. (the "Company").
2. Purpose. The Company is formed for the
object and purpose of, and the nature of the business to be
conducted and promoted by the Company is, engaging in any
lawful act or activity for which limited liability companies
may be formed under the Act, including, but not limited to,
generating electrical power.
3. Registered Office. The address of the
registered office of the Company in the Commonwealth of
Pennsylvania is C T Corporation System, 1635 Market Street,
Philadelphia, PA 19101.
<PAGE>
4. Registered Agent. The name and address of
the registered agent of the Company for service of process
on the Company in the Commonwealth of Pennsylvania is C T Corporation
System, 1635 Market Street, Philadelphia, PA 19101.
5. Members. The name of the Member is as set
forth above in the preamble to this Agreement.
6. Powers. The business and affairs of the
Company shall be managed by the Member. The Member shall
have the power to do any and all acts necessary or
convenient to or for the furtherance of the purposes
described herein. West Penn is hereby designated as an
authorized person, within the meaning of the Act, to
execute, deliver and file the certificate of formation of
the Company (and any amendments and/or restatements thereof)
and any other certificates (and any amendments and/or
restatements thereof) necessary for the Company to qualify
to do business in a jurisdiction in which the Company may
wish to conduct business.
7. Dissolution. The Company shall dissolve, and
its affairs shall be wound up upon the first to occur of the
following: (a) the written consent of the Member, (b) the
death, retirement, resignation, expulsion, bankruptcy or
dissolution of the Member or the occurrence of any other
event which by law terminates the continued membership of the
Member in the Company or (c) the entry of a decree of
judicial dissolution under Section 8972 of the Act.
8. Capital Contributions. The Member has
contributed amounts in cash, and no other property, to the
Company according to the Percentage Interests set forth on
Annex I hereto.
9. Additional Contributions. The Member is not
required to make any additional capital contribution to the
Company. However, the Member may make additional capital
contributions to the Company.
10. Distributions. Distributions shall be made
to the Member at the times and in the aggregate amounts
determined by the Member.
11. Liquidation. Upon dissolution of the Company
in accordance with Section 7, the proceeds of liquidation shall
be applied and distributed in the order of priority specified
in Sections 8932 and 8933 of the Act.
12. Assignments. The Member may transfer or
assign in whole or in part its limited liability company
interest.
13. Admission of Additional Members. One or more
additional members of the Company may be admitted to the
Company with the consent of the Member.
<PAGE>
14. Liability of Members. The Member shall not
have any liability for the obligations or liabilities of the
Company except to the extent provided in the Act.
15. Governing Law. This Agreement shall be
governed by, and construed under, the laws of the Commonwealth
of Pennsylvania, without reference to conflict of law principles,
all rights and remedies being governed by said laws.
16. Treatment for Tax Purposes. The Member
hereby agrees to disregard the Company as a separate entity
for tax purposes.
IN WITNESS WHEREOF, the undersigned,
intending to be legally bound hereby, has duly executed this
Limited Liability Company Agreement as of the date first
above written.
Member:
WEST PENN POWER COMPANY, a
Pennsylvania corporation
By:____________________________
Name:
Title:
EXHIBIT A-2
FORM OF
CERTIFICATE OF FORMATION
OF
GENCO, L.L.C.
1. The name of the limited liability company is
GENCO, L.L.C.
2. The address of its registered office in the
State of Delaware is The Corporation Trust Company, 1209
Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is
The Corporation Trust Company.
IN WITNESS WHEREOF, the undersigned has executed
this Certificate of Formation of GENCO, L.L.C. this ___ day
of ___________, 1999.
MEMBER:
ENERGY SUB, LLC, a
Pennsylvania corporation
By:___________________________
Name:
Title:
<PAGE>
FORM OF
LIMITED LIABILITY COMPANY
AGREEMENT
OF
GENCO, L.L.C.
This Limited Liability Company Agreement (this
"Agreement") entered into as of this ______ day of
______________, 1999 by Energy Sub, LLC ("Energy Sub"), a
Pennsylvania corporation, as member (the "Member"), which
Member does hereby form a limited liability company pursuant
to the Delaware Limited Liability Company Act (the "Act")
upon the following terms and conditions.
1. Name. The name of the limited liability
company formed hereby is GENCO, L.L.C. (the "Company").
2. Purpose. The Company is formed for the
object and purpose of, and the nature of the business to be
conducted and promoted by the Company is, engaging in any
lawful act or activity for which limited liability companies
may be formed under the Act, including, but not limited to,
generating electrical power.
3. Registered Office. The address of the
registered office of the Company in the State of Delaware is
The Corporation Trust Company, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801.
4. Registered Agent. The name and address of
the registered agent of the Company for service of process
on the Company in the State of Delaware is The Corporation
Trust Company, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801.
5. Members. The name of the Member is as set
forth above in the preamble to this Agreement.
6. Powers. The business and affairs of the
Company shall be managed by the Member. The Member shall
have the power to do any and all acts necessary or
convenient to or for the furtherance of the purposes
described herein. Energy Sub is hereby designated as an
authorized person, within the meaning of the Act, to
execute, deliver and file the certificate of formation of
the Company (and any amendments and/or restatements thereof)
and any other certificates (and any amendments and/or
restatements thereof) necessary for the Company to qualify
to do business in a jurisdiction in which the Company may
wish to conduct business.
7. Dissolution. The Company shall dissolve, and
its affairs shall be wound up upon the first to occur of the
following: (a) the written consent of the Member, (b) the
death, retirement, resignation, expulsion, bankruptcy or
dissolution of the Member or the occurrence of any other
event which terminates the continued membership of the
Member in the Company or (c) the entry of a decree of
judicial dissolution under Section 18-802 of the Act.
8. Capital Contributions. The Member has
contributed amounts in cash, and no other property, to the
Company according to the Percentage Interests set forth on
Annex I hereto.
9. Additional Contributions. The Member is not
required to make any additional capital contribution to the
Company. However, the Member may make additional capital
contributions to the Company.
10. Distributions. Distributions shall be made
to the Member at the times and in the aggregate amounts
determined by the Member.
11. Assignments. The Member may transfer or
assign in whole or in part its limited liability company
interest.
12. Admission of Additional Members. One or more
additional members of the Company may be admitted to the
Company with the consent of the Member.
13. Liability of Members. The Member shall not
have any liability for the obligations or liabilities of the
Company except to the extent provided in the Act.
14. Governing Law. This Agreement shall be
governed by, and construed under, the laws of the State of
Delaware, all rights and remedies being governed by said
laws.
15. Treatment for Tax Purposes. The Member
hereby agrees to disregard the Company as a separate entity
for tax purposes.
IN WITNESS WHEREOF, the undersigned,
intending to be legally bound hereby, has duly executed this
Limited Liability Company Agreement as of the date first
above written.
Member:
ENERGY SUB, LLC, a
Pennsylvania corporation
By:____________________________
Name:
Title:
<PAGE>
ANNEX I
Percentage Interests of the Member
Energy Sub, LLC 100%
EXHIBIT B-1
FORT MARTIN UNIT NO. 2 CONSTRUCTION AND OPERATING
AGREEMENT, dated December 30, 1965, among MONONGAHELA POWER
COMPANY, a West Virginia corporation ("Monongahela"), THE
POTOMAC EDISON COMPANY, a Maryland corporation ("Potomac"),
and WEST PENN POWER COMPANY, a Pennsylvania corporation
("West Penn"),
WITNESSETH:
1. Station.
Monongahela, Potomac, and West Penn (the
"Companies") hereby provide for the construction and
operation of the second unit of approximately 500,000 kw
name plate capacity of a steam electric generating station
in Monongalia County, West Virginia, to be owned by the
Companies as tenants in common with undivided ownership
interests of Monongahela 20 %, Potomac 30%, and West Penn
50% (their respective "Ownership Shares"), all as
contemplated in the deed dated December 30, 1965 (the
"Deed") from Monongahela to Potomac and West Penn. Said
second unit, the interests of the Companies in all renewals,
replacements, and additions in respect of said second unit,
50% of all undivided ownership interests in the Common
Facilities referred to in the Deed, and 50% of all undivided
ownership interests in all renewals, replacements, and
additions in respect of said Common Facilities are together
hereinafter called the "Second Unit". The provisions of
this Agreement are intended, as contemplated in the Deed, to
establish among the Companies more detailed provisions and
procedures for carrying out provisions of the Deed.
<PAGE>
2. Construction.
Construction of the Second Unit shall be carried
out by the Companies under the general supervision and
direction of a Construction Committee, which shall be the
Allegheny Power System Fort Martin Construction Committee.
The Companies intend to use their best efforts
toward the end that the construction of the Second Unit will
be completed, and full-scale operation commenced, on or
before May 1, 1969.
The Companies shall, with reasonable expedition,
enter into contracts (which may be purchase order contracts)
providing for (a) the purchase of materials, equipment and
services for, and construction of, the Second Unit and (b)
insurance to insure all work under construction against
risks usually insured against for such work. Each such
contract shall provide, among other things, that the
performance of the contract shall be for the account of, and
the charges therefor shall be billed to, and paid by the
Companies in proportion to their respective Ownership Shares
and that the invoices for such billing (contractor's invoice
or invoices) shall be submitted in the names of the
Companies.
Books of account and records containing details of
the items of cost applicable to the construction of the
Second Unit shall be kept under the supervision of the
Construction Committee and shall be open to examination at
any time by any Company or its representatives.
The Construction Committee shall cause the
Companies to be furnished with counterparts of such books of
account and records as they may request. The basic books of
account and records shall be turned over to and maintained
by the Operating Company referred to in Section 3.
<PAGE>
3. Operation and Maintenance.
The Second Unit shall be operated and maintained
in accordance with good utility operating practice.
The Companies shall establish an Operating
Committee, consisting of one member appointed by each
Company, for the purpose of establishing policies for the
operation and maintenance of the Second Unit. The Operating
Committee shall meet at the call of any member.
The Second Unit will be operated and maintained by
one of the Companies (the "Operating Company") in accordance
with policies to be established by the Operating Committee.
Until otherwise agreed by all the Companies, Monongahela
shall be the Operating Company. The Operating Company shall
not be liable in respect of operation or maintenance except
for its gross negligence or willful misconduct. The
Operating Company shall keep books of account and records
containing details of the items of cost applicable to the
operation and maintenance of the Second Unit. Such books of
account and records shall be open to examination at any time
by any Company or its representatives. The Operating
Company shall furnish the Companies with counterparts of
such books of account and records as they may request.
4. Renewals, Replacements, Additions and Retirements.
Renewals and replacements necessary for the
operation of the Second Unit shall be made as required by
good utility operating practice. Other renewals and
replacements and any additions to the Second Unit may be
made only by agreement of all the Companies. Retirements,
sales and other dispositions of Second Unit property shall
be effected only in a
<PAGE>
manner consistent with the Companies' respective mortgage
indentures, if any. Renewals, replacements, additions, and
retirements (and related dispositions and sales) shall be
effected by the Operating Company subject to the policies
established by the Operating Committee.
5. Title to Property.
Title to all property acquired or constructed in
connection with the Second Unit (including without
limitation property acquired for use or consumption in
connection with its construction, operation or maintenance)
shall be in the Companies as tenants in common in proportion
to their Ownership Shares. Construction, acquisitions and
purchases shall be made in such manner that title shall vest
in accordance with the foregoing.
6. Power and Energy.
Subject to Section 9, each Company shall at all
times have full ownership of and available to it at the
Second Unit the portion of the generating capability of the
Second Unit and the energy associated therewith,
corresponding to its Ownership Share.
Each Company shall keep the Operating Company
informed as to the amount of power it requires to be
generated for it.
Subject to its capability and to necessary or
unavoidable outages, the Second Unit shall be operated so as
to produce an output equal to the sum of the power
requirements of the Companies therefrom.
7. Expenditures.
All expenditures in respect of the Second Unit
shall be accounted for in accordance with the Uniform System
of Accounts
<PAGE>
prescribed by the Federal Power Commission for Public
Utilities and Licensees (Class A and B Electric Utilities)
as in effect on the date of this Agreement.
All expenditures (including without limitation all
expenditures for administration, labor, payroll taxes,
employee benefits, maintenance, materials, research and
development, supplies and services), except those in respect
of the aforesaid Common Facilities, for the construction,
operation and maintenance (excluding fuel) of the Second
Unit and for renewals, replacements, additions and
retirements in respect thereof shall be shared by the
Companies in proportion to their Ownership Shares. One-half
of all such expenditures in respect of the aforesaid Common
Facilities shall be shared by the Companies (in their
capacities as Second Unit owners) in proportion to their
Common Facilities Ownership Shares as defined in
subparagraph 1 of the Deed. All expenditures in respect of
the Second Unit properly chargeable to account 501 (Fuel) of
such Uniform System of Accounts for any period shall be
shared by the Companies pro rata according to the total
kilowatthours of energy respectively taken by them from the
Second Unit during such period.
Interest charges on borrowed funds, income taxes,
and property, business and occupation and like taxes, of
each Company shall be borne entirely by such Company; and
such items, as well as depreciation, amortization, and
interest charged to construction, shall not be deemed
expenditures for purposes of this Section.
<PAGE>
8. Joint Account.
The Companies shall maintain one or more joint
accounts (collectively, the "Joint Account") in a bank or
banks agreed upon by them. All expenditures referred to in
the second paragraph of Section 7 shall be paid out of the
Joint Account.
From time to time the Construction Committee or
the Operating Company may request the Companies to advance
to the Joint Account such amount as is then needed for cash
working capital. Within ten days thereafter the Companies,
pro rata according to their respective Ownership Shares,
shall deposit in the Joint Account the amount specified in
such request.
As promptly as practicable after the end of each
month, the Construction Committee or the Operating Company
shall send to each of the Companies a statement in
reasonable detail of all expenditures for such month and the
amount of each Company's share thereof. Within ten days
after its receipt of such statement, each Company shall
deposit its share in the Joint Account
The Construction Committee or Operating Company
shall cause to be drawn against the Joint Account, and to be
delivered, checks or drafts in the names of the companies in
payment of expenditures. Funds shall be disbursed from the
Joint Account in accordance with sound accounting and
disbursement procedures. All persons authorized to handle
or disburse funds from the Joint Account shall be bonded in
favor of Monongahela, Potomac, and West Penn, as their
respective interests may appear, for not less than $500,000.
<PAGE>
9. Default.
During any period that a Company is in default in
whole or in part in making the most recent deposit in the
Joint Account then required under this Agreement, (a) such
Company shall be entitled to no energy from the Second Unit
(but shall be obligated to pay any damages to the non-
defaulting Companies resulting from the default) and (b) the
non-defaulting Companies shall be entitled to all of the
energy from the Second Unit in proportion to their Ownership
Shares. No such default shall affect any Company's
ownership interest, or any Company's obligations under
Sections 7 and 8.
10. Arbitration.
The Companies hereby declare their intention and
agree that any controversy arising out of or relating to
this Agreement or the Deed, or the breach of either thereof,
shall be settled by arbitration in accordance with the Rules
of the American Arbitration Association and that judgment
upon the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof.
11. Term of Agreement.
This Agreement shall continue in full force and
effect for a period of forty-four years from the date hereof
and for such longer period as the Companies shall by mutual
agreement continue to operate the Second Unit. Termination
of this Agreement shall not terminate the provisions of
Section 10.
<PAGE>
12. Amendment.
This Agreement may be amended from time to time or
canceled at any time by an instrument or instruments in
writing signed by all of the Companies (or their successors
or assigns).
13. Successors and Assigns.
This Agreement shall inure to the benefit of and
bind the successors and assigns of the parties hereto, but
it may be assigned in whole or in part only in connection
with transfer to the assign of a corresponding ownership
interest in the Second Unit.
IN WITNESS WHEREOF each of the parties has caused
this Agreement to be duly executed.
MONONGAHEAL POWER COMPANY
By_________/S/_____________
President
THE POTOMAC EDISON COMPANY
By__________/S/_______________
President
WEST PENN POWER COMPANY
By___________/S/_______________
President
Exhibit B-2
PLEASANTS POWER STATION CONSTRUCTION AND OPERATING
AGREEMENT, dated as of September 15, 1977, among MONONGAHELA
POWER COMPANY, an Ohio corporation ("Monongahela"), THE POTOMAC
EDISON COMPANY, a Maryland and a Virginia corporation
("Potomac"), and WEST PENN POWER COMPANY, a Pennsylvania
corporation ("West-Penn"),
W I T N E S S E T H:
1. Station.
Monongahela, Potomac, and West Penn (the "Companies")
hereby provide for the construction and operation of a steam
electric generating station in Pleasants County, West Virginia,
with 2 generating units, each with a name plate capacity of
approximately 626,000 kw (net), (hereinafter called the
"Station") to be owned by the Companies as tenants in common with
undivided ownership interests as follows: Monongahela 25%,
Potomac 30%, and West Penn 45% (each such interest being
hereinafter referred to as its owner's "Ownership Share") all as
contemplated in the deed dated September 16, 1976 and such future
deeds as may be delivered (the "Deeds") from Monongahela to West
Penn and Potomac. The provisions of this Agreement are intended,
as contemplated in the Deeds, to establish among the Companies
more detailed provisions and procedures for carrying out the
provisions of the Deeds.
2. Construction.
Construction of the Station shall be carried out by the
Companies pursuant to their agreements with Allegheny Power
Service Corporation under the general supervision and direction
of that Corporation's Vice President - Bulk Power Supply (the
"Vice President").
<PAGE>
The Companies now plan to complete construction and
commence full-scale operation of (a) the first generating unit at
the Station on or before March 1, 1979, and (b) the second
generating unit there on or before March 1, 1980.
The Companies shall enter into contracts (which may be
purchase order contracts) provided for (a) the purchase of
materials, equipment and services for, and the construction of,
the Station and (b) insurance against risks usually insured
against for work under construction. Each such contract shall
provide, among other things, that the performance of the contract
shall be for the account of, and the charges therefor shall be
billed to and paid by, the Companies in proportion to their
respective Ownership Shares.
Books of account and records containing details of the
items of cost applicable to the construction of each unit at the
Station shall be kept under the supervision of the Vice President
and shall be open to examination at any time by any Company or
its representatives. The Vice President shall cause the Companies
to be furnished with counterparts of such books of account and
records as they may request.
3. Operation and Maintenance.
The Station will be operated and maintained by one of
the Companies (hereinafter referred to as the "Operating
Company") under the supervision of the Vice President. Unless
otherwise agreed by all the Companies, Monongahela shall be
the Operating Company. The Operating Company shall not be
liable to the other Companies for loss, damage, or injury
arising out of such operation
<PAGE>
or maintenance unless caused by its gross negligence or willful
misconduct. The Operating Company shall keep or cause to be kept
books of account and records containing details of the items of
cost applicable to the operation and maintenance of the Station.
Such books of account and records shall be open to examination at
any time by any Company or its representatives. The Operating
Company shall furnish the Companies with copies of such books of
account and records as they may request.
4. Renewals, Replacements, Additions, and Retirements.
Renewals and replacements necessary for the operation
of the Station shall be made as required in accordance with good
utility operating practice. Other renewals and replacements of,
and any additions to, the Station may be made only upon agreement
of all the Companies. Retirements, sales, and other dispositions
of property shall be effected only in a manner consistent with
the Companies' mortgage indentures, if any. Renewals,
replacements, additions and retirements (and related dispositions
and sales) shall be accomplished by the Operating Company under
the supervision of the Vice President.
5. Title to Property.
Title to all property acquired or constructed in
connection with the Station (including, without limitation,
property acquired for use or consumption in connection with its
construction, operation, or maintenance) shall be in the
Companies as tenants in common in proportion to their Ownership
Shares. Construction, acquisitions, and purchases shall be made
in such manner that title shall vest in accordance with the
foregoing; except that any land required by Monongahela and,in
such event, Monongahela shall convey to Potomac and West Penn
undivided interests therein of 30% and 45% respectively, upon
<PAGE>
receipt from them of those percentages of the price it
paid for said land.
6. Power and Energy.
Subject to Section 9, each Company shall at all times
have full ownership of and available to it at the Station a
portion of the generating capability of the Station, and the
energy associated therewith, corresponding to its Ownership
Share. Each Company shall cause the Operating Company to be kept
informed as to the amount of power it requires be generated for
it at the Station.
Subject to its capability and to necessary or
unavoidable outages, the Station shall be operated so as to
produce continually an electrical energy output equal to the sum
of the power requirements of the Companies therefrom.
7. Expenditures.
All expenditures in respect of the Station shall be
accounted for in accordance with the Uniform System of Accounts
prescribed by the Federal Power Commission for Public Utilities
and Licensees (Class A and B Electric utilities) in effect on the
date of this Agreement and as may be amended from time to time.
All expenditures (other than fuel) for the
construction, operation, and maintenance of the Station
(including, without limitation, all expenditures for
administration, labor, payroll taxes, employee benefits,
research and development, materials, supplies and services) and
all expenditures for renewals, replacements, additions, and
retirements related to the Station shall be shared by the
Companies in proportion to their Ownership Shares.
<PAGE>
All expenditures in respect of the Station properly chargeable to
Account 501 (Fuel) of such Uniform System of Accounts for any
period shall be shared by the Companies pro rata according to the
total kilowatt-hours of electrical energy taken from the Station
during such period.
Interest charges on borrowed funds, income taxes, and
property, business and occupation and like taxes related to the
Station imposed upon each Company shall be borne entirely by such
Company; and such items, as well as depreciation, amortization
and interest charged during construction, shall not be deemed
expenditures for purposes of this Section.
8. Joint Account.
The Companies shall maintain one or more joint accounts
(collectively, the "Joint Account") in a bank or banks agreed
upon by them. All expenditures referred to in the second
paragraph of Section 7 hereof shall be paid out of the Joint
Account.
From time to time the Vice President or the Operating
Company through Allegheny Power Service Corporation may request
the Companies to advance to the Joint Account such amount as is
then needed for cash working capital. Within ten days thereafter
the Companies pro rata according to their respective Ownership
Shares, shall deposit in such Joint Account the amount specified
in such request.
As promptly as practicable after the end of each month,
the Operating Company shall cause the aforesaid Vice President to
send, to each of the Companies a statement in reasonable detail
of all expenditures hereunder for such month and the amount of
each Company's share thereof. Within ten days after its receipt
of such statement, each Company shall deposit its share in the
Joint Account.
<PAGE>
The Vice President or Operating Company shall cause to
be drawn against the Joint Account, and to be delivered, checks
or drafts in the names of the Companies in payment of
expenditures. Funds shall be disbursed from the Joint Account in
accordance with sound accounting and disbursement procedures. All
persons authorized to handle or disburse funds from the Joint
Account shall be bonded in favor of Monongahela, Potomac, and
West Penn, as their respective interest may appear, for not less
than $500,000.
9. Default.
During any period that a Company is in default in whole
or in part in making a deposit in the Joint Account required
under this Agreement, (a) such Company shall be entitled to no
energy from the Station (but it shall be obligated to pay any
damages to the non-defaulting Companies resulting from such
default) and (b) the non-defaulting Companies shall be entitled
to all of the energy from the Station in proportion of their
Ownership Shares. No such default shall affect any Company's
ownership interest, or any Company's obligations under Section 7
and 8.
10. Arbitration.
Any controversy relating to this Agreement or the Deed
shall be settled by arbitration in accordance with the Rules of
the American Arbitration Association, and judgment upon an award
rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
11. Term of Agreement.
This Agreement shall continue in full force and effect for
a period of 45 years from the date hereof and for such longer
period as the Companies
<PAGE>
shall by agreement continue to operate any of the units at the
Station. Termination of this Agreement shall not terminate the
provisions of Section
12. Successors and Assigns.
This Agreement shall inure to the benefit of and bind
the successors and assigns of the parties hereto, but it may be
assigned in whole or in part only in connection with transfer to
the assign of the assignor's corresponding ownership interest in
the Station.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement
to be duly executed.
MONONGAHELA POWER COMPANY
By_____________/s/_____________________
Vice President
THE POTOMAC EDISON COMPANY
By______________/s/_____________________
Vice President
WEST PENN POWER COMPANY
By_________/s/_________________________
Vice President
EXHIBIT B-3
HATFIELD'S FERRY POWER STATION CONSTRUCTION AND
OPERATING AGREEMENT, dated April 20, 1968, among MONONGAHELA
POWER COMPANY, an Ohio corporation ("Monongahela"), THE
POTOMAC EDISON COMPANY, a Maryland corporation ("Potomac"),
and WEST PENN POWER COMPANY, a Pennsylvania corporation
("West Penn"),
WITNESSETH:
1. Station.
Monongahela, Potomac, and West Penn (the
"Companies") hereby provide for the construction and
operation of a steam electric generating station (the
"Station") in Greene County, Pennsylvania, with 3 generating
units with a nameplate capacity of approximately 500,000 kw
each to be owned by the Companies as tenants in common with
undivided ownership interests of Monongahela 27.5%, Potomac
20%, and West Penn 52.5% (their respective "Ownership
Shares"), all as contemplated in the deed dated April 20,
1968 (the "Deed") from West Penn to Monongahela and Potomac.
The provisions of this Agreement are intended, as
contemplated in the Deed, to establish among the Companies
more detailed provisions and procedures for carrying out the
provisions of the Deed.
2. Construction.
Construction of the Station shall be carried out
<PAGE>
by the Companies under the general supervision and direction
of a Construction Committee, which shall be the Allegheny
Power System Hatfield's Ferry Construction Committee.
The Companies intend to use their best efforts
toward the end that the construction of the first generating
unit at the Station will be completed, and full-scale
commercial operation commenced, on or before October 1,
1969, that the construction of the second generating unit at
the Station will be completed, and full-scale commercial
operation commenced, on or before October 1, 1970, and that
the construction of the third generating unit at the Station
will be completed, and full-scale commercial operation
commenced, on or before May 1, 1972.
The Companies shall, with reasonable expedition,
enter into contracts (which may be purchase order contracts)
providing for (a) the purchase of materials, equipment and
services for, and construction of, the Station and (b)
insurance to insure all work under construction against
risks usually insured against for such work. Each such
contract shall provide, among other things, that the
performance of the contract shall be for the account of, and
the charges therefor shall be billed to, and paid by the
Companies in proportion to their respective Ownership Shares
and that the invoices for such billing (contractor's invoice
<PAGE>
or invoices) shall be submitted in the names of the
Companies.
Books of account and records containing details of
the items of cost applicable to the construction of each
unit at the Station shall be kept under the supervision of
the Construction Committee and shall be open to examination
at any time by any Company or its representatives.
The Construction Committee shall cause the
Companies to be furnished with counterparts of such books of
account and records as they may request.
The basic books of account and records shall be turned over
to and maintained by the Operating Company referred to in
Section 3.
3. Operation and Maintenance.
The Station shall be operated and maintained in
accordance with good utility operating practice.
The Companies shall establish an Operating
Committee, consisting of one member appointed by each
Company, for the purpose of establishing policies for the
operation and maintenance of the Station. The Operating
Committee shall meet at the call of any member.
The Station will be operated and maintained by one
of the Companies (the "Operating Company") in accordance
with policies to be established by the Operating Committee.
<PAGE>
Until otherwise agreed by all the Companies, West Penn shall
be the Operating Company. The Operating Company shall not
be liable for loss, damage, or injury in respect of
operation or maintenance except for its gross negligence or
willful misconduct. The Operating Company shall keep books
of account and records containing details of the items of
cost applicable to the operation and maintenance of the
Station. Such books of account and records shall be open to
examination at any time by any Company or its
representatives. The Operating Company shall furnish the
Companies with counterparts of such books of account and
records as they may request.
4. Renewals, Replacements, Additions, and Retirements.
Renewals and replacements necessary for the
operation of the Station shall be made as required by good
utility operating practice. Other renewals
and replacements and any additions to the Station may be
made only by agreement of all the Companies. Retirements,
sales, and other dispositions of property shall be effected
only in a manner consistent with the Companies' respective
mortgage indentures, if any. Renewals, replacements,
<PAGE>
additions, and retirements (and related dispositions and
sales) shall be effected by the Operating Company subject to
the policies established by the Operating Committee.
5. Title to Property.
Title to all property acquired or constructed in
connection with the Station (including without limitation
property acquired for use or consumption in connection with
its construction, operation, or maintenance) shall be in the
Companies as tenants in common in proportion to their
Ownership Shares. Construction, acquisitions, and purchases
shall be made in such manner that title shall vest in
accordance with the foregoing.
6. Power and Energy.
Subject to Section 9, each Company shall at all
times have full ownership of and available to it at the
Station the portion of the generating capability of the
Station, and the energy associated therewith, corresponding
to its Ownership Share.
Each Company shall keep the Operating Company
informed as to the amount of power it requires to be
generated for it.
Subject to its capability and to necessary or
<PAGE>
unavoidable outages, the Station shall be operated so as to
produce an output equal to the sum of the power requirements
of the Companies therefrom.
7. Expenditures.
All expenditures in respect of the Station shall
be accounted for in accordance with the Uniform System of
Accounts prescribed by the Federal Power Commission for
Public Utilities and Licensees (Class A and B Electric
Utilities) as in effect on the date of this Agreement.
All expenditures (including without limitation all
expenditures for administration, labor, payroll taxes,
employee benefits, maintenance, materials, research and
development, supplies and services) for the construction,
operation, and maintenance (excluding fuel) of the Station
and for renewals, replacements, additions, and retirements
in respect thereof shall be shared by the Companies in
proportion to their Ownership Shares. All expenditures in
respect of the Station properly chargeable to Account 501
(Fuel) of such Uniform System of Accounts for any period
shall be shared by the Companies pro rata according to the
total kilowatthours of energy respectively taken by them
from the Station during such period.
<PAGE>
Interest charges on borrowed funds, income taxes,
and property, business and occupation and like taxes, of
each Company shall be borne entirely by such Company; and
such items, as well as depreciation, amortization, and
interest charged to construction, shall not be deemed
expenditures for purposes of this Section.
8. Joint Account.
The Companies shall maintain one or more joint
accounts (collectively, the "Joint Account") in a bank or
banks agreed upon by them. All expenditures referred to in
the second paragraph of Section 7 shall be paid out of the
Joint Account.
From time to time the Construction Committee or
the Operating Company may request the Companies to advance
to the Joint Account such amount as is then needed for cash
working capital. Within ten days thereafter the Companies,
pro rata according to their respective Ownership Shares,
shall deposit in such Joint Account the amount specified in
such request.
As promptly as practicable after the end of each
month, the Construction Committee or the Operating Company
<PAGE>
shall send to each of the Companies a statement in
reasonable detail of all expenditures for such month and the
amount of each Company's share thereof. Within ten days
after its receipt of such statement, each Company shall
deposit its share in the Joint Account.
The Construction Committee or Operating Company
shall cause to be drawn against the Joint Account, and to be
delivered, checks or drafts in the names of the Companies in
payment of expenditures. Funds shall be disbursed from the
Joint Account in accordance with sound accounting and
disbursement procedures. All persons authorized to handle
or disburse funds from the Joint Account shall be bonded in
favor of Monongahela, Potomac, and West Penn, as their
respective interests may appear, for not less than $500,000.
9. Default.
During any period that a Company is in default in
whole or in part in making the most recent deposit in the
Joint Account then required under this Agreement, (a) such
Company shall be entitled to no energy from the Station (but
shall be obligated to pay any damages to the non-defaulting
Companies resulting from the default) and (b) the non-
<PAGE>
defaulting Companies shall be entitled to all of the energy
from the Station in proportion to their Ownership Shares.
No such default shall affect any Company's ownership
interest, or any Company's obligations under Sections 7 and
8.
10. Arbitration.
The Companies hereby declare their intention and
agree that any controversy arising out of or relating to
this Agreement or the Deed, or the breach of either thereof,
shall be settled by arbitration in accordance with the Rules
of the American Arbitration Association and that judgment
upon the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof.
11. Term of Agreement.
This Agreement shall continue in full force and
effect for a period of forty-five years from the date hereof
and for such longer period as the Companies shall by mutual
agreement continue to operate any of the units at the
Station. Termination of this Agreement shall not terminate
the provisions of Section 10.
<PAGE>
12. Amendment.
This Agreement may be amended from time to time or
canceled at any time by an instrument or instruments in
writing signed by all of the Companies (or their successors
or assigns).
13. Successors and Assigns.
This Agreement shall inure to the benefit of and
bind the successors and assigns of the parties hereto, but
it may be assigned in whole or in part
Only in connection with transfer to the assign of a
corresponding ownership interest in the Station.
IN WITNESS WHEREOF each of the parties has caused this
Agreement to be duly executed.
MONONGAHELA POWER COMPANY
By_______/S/____________
Vice President
THE POTOMAC EDISON COMPANY
By________/S/___________
President
WEST PENN POWER COMPANY
By_________/S/__________
President
EXHIBIT B-4
HARRISON POWER STATION CONSTRUCTION AND OPERATING
AGREEMENT, dated as of March 3, 1971, among MONONGAHELA POWER
COMPANY, an Ohio corporation ("Monongahela"), THE' POTOMAC EDISON
COMPANY, a Maryland corporation ("Potomac"), and WEST PENN POWER
COMPANY, a Pennsylvania corporation ("West Penn"),
W I T N E S S E T H:
1. Station.
Monongahela, Potomac, and West Penn (the "Companies") hereby
provide for the construction and operation of a steam electric
generating station in Harrison and Lewis Counties, West Virginia,
with 3 generating units, each with a name plate capacity of
approximately 600,000 kw, and a water impoundment (hereinafter
called the "Station") to be owned by the Companies as tenants in
common with undivided ownership interests as follows:
Monongahela 25%, Potomac 25%, and West Penn 50% (each such
interest being hereinafter referred to as its owner's "Ownership
Share), all as contemplated in the deed dated March 31, 1971 (the
"Deed") from Monongahela to West Penn and Potomac. The provisions
of this Agreement are intended, as contemplated in the Deed, to
establish among the Companies more detailed provisions and
procedures for carrying out the provisions of the Deed.
2. Construction.
Construction of the Station shall be carried out by the
Companies pursuant to their agreements with Allegheny Power
Service Corporation under the general supervision and direction
of that Corporation's Director, Power Engineering and
Construction (the "Director").
The Companies will use their best efforts to effect
completion of construction and commencement of full-scale
operation of (a) the first generating unit at the Station on or
before December 1, 1972, (b) the second generating unit there on
or before October 1, 1973, and (c) the third generating unit
there on or before May 1, 1975.
<PAGE>
The Companies shall, with reasonable expedition, enter
into contracts (which may be purchase order contracts) providing
for (a) the purchase of materials, equipment and services for,
and the construction of, the Station and (b) insurance to insure
all work under construction against risks usually insured against
for such work. Each such contract shall provide, among other
things, that the performance of the contract shall be for the
account of , and the charges therefor shall be billed to and paid
by, the Companies in proportion to their respective Ownership
Shares.
Books of account and records containing details of the
items of cost applicable to the construction of each unit at the
Station shall be kept under the supervision of the Director and
shall be open to examination at any time by any Company or its
representatives. The Director shall cause the Companies to be
furnished with counterparts of such books of account and records
as they may request.
3. Operation and Maintenance.
The Station will be operated and maintained by one of
the Companies (hereinafter referred to as the "Operating
Company") under the supervision of the Vice President, System
Power Supply, of Allegheny Power Service Corporation. Until
otherwise agreed by all the Companies, Monongahela shall be the
Operating Company. The Operating Company shall not be liable to
the other Companies for loss, damage, or injury arising out of
such operating or maintenance unless caused by its gross
negligence or willful misconduct. The Operating Company shall
keep or cause to be kept books of account and records containing
details of the items of cost applicable to the operation and
maintenance of the Station. Such books of account and records
shall be open to examination at any time by any Company or its
representatives. The Operating Company shall furnish the
Companies with copies of such books of account and records as
they may request.
4. Renewals , Replacements Additions, and Retirements.
Renewals and replacements necessary for the operation of
the Station shall be made as required in accordance with good
utility operating practice
<PAGE>
Other renewals and replacements of, and any additions to, the
Station may be made only upon agreement of all the Companies.
Retirements, sales, and other dispositions of property shall be
effected only in a manner consistent with the Companies' mortgage
indentures, if any. Renewals, replacements, additions and
retirements (and related dispositions and sales) shall be
effected by the Operating Company under the supervision of the
Director.
5. Title to Property.
Title to all property acquired or constructed in
connection with the Station (including, without limitation,
property acquired for use or consumption in connection with its
construction, operation, or maintenance) shall be in the
Companies as tenants in common in proportion to their Ownership
Shares. Construction, acquisitions. and purchases shall be made
in such manner that title shall vest in accordance with the
foregoing; except that any land required for the Station in
addition to that described in the Deed my be acquired by
Monongahela and, in such event, Monongahela shall convey to
Potomac and West Penn undivided interests therein of 25% and 50%
respectively, upon receipt from them of those percentages of the
price it paid for said land.
6. Power and Energy.
Subject to Section 9, each Company shall at all times
have full ownership of and available to it at the Station a
portion of the generating capability of the Station, and the
energy associated therewith, corresponding to its Ownership
Share. Each Company shall cause the Operating Company to be kept
informed as to the amount of power it requires be generated for
it at the Station.
Subject to its capability and to necessary or
unavoidable outages, the Station shall be operated so as to
produce continually an electrical energy output equal to the sum
of the power requirements of the Companies therefrom.
7. Expenditures
All expenditures in respect of the Station shall be
accounted for in accordance with the Uniform. System of Accounts
prescribed by the Federal
<PAGE>
Power Commission for Public Utilities and Licenses (Class A and B
Electric Utilities) in effect on the date of this Agreement.
All expenditures (other than fuel) for the construction,
operation, and maintenance of the Station (including, without
limitation, all expenditures for administration, labor, payroll
taxes, employee benefits, research and development, materials,
supplies and services) and all expenditures for renewals,
replacements, additions, and retirements in respect of the
Station shall be shared by the Companies in proportion to their
Ownership Shares. All expenditures in respect of the Station
properly chargeable to Account 501 (Fuel) of such Uniform System
of Accounts for any period shall be shared by the Companies pro
rata according to the total kilowatt-hours of electrical energy
they take from the Station during such period.
Interest charges on borrowed funds, income taxes, and
property, business and occupation and like taxes imposed upon
each Company shall be borne entirely by such Company; and such
items, as well as depreciation, amortization and interest charged
during construction, shall not be deemed expenditures for
purposes of this Section.
8. Joint Account.
The Companies shall maintain one or. more joint accounts
(collectively, the "Joint Account") in a bank or banks agreed
upon by them. All expenditures referred to in the second
paragraph of Section 7 hereof shall be paid out of the Joint
Account.
<PAGE>
From time to time the Director or the Operating Company
through the Vice President, System Power Supply, of Allegheny
Power Service Corporation may request the Companies to advance to
the Joint Account such amount as is then needed for cash working
capital. Within ten days thereafter the Companies pro rata
according to their respective Ownership Shares, shall deposit in
such Joint Account the amount specified in such request.
As promptly as practicable after the end of each month,
the Director shall send, and the Operating Company shall cause
the aforesaid Vice President
to send, to each of the Companies a statement in reasonable
detail of all expenditures hereunder for such month and the
amount of each Company's share thereof. Within ten days after its
receipt of such statement, each Company shall deposit its share
in the Joint Account.
The Director or Operating Company shall cause to be
drawn against the Joint Account, and to be delivered, checks or
drafts in the names of the Companies in payment of expenditures.
Funds shall be disbursed from the Joint Account in accordance
with sound accounting and disbursement procedures. All persons
authorized to handle or disburse funds from the Joint Account
shall be bonded in favor of Monongahela, Potomac, and West Penn,
as their respective interests may appear, for not less than
$500,000.
9. Default.
During any period that a Company is in default in whole
or in part in making a deposit in the Joint Account required
under this Agreement, (a) such Company shall be entitled to no
energy from the Station (but it shall be obligated to pay any
damages to the non-defaulting Companies resulting from such
default) and (b) the non-defaulting Companies shall be entitled
to all of the energy from the Station in proportion to their
Ownership Shares. No such default shall affect any Company's
ownership interest, or any Company's obligations under Sections 7
and 8.
10. Arbitration.
Any controversy relating to this Agreement or the Deed
shall be settled by arbitration in accordance with the Rules of
the American Arbitration Association, and judgment upon an award
rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
<PAGE>
11. Term of Agreement
This Agreement shall continue in full force and effect
for a period of 45 years from the date hereof and for such longer
period as the Companies shall by mutual agreement continue to
operate any of the units at the Station. Termination of this
Agreement shall not terminate the provisions of Section 10.
<PAGE>
12. Successors and Assigns.
This Agreement shall inure to the benefit of and bind
the successors and assigns of the parties hereto, but it may be
assigned in whole or in part only in connection with transfer to
the assign of the assignor's corresponding ownership interest in
the Station.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement
to be duly executed.
MONONGAHELA POWER COMPANY
By
__________/s/__________________
President
THE POTOMAC EDISON COMPANY
By
____________/s/_________________
President
WEST PENN POWER COMPANY
By
_____________/s/________________
President
EXHIBIT B-5
FORM OF PROPOSED OPERATING AGREEMENT
OPERATING AGREEMENT, dated ____, 1999, between
WEST PENN POWER COMPANY, a Pennsylvania corporation
("Operating Company") and [Genco, LLC], a limited liability
company ("Owner").
W I T N E S S E T H:
1. Station.
The Owner and the Operating Company hereby provide for
the operation of [a electric generating station in______,
[Pennsylvania] [West Virginia], with ___ generating units,
each with a name plate capacity of approximately ___ kw
(net), (hereinafter called the "Station") to be leased by
the Operating Company for the duration of this Agreement
from the Owner.
2. Operation and Maintenance.
The Station will be operated and maintained by the
Operating Company under the supervision of a Vice President
of the Operating Company (the "Vice President"). The
Operating Company shall not be liable to the Owner for loss,
damage, or injury arising out of such operation or
maintenance unless caused by its gross negligence or willful
misconduct. The Operating Company shall keep or cause to be
kept books of account and records containing details of the
items of cost applicable to the operation and maintenance of
the Station. Such books of account and records shall be
open to examination at any time by the Owner or its
representatives. The Operating Company shall furnish the
<PAGE>
Owner with copies of such books of account and records as
they may request.
3. Renewals, Replacements, Additions, and Retirements.
Renewals and replacements necessary for the operation
of the Station shall be made as required in accordance with
good utility operating practice. Other renewals and
replacements of, and any additions to, the Station may be
made only upon agreement of the Owner and the Operating
Company. Retirements, sales, and other dispositions of
property shall be effected only in a manner consistent with
the Owner's and the Operating Company's mortgage indentures,
if any. Renewals, replacements, additions and retirements
(and related dispositions and sales) shall be accomplished
by the Operating Company under the supervision of the Vice
President.
4. Power and Energy.
The Operating Company shall at all times during the
term of this Agreement have full ownership of and available
to it at the Station the generating capability of the
Station, and the energy associated therewith.
5. Expenditures.
All expenditures in respect of the Station shall be
accounted for in accordance with the Uniform System of
Accounts prescribed by the Federal Power Commission for
Public Utilities and Licensees (Class A and B Electric
Utilities) in effect on the date of this Agreement and as
may be amended from time to time.
All expenditures for the operation, and maintenance of
the Station (including, without limitation, all expenditures
for administration, labor, payroll taxes, employee benefits,
research and development, materials, supplies and services)
and all expenditures for renewals, replacements, additions,
and retirements related to the Station shall be for the
account of the Operating Company.
<PAGE>
Interest charges on borrowed funds, income taxes, and
property, business and occupation and like taxes related to
the Station imposed upon the Operating Company shall be
borne entirely by such Operating Company; and such items, as
well as depreciation and amortization and interest charged
during construction, shall not be deemed expenditures for
purposes of this Section.
6. Arbitration.
Any controversy relating to this Agreement shall be
settled by arbitration in accordance with the Rules of the
American Arbitration Association, and judgment upon an award
rendered by the arbitrator may be entered in any court
having jurisdiction thereof.
7. Term of Agreement.
This Agreement shall continue in full force and effect
until January 2, 2000. Termination of this Agreement shall
not terminate the provisions of Section 6.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed.
WEST PENN POWER COMPANY
By_____________________________
___
Vice President
[GENCO, LLC]
By_____________________________
___
Vice President
EXHIBIT B-6
FORM OF PROPOSED OPERATING AGREEMENT
OPERATING AGREEMENT, dated ____, 1999, between
WEST PENN POWER COMPANY, a Pennsylvania corporation ("West
Penn") and [Genco, LLC], a
limited liability company ("Operator").
W I T N E S S E T H:
1. Station.
West Penn and the Operator hereby provide for the
operation of [a electric generating station in _______,
[Pennsylvania] [West Virginia], with _____ generating units,
each with a name plate capacity of approximately ____ kw
(net), (hereinafter called the "Station") to be leased by
West Penn for the duration of this Agreement from the
Operator.
2. Operation and Maintenance.
The Station will be operated and maintained by the
Operator. The Operator shall not be liable to West Penn for
loss, damage, or injury arising out of such operation or
maintenance unless caused by its gross negligence or willful
misconduct. The Operator shall keep or cause to be kept
books of account and records containing details of the items
of cost applicable to the operation and maintenance of the
Station. Such books of account and records shall be open to
examination at any time by West Penn or its representatives.
The Operator shall furnish West Penn with copies of such
books of account and records as they may request.
<PAGE>
3. Renewals, Replacements, Additions, and Retirements.
Renewals and replacements necessary for the operation
of the Station shall be made as required in accordance with
good utility operating practice. Other renewals and
replacements of, and any additions to, the Station may be
made only upon agreement of West Penn and the Operator.
Retirements, sales, and other dispositions of property shall
be effected only in a manner consistent with West Penn's and
the Operator's mortgage indentures, if any. Renewals,
replacements, additions and retirements (and related
dispositions and sales) shall be accomplished by the
Operator.
4. Power and Energy.
West Penn shall at all times during the term of this
Agreement have full ownership of and available to it at the
Station its approximately one-third generating capability of
the Station, and the energy associated therewith, in
accordance with the Lease Agreement of even date herewith.
5. Expenditures.
All expenditures in respect of the Station shall be
accounted for in accordance with the Uniform System of
Accounts prescribed by the Federal Power Commission for
Public Utilities and Licensees (Class A and B Electric
Utilities) in effect on the date of this Agreement and as
may be amended from time to time.
All expenditures for the operation, and maintenance of
the Station (including, without limitation, all expenditures
for administration, labor, payroll taxes, employee benefits,
research and development, materials, supplies and services)
and all expenditures for renewals, replacements, additions,
and retirements related to the Station shall be for the
account of West Penn.
Interest charges on borrowed funds, income taxes, and
property, business and occupation and like taxes related to
the Station imposed upon the approximately one-third of
generation leased by West Penn shall be borne entirely by
West Penn; and such items, as well as depreciation and
<PAGE>
amortization and interest charged during construction, shall
not be deemed expenditures for purposes of this Section.
6. Arbitration.
Any controversy relating to this Agreement shall be
settled by arbitration in accordance with the Rules of the
American Arbitration Association, and judgment upon an award
rendered by the arbitrator may be entered in any court
having jurisdiction thereof.
7. Term of Agreement.
This Agreement shall continue in full force and effect
until January 2, 2000. Termination of this Agreement shall
not terminate the provisions of Section 6.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed.
WEST PENN POWER COMPANY
By_____________________________
Vice President
[GENCO, LLC]
By_____________________________
Vice President
D R A F T 9-8-99
FACILITIES LEASE AGREEMENT
BETWEEN
ALLEGHENY ENERGY SUPPLY COMPANY
and
WEST PENN POWER COMPANY
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions 2
ARTICLE II
Effective Date 3
ARTICLE III
Lease of Generating Facilities 4
ARTICLE IV
Operation and Maintenance of Leased Facilities 5
ARTICLE V
Assignment of Existing Contracts 7
ARTICLE VI
Generating Resource Responsibilities of APC 8
ARTICLE VII
Operating Committee 11
ARTICLE VIII
Term of Lease 11
ARTICLE IX
Compensation for Lease and Assignment of Generation 12
ARTICLE X
Taxes 14
ARTICLE XI
Stranded Cost Recovery 15
ARTICLE XII
Insurance 15
ARTICLE XIII
Amendment of Prior Agreements 15
ARTICLE XIV
Exchange of Information/Right of Inspection 16
<PAGE>
TABLE OF CONTENTS (cont'd.)
Page
ARTICLE XV
Settlements 16
ARTICLE XVI
Indemnity 17
ARTICLE XVII
Force Majeure 18
ARTICLE XVIII
Conditions Precedent 20
ARTICLE XIX
Liens 21
ARTICLE XX
Successors and Assigns 21
ARTICLE XXI
Miscellaneous 21
ARTICLE XXII
Indenture Provisions 23
ARTICLE XXIII
Dispute Resolution Procedures 24
APPENDIX A
Leased Properties
APPENDIX B
List of Joint Operating Agreements
APPENDIX C
Power Sales Agreements
<PAGE>
FACILITIES LEASE AGREEMENT
THIS LEASE made and entered into this ____ day of
_____________, 1999, between Allegheny Energy Supply Company
(a ________ corporation) ("AESC" or "Lessor"), and West Penn
Power Company (a Pennsylvania corporation) ("West Penn" or
"Lessee"), and being hereinafter individually referred to as
Party and collectively referred to as Parties.
W I T N E S S E T H:
WHEREAS, the common stock of each Party is wholly
owned by Allegheny Energy, Inc., a Maryland corporation; and
WHEREAS, the Parties desire to accommodate safe
and reliable electric generation operations for the public
in the transition from a regulated to a deregulated
environment during which time West Penn will maintain an
obligation under Pennsylvania law to serve a portion of its
customer base with generation service; and
WHEREAS, subject to the terms of this Lease, AESC
desires to lease designated generating assets to West Penn,
and to assign its rights to certain other generation
resources to West Penn, subject to certain conditions as
more fully described herein;
NOW THEREFORE, in consideration of the covenants
and premises herein set forth, and intending to be legally
bound, the Parties mutually agree as follows:
<PAGE>
ARTICLE I
Definitions
For the purpose of this Lease, the following terms
shall have the following meanings:
1.1 Emission Allowances: The cost of sulfur dioxide and
nitrous oxide emissions allowances purchased by the
Transmission Provider ("TP"), if any, as calculated
with compensation or transfer of allowances in
accordance with the FERC's Rules and Regulations.
1.2 Federal Energy Regulatory Commission ("FERC" or
"Commission"): The current Federal Energy Regulatory
Commission or successor agency.
1.3 Good Utility Practice: Any of the practices, methods
and acts engaged in or approved by a significant
portion of the electric utility industry during the
relevant time period, including national and regional
standards set by North American Electric Reliability
Council ("NERC") or any successor organization, or any
of the practices, methods and acts which, in the
exercise of reasonable judgment in light of the facts
known at the time the decision was made, could have
been expected to accomplish the desired result at a
reasonable cost consistent with good business
practices, reliability, safety and expedition. Good
Utility Practice is not intended to be limited to the
optimum practice, method, or act to the exclusion of
all others, but rather to be acceptable practices,
methods, or acts generally accepted in the region.
<PAGE>
Good Utility Practices shall include applicable local,
regional and national reliability standards including
those established by NERC or any successor
organization.
1.4 Indenture: Shall mean the Purchase Money Mortgage
dated ______________ between AESC and
___________________.
1.5 Local Distribution Utilities ("LDU's"): West Penn and
any other subsidiary existing or hereafter created
under or as an affiliate of Allegheny Energy, Inc.,
which performs the functions of a local electric
distribution utility and leases facilities hereunder.
1.6 Regulated Loads: As defined under Pennsylvania law,
and under Pennsylvania Public Utility Commission Order
interpreting the law in West Penn's restructuring
proceeding at PaPUC Docket No. A-00973981, the electric
load of the West Penn consisting of retail customers
who do not have the legal right to choose their
generation supplier and customers.
1.7 Regulatory Contingencies: The conditions precedent set
forth in Article XVIII of this Lease.
<PAGE>
ARTICLE II
Effective Date
2.1 This Lease shall become effective on
_____________________ or such later date as may be
required by competent regulatory authority having
jurisdiction over this Lease.
<PAGE>
ARTICLE III
Lease Of Generating Facilities
3.1 In consideration of the mutual covenants and agreements
contained in this Lease, and other good and valuable
consideration, AESC hereby leases to West Penn, and
West Penn leases from AESC, a portion of its generating
facilities as follows:
3.1.1 AESC hereby leases to West Penn 1/3 of each
of the generating facilities more fully described
on Appendix A hereto, subject in all respects to
the requirements of the Indenture. The
description of facilities being leased contained
on Appendix A is intended to and shall exclude
facilities booked to transmission and distribution
under FERC's Uniform System of Accounts. This
Lease may be amended from time to time to remove
generating facilities, in whole or in part, in the
event that additional customers served by West
Penn obtain a legal right to choose their
generation supplier, or in the event that
additional generation is no longer required to
serve bundled retail customers or otherwise
removed from obligations under Pennsylvania law or
regulatory order.
3.2 During the term of this Lease, West Penn shall have the
exclusive right to operate and utilize the output of
the leased generating facilities, including the right
to dispatch, sell, transfer, or otherwise dedicate the
<PAGE>
output of such generation resources, including both
capacity and energy, to or for the benefit of any
entity.
3.3 Title to the generating facilities which are subject to
this Lease shall at all times remain with AESC. West
Penn shall have no right, title, or interest in such
generating facilities, except to the extent expressly
set forth in this Lease.
3.4 Upon termination of this Lease, the leased generating
facilities, including certain capital additions made
during the term of this Lease, subject to the terms of
this Lease, shall revert to AESC.
3.5 Subject to the provisions of this Lease, West Penn
shall have the unlimited right to use the leased
generating facilities to serve its Regulated Loads.
3.6 The Parties agree that it is the understanding and
intention of the Parties that this Lease is to be
classified as an operating lease agreement. To the
extent that, by law or regulation, this Lease cannot be
classified as an operating lease agreement, the Parties
agree to negotiate in good faith to effect mutually
agreed upon changes necessary to classify this Lease as
an operating lease agreement.
<PAGE>
ARTICLE IV
Operation and Maintenance of Leased Facilities
4.1 West Penn shall maintain the leased generating
facilities pursuant to the terms of this Lease. West
Penn shall have the right to utilize the services of
third parties, or parties hereto, in connection with its
obligations and rights under this Lease.
4.2 West Penn shall perform the operation and maintenance
obligations specified in this Lease in a good and
workmanlike manner in accordance with Good Utility
Practice and in compliance with all applicable laws,
rules and regulations.
4.3 West Penn shall perform, or cause to be performed,
operation and maintenance services, which shall
include, but not be limited to, the furnishing of all
materials, equipment, services, supplies and labor
necessary for the operation, inspection, surveillance,
monitoring and repair of the generation facilities
leased pursuant to this Lease.
4.4 West Penn shall perform, or cause to be performed,
emergency operation and maintenance services, which
shall include, but not be limited to, those services
performed in case of explosion, fire, storm, sudden
emergencies, sabotage, or any unscheduled major
interruption of the operation of the generation
facilities leased pursuant to the terms of this Lease.
Prior to the performance of such services, the
Operating Committee, set forth in Article VII below,
may upon mutual agreement, retire or place in cold
storage, in whole or in part, a generating facility
<PAGE>
affected by an emergency as contemplated by this
Section, provided that alternate arrangements are made
to satisfy West Penn's obligations to its Regulated
Load.
4.5 Except as limited by Section 4.4 above, West Penn shall
have the sole right and discretion to determine and
perform the operation and maintenance activities set
forth in this Article IV and for those capital
additions for which it assumes financial
responsibility, and the timing of such activities and
additions. West Penn shall not exercise its discretion
under this Article IV in a fashion which impairs AESC's
ability to effectively run its generating facilities.
ARTICLE V
Assignment Of Existing Contracts
5.1 Existing Joint Ownership and Operating Agreements:
AESC hereby grants and assigns to West Penn a
proportional share of the dispatch rights, and all
rights to output, of both capacity and energy, given to
AESC under each of the Joint Ownership and Operating
Agreements listed on Appendix B hereto. AESC hereby
grants and assigns to West Penn proportionate rights,
to the extent AESC has such rights, to purchase, and
utilize the output, both capacity and energy, of the
Bath County Generating Plant ("AGC Agreement").
5.2 Purchase Power and Power Sales Agreements: AESC hereby
grants and assigns to West Penn proportionate rights,
to the extent each of them has such rights, to operate,
<PAGE>
dispatch, and utilize the capacity and energy purchase
and exchange rights under the Purchase Power and Power
Sale Agreements listed in Appendix C.
5.3 Emission Allowances: Within ten (10) working days of
the end of each calendar month, AESC shall transfer to
West Penn 1) the amount of SO2 allowances required by
West Penn to produce energy by West Penn derived from
the leased facilities to service its Regulated Load for
the calendar month just ended and 1/3 of the NOx
allowances granted to these facilties, and 2) an
appropriate amount of allowances, to allow West Penn to
make sufficient non-affiliated sales under the Power
Supply Agreement between Monongahela Power, Potomac
Edison and West Penn, dated 1982, to support its
obligations thereunder.
5.4 Fuel Procurement Contracts and Inventories: AESC
hereby grants to West Penn the right to use fuel
inventories existing as of the effective date of this
Lease as needed to supply power for its Regulated Load;
provided that upon termination of this Lease, West Penn
shall return similar inventories. Fuel inventories
shall be measured in British Thermal Unit per unit
capability.
<PAGE>
ARTICLE VI
Generating Resource Responsibilities of West Penn
6.1 Operating Control: Except as hereinafter set forth,
West Penn shall have operating control of the
generation resources leased from AESC under Article III
or assigned under Article V. West Penn shall operate
those resources at its own cost and expense, and shall
maintain, or cause to be maintained, each generating
resource so as to keep it in similar operating
condition as it was when it first became subject to
this Lease, ordinary wear and tear excepted. West Penn
shall replace all parts of any generating resource that
become unfit for use with appropriate replacement
parts.
West Penn shall not, without the prior written consent
of the Operating Committee defined in Section 7.1,
alter any generating resource, or affix or install any
accessories or devices on any generating resource, if
the same shall impair the originally intended function
or use of such generating resource or shall diminish
its commercial value. Any and all unseverable
additions to and improvements of any generating
resource, and any and all parts installed on and
additions and replacements made to any generating
resource, shall constitute accessions to such
generating resource and ownership thereof, free from
any lien, charge, security interest or encumbrance
shall immediately be vested in Lessor.
6.2 Operating Costs: West Penn shall be responsible for
the payment, from its own funds, of such operating and
non-capital maintenance expenses, including all fuel
<PAGE>
contracts and the acquisition of necessary additional
emission allowances as required beyond those granted in
Section 5.4 above, as it incurs in its sole judgment
for the purpose of efficiently operating the leased
generation resources. West Penn shall be responsible
for payment, from its funds, of amounts due and payable
for the exercise of all purchase rights, both capacity
and energy, under the contracts referred to in Article
V above. It is recognized that AESC currently has in
place various fuel procurement contracts which must be
taken account of by West Penn in determining whether
and the extent to which West Penn will incur additional
fuel expenses. AESC shall remain responsible for
compliance with all terms of their currently existing
fuel contracts, including payment obligations, unless
such contracts are assigned to West Penn. Recognizing
the existence of such contracts, West Penn may incur
the cost of such additional fuel over and above the
current fuel inventory and fuel required to be
purchased under existing contracts and may incur all
other necessary operating expenses which it determines
in its sole judgment to be appropriate to efficiently
operate the generation resources leased from AESC.
6.3 Fixed Costs: AESC will remain responsible for the
fixed cost and fixed payment obligations associated
with the various contracts referred to in Article V
above. It is the intent of the parties to this Lease
that the payments for lease and transfer of rights to
generation in this Lease shall be sufficient to cover
all fixed payment obligations which AESC retains as a
result of its ownership of generating units and/or its
obligations under the various contracts referred to in
Article V. It is further the intent of the parties to
<PAGE>
this Lease that the obligation to pay operating costs
incurred under each of these agreements shall be
transferred to and become the responsibility of West
Penn.
6.4 Capital Additions, Retirements or Re-Rates: All
capital additions made at the discretion of the
Operating Committee shall be paid for by AESC and shall
be the property of AESC upon the termination of this
Lease. Unseverable capital additions unilaterally
initiated and financed by West Penn shall also become
the property of the AESC upon termination of this
Lease. The Operating Committee may decide to
permanently re-rate any of the leased generation
resources. Following the permanent rerate of leased
generating facilities, Lease payments shall be adjusted
as necessary.
ARTICLE VII
Operating Committee
7.1 An Operating Committee shall be established to carry
out and coordinate the provisions of this Lease. Said
Operating Committee shall consist of one representative
from each Party as designated in writing. Any Party
may change its designated representative by notifying
the other Parties in writing.
ARTICLE VIII
Term of Lease
8.1 Effective Date: This Lease shall become effective on
_________________________, however, if the Conditions
Precedent set forth in Article XVIII have not been
satisfied on or before __________________________, this
Lease shall become null and void and of no effect.
<PAGE>
8.2 Initial Term: This Lease shall continue in full force
and effect from the effective date set forth in Section
8.1 until January 2, 2000. This Initial Term may be
modified upon mutual agreement of all Parties to this
Lease.
8.3 Termination: This Lease is also subject to termination
or modification to the extent that performance
hereunder may conflict with any applicable provision of
law or with any rule, regulation or order of any
regulatory agency having jurisdiction, whether adopted
before or after the making of this Lease. This Lease
may be subject to termination or modification in the
event any state or federal regulatory or legislative
body should adopt a plan requiring retail customer
choice for electricity that results in a termination or
material modification of the Lease.
8.4 Default Events: In the event either Party shall (a)
make an assignment or any general arrangement for the
benefit of creditors; (b) default in the payment or
performance of its obligations to another Party under
this Lease (which shall not include a delay in
performance or payment that is cured within two (2)
business days (as used herein, business day shall mean
any day on which Federal Reserve member banks in New
York are open for business) of a demand for corrective
action); (c) file a petition or otherwise commence,
authorize or acquiesce in the commencement of a
proceeding or cause under any bankruptcy or similar law
<PAGE>
for the protection of creditors or have such petition
filed or proceeding commenced against it; (d) otherwise
become bankrupt or insolvent (however evidenced); (e)
be unable to pay its debts as they fall due; or (f)
fail to give adequate security for or assurance of its
ability to perform its further obligations under this
Lease within two business days of a reasonable request
by another Party, then the performing Party shall have
the right to terminate this Lease without prior notice,
in addition to any and all other remedies available
hereunder or pursuant to law. Notice of termination
shall be given within one business day, unless
otherwise provided for herein.
ARTICLE IX
Compensation For Lease And Assignment Of Generation
9.1 As compensation for the foregoing rights to the leased
and assigned generation resources, including the
exclusive right to utilize the output of generation
resources and all purchase rights as described therein,
West Penn agrees to pay AESC $5,030,000 per month. The
Parties recognize and agree that the foregoing payments
to AESC are intended to cover depreciation, property
tax, property insurance, income tax, interest return on
all leased and assigned assets, and a regulated equity
return on those portions of the assets subject to this
Lease which remain subject to rate base regulation.
9.2 Billing and Payments: Monthly payments equivalent to
1/12 of the above annual amounts shall be made by [wire
transfer] on or before the 15th day of the following
month. The initial payments under this Lease shall be
made on or before the 15th day of the month immediately
following the month in which the effective date occurs
<PAGE>
and shall be prorated to cover the portion of the month
in which the effective date occurs for which this Lease
is in effect.
9.3 Automatic Adjustment for Environmental Capital
Additions: Parties to this Lease shall not be prevented
from filing changes with the FERC if any federal, state
or local legislative body, judicial authority, or
administrative agency, including the FERC, orders any
new, or changes any existing, statutes, regulations,
regulatory policies, interpretations, or changes
preexisting programs or procedures directly resulting
in costs, savings, expenses or requiring of AESC a
change in compensation not otherwise provided for in
this Lease for environmental capital additions.
9.4 Automatic Adjustment for Tax Changes: An adjustment
for tax changes shall apply to the compensation for
this Lease. Rates to be adjusted, as required, by
including an automatic pass-through of changes in
federal, state, or local taxes or tax rates by
providing an automatic adjustment of all taxes included
in the Lease, upward or downward, based on actual tax
expense incurred by AESC.
9.5 Regulatory Approved Changes: Nothing contained herein
shall be construed as affecting in any way the right of
AESC individually or jointly, to unilaterally make
application to the FERC for a change in rates under
Sections 205 or 206 of the Federal Power Act and
pursuant to FERC's Rules and Regulations promulgated
thereunder.
<PAGE>
ARTICLE X
Taxes
10.1 AESC shall remain responsible for paying all property
related taxes, including but not limited to state and
local ad valorem taxes, levied on the facilities leased
pursuant to this Lease. The Parties shall be
responsible for gross receipts taxes associated with
the sales, if any, which each of them makes to ultimate
consumers of electricity. The Parties hereby commit
that they will not impair or encumber the leased
property, by incurring any lien on such leased property
arising by failure to pay taxes or other lawful debts.
ARTICLE XI
Stranded Cost Recovery
11.1 This Lease does not in any way affect the right of any
Party to seek and recover stranded cost recovery.
ARTICLE XII
Insurance
12.1 AESC will maintain existing levels of property, boiler,
machinery and liability insurance coverage on the
leased properties described in Appendix A.
<PAGE>
ARTICLE XIII
Amendment Of Prior Agreements
13.1 Existing Ownership and Operating Agreements: This Lease
shall constitute an amendment of each of the Joint
Ownership and Operating Agreements listed on Appendix
B. Each such Lease is hereby amended to eliminate the
sections of such agreements identified on Appendix B
and substitute for such eliminated sections the
provisions contained in this Lease. AESC is
responsible for obtaining approvals necessary to amend
all relevant agreements affected by this Lease and to
which AESC is a party or a successor or assignor
thereof. The consent of all affected parties to such
amendments shall be evidenced by a separate amendment
executed by all parties to the agreements, indicating
consent to said amendments, and executed
contemporaneously herewith. The rights and obligations
to the capacity and energy accruing to AESC under said
contract are proportionally granted and assigned to
West Penn under Article V above.
ARTICLE XIV
Exchange of Information/Right of Inspection
14.1 Records and Accounts: All records and accounts
pertaining to services hereunder shall be available to
any Party for audit and review at all reasonable times.
14.2 Right of Inspection: AESC shall have the right at any
reasonable time to enter the premises where the leased
generating facilities are located and shall be given
free access to inspect the facilities.
<PAGE>
14.3 Standards of Conduct: Services and related exchanges
of information remain subject to any relevant standards
of conduct imposed by state and/or federal regulatory
authorities.
ARTICLE XV
Settlements
15.1 Accounting Period: The accounting period for
transactions hereunder shall be one month, which,
unless otherwise specified by the Operating Committee,
shall be a calendar month.
15.2 Disputed Bills: In case a portion of any bill is in
dispute, the undisputed amount shall be paid when due,
and the remainder, if any, shall be paid promptly after
determination of the correct amount. Interest on
unpaid amounts shall accrue daily at the then current
prime interest rate (or comparable rate) from the due
date of such unpaid amount until the date paid.
ARTICLE XVI
Indemnity
16.1 Each Party will indemnify and save harmless each other
Party from all claims, liability, and expense arising
out of any bodily injury, death, or damage to property
caused by negligence of a Party thereto (other than
those caused by the gross negligence of such other
Party or its employees, agents, or servants) occurring
in or about facilities owned by it and used for the
<PAGE>
purposes of this Lease, except that each Party shall be
responsible for all claims of its own employees,
agents, and servants under any workmen's compensation
or similar law. This Indemnity obligation shall
survive termination of this Lease.
16.2 AESC hereby agrees to indemnify and save harmless West
Penn from all claims, liability and expense arising out
of any preexisting but not yet identified environmental
related claim or liability arising in whole or in part
from the operation of the generating facilities which
are the subject of this Lease. This indemnification
shall include but not be limited to any future
discovered environmental costs associated with removal
of any previously deposited hazardous materials
resulting from the operation of the referenced
generating units.
16.3 It is understood that during the term of this Lease,
West Penn is solely responsible for compliance with all
environmental laws and regulations, and West Penn
hereby agrees to indemnify and save harmless AESC for
any environmental claim or liability which results from
West Penn's failure to comply with such environmental
laws or regulations regarding facilities subject to
this Lease.
16.4 The indemnity contemplated by this Lease shall survive
termination of this Lease.
<PAGE>
ARTICLE XVII
Force Majeure
17.1 If by reason of force majeure any Party hereto is
rendered unable, in whole or in part, to carry out its
obligations under this Lease, and if such Party gives
notice and reasonably full particulars of such force
majeure in writing, by telegram, facsimile, or E-mail
to the other Party or Parties, as appropriate, within a
reasonable period of time after the occurrence of the
force majeure event, the Party giving such notice, so
far as and to the extent that it is affected by such
force majeure event, shall be relieved of its
performance obligations under this Lease and shall not
be liable in damages during the continuance of
inability to perform so caused; provided, however, that
such cause shall be remedied with all reasonable
dispatch.
17.2 As used herein, the term "force majeure" shall mean:
acts of God, strikes, lockouts or other industrial
disturbances; acts of public enemies, wars, blockades,
insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, storms, floods or washouts; arrests
and restraints imposed by the government, either
federal or local, civil or military; the binding order
of any court, legislative body, or governmental
authority which has been resisted in good faith by all
reasonable legal means; vandalism, sabotage or civil
disturbances; relocation of facilities; breakage or
accident to machinery, including but not limited to
generation facilities or transmission lines; the
necessity for testing (as required by governmental
authority or as deemed necessary by the testing party
for safe operations) or for making repairs or
alterations to machinery, including but not limited to
generation facilities or transmission lines; accidents,
<PAGE>
breakdowns or the inability of a Party to obtain
necessary material, supplies, permits, rights-of-way or
labor to perform or comply with any obligation or
condition of this Lease; and any other causes, whether
of the kind herein enumerated or otherwise, which are
not reasonably in control of the Party claiming
suspension. It is understood that the settlement of
strikes or lockouts shall be entirely within the
discretion of the Party having the difficulty and that
the above requirement that force majeure events be
remedied with reasonable dispatch shall not require the
settlement of strikes, lockouts or disagreements by
acceding to the demands of any opposing party when such
course is inadvisable in the discretion of the Party
having the difficulty.
17.3 Such force majeure affecting the performance hereunder
by any Party, however, shall not relieve such Party of
liability in the event of its concurring negligence or
willful misconduct in creating such force majeure event
or in the event of failure to use due diligence to
remedy the situation and to remove the cause or
contingencies affecting such performance in an adequate
manner and with all reasonable dispatch.
ARTICLE XVIII
Conditions Precedent
The Parties hereto expressly agree that each Party's
rights and obligations under this Lease are contingent
upon satisfaction of each of the following conditions
precedent:
<PAGE>
18.1 The parties agree that this Lease has received approval
of the PaPUC at Docket No. R-0097398 as a component of
the transfer, lease, or assignment of West Penn's
generating assets.
18.2 All authorizations of the United States Securities and
Exchange Commission, to the extent required by the
Public Utility Holding Company Act of 1935, for the
transactions contemplated by this Lease.
18.3 All necessary Trustee consents under the bond
indentures referenced in Article II above and all
affected contracts.
18.4 Acceptance of this Lease without modification or
condition by the FERC, but solely in the event the FERC
determines that it has jurisdiction over this Lease.
ARTICLE XIX
Liens
19.1 Subject to the terms of the indentures identified in
Article I above, West Penn may incur liens or other
encumbrances on the property which is the subject of
this Lease including liens or other encumbrances made
by West Penn.
<PAGE>
ARTICLE XX
Successors and Assigns
20.1 This Lease shall inure to and bind the successors and
assigns of the Parties. This Lease, and the leases set
forth in Article III, shall not be assigned by any
Party without the written consent of the others, which
consent shall not be unreasonably withheld; provided
that this Lease may be assigned without prior written
consent to a corporation into which such Party shall be
merged or with which it shall be consolidated or to a
corporation resulting from any merger or consolidation
to which such Party shall be a party or to a person or
corporation to which substantially all the business and
assets of such Party shall be transferred.
ARTICLE XXI
Miscellaneous
21.1 Waivers: Any waiver at any time of any rights as to
any default hereunder or any other matter arising
hereunder shall not be deemed a waiver as to any
subsequent default or matter.
21.2 Governing Law: This Lease shall be governed by and
interpreted in accordance with the laws of the
Commonwealth of Pennsylvania without recourse to the
law regarding conflict of laws.
21.3 Authority: Each Party hereto represents to the
others that this Lease, the transactions contemplated
herein, and the execution and delivery of this Lease
have been duly authorized by all necessary corporation
<PAGE>
actions, including without limitation, required action
on the part of the officers and agents of the
representing Party, and this Lease, when executed and
delivered, shall be valid and binding on it.
21.4 Headings: The headings contained in this Lease are for
reference purposes only and shall not affect the
meaning or interpretation of this Lease.
21.5 Notices: Unless otherwise specifically provided in
this Lease, any written notice or other communication
shall be deemed to be given and received on the date
when such notice or communication is given by facsimile
or E-mail, and confirmed as received by the other
Party, or the date received if given by registered or
certified mail, postage prepaid, addressed to:
Allegheny Energy Supply Company
Attn: David C. Benson
Roseytown Road
Greensburg, PA 15601
West Penn Power Company
Attn: Secretary
800 Cabin Hill Drive
Greensburg, PA 15601
21.6 Entirety: This Lease and the appendices hereto
constitute the entire agreement between the parties
hereto. There are no prior or contemporaneous
agreements or representations affecting the same
subject matter other than those expressed herein.
<PAGE>
21.7 Transfer of Assets: The Parties reserve the right
individually or collectively to transfer ownership of
assets which are the subject of this Lease to West Penn
or another entity of its choosing. No signatory will
oppose such transfer of assets.
21.8 Severability: Except as otherwise stated herein, any
provision, Article or Section declared or rendered
unlawful by a court of law or regulatory agency with
jurisdiction over this agreement, or deemed unlawful
because of statutory change, will not otherwise affect
the lawful obligations that arise under this Lease.
ARTICLE XXII
Indenture Provisions
22.1 This Lease is expressly made subject to the lien and
security of the Indenture, and is not intended to
impair in any way such lien or security or the rights
under the Indenture.
ARTICLE XXIII
Dispute Resolution Procedures
23.1 Internal Dispute Resolution Procedures: Any dispute
between West Penn and AESC involving service under this
Lease (excluding applications for rate changes or other
changes which shall be presented directly to the FERC
for resolution) shall be referred within six (6) months
of the written notification of a dispute by a Party to
a designated senior representative of AESC and a senior
representative of the West Penn for resolution on an
informal basis as promptly as practicable. In the
event the designated representatives are unable to
resolve the dispute within thirty (30) days [or such
<PAGE>
other period as the Parties may agree upon] by mutual
agreement, such dispute may be submitted to arbitration
and resolved in accordance with the arbitration
procedures set forth below.
23.2 External Arbitration Procedures: Any arbitration
initiated under this Lease shall be conducted before a
single neutral arbitrator appointed by the Parties. If
the Parties fail to agree upon a single arbitrator
within ten (10) days of the referral of the dispute to
arbitration, each Party shall choose one arbitrator who
shall sit on a three-member arbitration panel. The two
arbitrators so chosen shall within twenty (20) days
select a third arbitrator to chair the arbitration
panel. In either case, the arbitrators shall be
knowledgeable in electric utility matters, including
electric transmission and bulk power issues, and shall
not have any current substantial business or financial
relationships with any party to the arbitration (except
prior arbitration). The arbitrator(s) shall provide
each of the Parties an opportunity to be heard and,
except as otherwise provided herein, shall generally
conduct the arbitration in accordance with the
Commercial Arbitration Rules of the American
Arbitration Association and any applicable Commission
regulations or regional Transmission Provider rules.
23.3 Arbitration Decisions: Unless otherwise agreed, the
arbitrator(s) shall render a decision within ninety
(90) days of appointment and shall notify the Parties
in writing of such decision and the reasons therefor.
The arbitrator(s) shall be authorized only to interpret
and apply the provisions of this Lease and shall have
no power to modify or change the Lease in any manner.
The decision of the arbitrator(s) shall be final and
<PAGE>
binding upon the Parties, and judgment on the award may
be entered in any court having jurisdiction. The
decision of the arbitrator(s) may be appealed solely on
the grounds that the conduct of the arbitrator(s), or
the decision itself, violated the standards set forth
in the Federal Arbitration Act and/or the
Administrative Dispute Resolution Act. The final
decision of the arbitrator must also be filed with the
Commission if it affects jurisdictional rates, terms
and conditions of service or facilities.
23.4 Costs: Each Party shall be responsible for its own
costs incurred during the arbitration process and for
the following costs, if applicable:
(a) the cost of the arbitrator chosen by the
Party to sit on the three member panel and one
half of the cost of the third arbitrator chosen;
or
(b) one half the cost of the single
arbitrator jointly chosen by the Parties.
23.5 Rights Under The Federal Power Act: Nothing in this
section shall restrict the rights of any party to file
a complaint with the Commission under relevant
provisions of the Federal Power Act.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Lease to be executed by their respective duly authorized
officers or representatives, as of the day and year first
above written.
Attest: ALLEGHENY ENERGY SUPPLY COMPANY
__________________ By:__________________________________
[Title]
Attest: WEST PENN POWER COMPANY
__________________ By:__________________________________
[Title]
u:\jsheleh\JLM\GENCO\Facilities Lease Agreement 3_99.doc
<PAGE>
APPENDIX A
Armstrong 1-2
Fort Martin 1
Fort Martin 2
Hatfield's Ferry 1-3
Harrison 1-3
Lake Lynn 1-4
Mitchell 1-3
Pleasants 1-2
<PAGE>
APPENDIX B
FOREIGN STATION OPERATING AGREEMENTS
1. Power Agreement among Monongahela, Potomac, West Penn,
and Allegheny Generating Company dated August 14, 1982 (the
"AGC Agreement")
2. Power Agreement between Ohio Valley Electric
Corporation and United States of America and related
agreements as amended, dated October 15, 1952 ("OVEC
Agreement")
___________________________________________
EQUITY AGREEMENT
BATH COUNTY PUMPED STORAGE PROJECT
____________________________________________
<PAGE>
EQUITY AGREEMENT, entered into this 17th day of June,
1981, among Monongahela Power Company, an Ohio corporation
("Mon"0, The Potomac Edison Company, a Virginia and Maryland
corporation ("PE"), West Penn Power Company, a Pennsylvania
Corporation ("WPP") (Mon, PE and WPP hereinafter sometimes
called a "Company" and collectively sometimes called the
"Companies"), and Allegheny Generating Company, a Virginia
corporation ("AGC").
WHEREAS, each of the parties hereto has entered into
the Basic Agreements with Virginia Electric and Power
Company, a Virginia corporation ("VEPCO"), concurrently with
this Agreement, setting forth the details of the obligations
and rights of VEPCO and AGC relating to the ownership,
construction, replacement, retirement, control, management,
operation and maintenance of the Project, and
WHEREAS, it is the intent and purpose of each of the
Companies to participate in the ownership through AGC of
undivided interests in the Project which AGC may purchase
from VEPCO and in the financing of such interests, and
WHEREAS, the parties desire to enter into this
Agreement for the purposes, among others, of providing for
the respective equity participations of the Companies in
AGC.
NOW, THEREFORE, in consideration of the premises and
the mutual convenants herein set forth, the parties agree as
follows:
<PAGE>
1. Definitions. Except as otherwise expressly provided or
unless the context otherwise requires, the following terms,
whenever used in this Agreement, shall have the following
respective meanings:
"Agreement" means this Equity Agreement as it may from
time to time be amended or supplemented.
"Approvals Date", "Basic Agreements", "Initial Purchase
Date" and "Project" have the respective meanings assigned to
them in the Purchase Agreement.
"Common Stock" means the Common Stock, par value $1 per
share, of AGC or stock of any class or classes resulting
from any reclassification or reclassifications thereof.
"Equity Participation Ratio" of a Company at any time
means that fraction the numerator of which is the number of
shares of Common Stock owned by such Company at such time
and the denominator of which is the number of shares of
Common Stock issued and outstanding at such time.
"Event of Default" has the meaning set forth in Section
5(a)
<PAGE>
"Purchase Agreement" means the Project
Construction and Purchase Agreement, dated June 17, 1981,
between VEPCO, on the one hand, and the Companies and AGC,
on the other hand, as such agreement may from time to time
be amended or supplemented.
2. Equity Participation. (a) Each of the Companies
agrees that it will use its best efforts to obtain
appropriate authorizations, to the extent required, from all
governmental agencies having jurisdiction in the premises
necessary to permit it to acquire shares of capital stock of
AGC and contribute equity capital to AGC as contemplated by
this Agreement. Upon the receipt of all appropriate
authorizations, AGC shall issue and sell to the Companies,
and the Companies shall purchase severally and not jointly
from AGC, at a purchase price of $10 per share, the
following respective numbers of shares of Common Stock:
Mon........270
PE.........280
WPP........450
(b) As soon as practicable after the Approvals Date
but prior to the Initial Purchase Date, the Companies shall
contribute to AGC, in proportion to their respective Equity
Participation Ratios, equity capital in an aggregate amount
to be determined by AGC but not to exceed $65,000,000.
<PAGE>
Thereafter, each of the Companies will furnish its share, in
proportion to its Equity Participation Ratio or as may be
otherwise agreed to by the Companies subject to any
regulatory approvals which may be required, of equity
capital (in the form of cash payments for shares of Common
Stock, capital contributions or otherwise, as AGC shall
determine) to AGC from time to time in such amounts as shall
be determined by the Companies to be necessary or desirable
to satisfy AGC's obligations under the Basic Agreements and
to conduct the business of AGC.
(c) In the case of each issuance of Common Stock under this
Agreement AGC will deliver to each Company purchasing
shares, against payment of the purchase price, certificates
for such shares in such denominations and registered in such
names as such Company requests.
3. Transfer and Issuance of Shares. (a) Each Company
hereby agrees that it shall not transfer its shares of
Common Stock to any person, other than to another Company,
without the written consent of the remaining Companies.
(b) AGC hereby agrees that it shall issue Common Stock to
the Companies only in proportion to their Equity
Participation Ratios, unless otherwise agreed by all the
parties hereto.
<PAGE>
4. Voting as to Charter Amendments. Each Company hereby
agrees that it shall not vote its shares of Common Stock to
amend the Articles of Incorporation of AGC unless each of
the other Companies agrees to vote its shares of Common
Stock in favor of such amendment.
5. Events of Default. (a) Any of the following shall
constitute an "event of Default" as to any Company, only
insofar as it relates to such Company:
(i) default in the payment or performance of any liability
or obligation or covenant of such Company hereunder, and the
continuance of such default for a period of 60 days after
notice to such defaulting Company from any non-defaulting
Company or from AGC, except that any such payment or
performance which is being contested in good faith by
appropriate proceedings shall not constitute an Event of
Default;
(ii) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of
such Company in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order
adjudging such Company a bankrupt or
<PAGE>
insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustments or
composition of or in respect of such Company under any
applicable Federal or State law, or appointing a
custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of such Company
or of any substantial part of its property, or ordering
the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or
any such other decree or order unstrayed and in effect
for a period of 60 consecutive days;
(iii) the commencement by such Company of a
voluntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization
or other similar law or of any other case or proceeding
to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for
relief in respect of such Company in an involuntary
case or proceeding under any applicable Federal or
State bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing
<PAGE>
by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or
State law, or the consent by it to the filing of such
petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of such Company or of any
substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the failure by
it generally to pay its debts as they become due, or the
taking of corporate action by such Company in furtherance of
any such action; or
(iv) any indebtedness of such Company shall not be paid
at the maturity thereof or an event of default as defined in
any mortgage, indenture or instrument under which there may
be issued, or by which there may be secured or evidenced,
any indebtedness of such Company, whether such indebtedness
now exists or shall hereafter by created, shall happen and
shall result in any such indebtedness becoming due and
payable prior to the date on which it would otherwise become
due and payable.
<PAGE>
(b) Upon the occurrence and during the
continuance of any Event of Default as to any Company, each
non-defaulting Company may in its discretion, at the same or
different times, take one or more of the following actions;
(i) proceed by appropriate proceedings, judicial,
administrative or otherwise, at law or in equity or
otherwise, to enforce performance or observance by the
defaulting Company, of the applicable provisions of
this Agreement or to recover from the defaulting
Company damages (other than consequential damages) for
any breach thereof;
(ii) subject to the receipt of all necessary
approvals, purchase from the defaulting Company, and
each Company, if it is the defaulting Company, hereby
agrees to sell, and to use its best efforts to obtain
all necessary approvals to sell, such shares of AGC
owned by the defaulting Company as the non-defaulting
Companies desire (if more than one non-defaulting
Company selects this remedy, such shares shall be
divided between the non-defaulting Companies in
proportion to their Equity Participation Ratios as of
the time of such default or as the non-defaulting
Companies shall otherwise agree) upon the payment to
the defaulting Company of the
<PAGE>
book value of such shares calculated as of the most
recent practicable date prior to such sale; or
(iii) at the expense of the defaulting Company, take any
action as may be necessary to cure such default.
The rights and remedies herein provided in case of an
occurrence of an Event of Default shall not be deemed to be
exclusive but shall, to the extent permitted by law, be
cumulative and in addition to all other rights and remedies
existing at law, inequity or otherwise. No delay or
omission of any non-defaulting Company to exercise any right
or remedy accruing upon any occurrence of an Event of
Default shall impair any such right or remedy or constitute
a waiver of such Event of Default or an acquiescence
therein. Every right and remedy given by this Agreement or
by law to any non-defaulting Company may be exercised from
time to time, and as often as may be deemed expedient, by
such non-defaulting Company.
6. Benefits of Agreement. Nothing in this
Agreement, express or implied, shall give to any person,
other than the parties hereto and their successors
hereunder, any benefit or any legal or equitable right,
remedy or claim under or by reason of this Agreement.
7. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
Commonwealth of Virginia.
<PAGE>
8. Regulatory Approvals. This Agreement, as well
as all the transactions contemplated herein, is subject to
the receipt of all necessary approvals and consents from the
Federal Energy Regulatory Commission, the Securities and
Exchange Commission, the Virginia State Corporation
Commission and all other regulatory agencies having
jurisdiction over the transactions contemplated herein or
over the parties to this Agreement.
9. Section Headings Not to Affect Meaning. The
descriptive headings of the various Sections of this
Agreement have been inserted for convenience of reference
only and shall in no way modify or restrict any of the terms
or provisions hereof.
10. Severability. In the event that any provision of
this Agreement, or the application of any such provision to
any person or circumstance, shall be held invalid or
unenforceable, the remainder of this Agreement, or the
application of such provision to persons or circumstances
other than those as to which it is held invalid or
unenforceable, shall not be affected thereby.
11. Waiver. Any waiver at any time, by any party hereto,
of any of its rights with respect to any other party, or
with respect to any default or other matter arising in
connection with this Agreement, shall not be considered a
waiver
<PAGE>
of any other rights or with respect to any subsequent
default of matter.
12. Amendment. Any amendment or supplement of
this Agreement shall be in writing and signed by the
Chairman of the Board or the President or a Vice President
of each of the respective parties hereto.
13. Counterparts. This Agreement may be executed
in separate counterparts, and by the different parties
hereto on different counterparts, each of which when so
executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same
agreement.
IN WITNESS WHEREOF, Mon, PE, WPP and AGC have
caused this Agreement to be duly executed by their
respective officers thereunto duly authorized on the date
first above written.
MONONGAHELA POWER COMPANY
By F. J. EPPICH
Vice President
THE POTOMAC EDISON COMPANY
By JOHN ADAMS
Vice President
<PAGE>
WEST PENN POWER COMPANY
By KLAUS BERGMAN
Vice President
ALLEGHENY GENERATING COMPANY
By Eileen M. Beck
Incorporator
EXHIBIT B-10
APS POWER AGREEMENT
BATH COUNTY PUMPED STORAGE PROJECT
This Agreement entered into this 14th day of August, 1981,
among Monangahela Power Company, an Ohio corporation ("Mon"), The
Potomac Edison Company, a Virginia and Maryland corporation
("PE"), West Penn Power Company, a Pennsylvania corporation
("WPP") (Mon, PE and WPP being hereinafter referred to
individually as "Company" and collectively as the "Companies"),
and Allegheny Generating Company, a Virginia corporation ("AGC")
(AGC and the Companies being hereinafter sometimes collectively
referred to as the "Parties").
WHEREAS, the Companies are engaged in furnishing electric
service in portions of Maryland, Ohio, Pennsylvania, West
Virginia and Virginia and, as such, own and operate facilities
for generation, transmission and distribution of electricity
within those states and will own all of the outstanding common
stock of AGC; and
WHEREAS, the Companies currently are parties to a Power
Supply Agreement which among other things provides for the
coordination in the planning and operation of their electric
systems yielding important benefits to each of them and to the
users of electric energy in their service areas; and
<PAGE>
WHEREAS , the Parties have entered into the Purchase
Agreement, the Capacity Agreement and the Operating Agreement,
with Virginia Electric and Power Company, a Virginia corporation
("VEPCO"), relating to the ownership, construction,
replacement, retirement, control, management, operation and
maintenance of the Bath County Pumped Storage Project (the
"Project") and to the purchase of capacity therefrom; and
WHEREAS, Mon and PE have entered into the Transmission
Facilities Exchange Agreement, dated June 17, 1981, with VEPCO,
relating to certain transmission lines and facilities; and
WHEREAS, AGC will purchase, and own as a tenant in common,
an undivided interest in the Project as described in the Purchase
Agreement, including all of the lands, dams, reservoirs,
buildings and other structures, electrical and hydraulic
equipment, substations and transmission lines described in the
Federal Power Commission License for Project No. 2716; and
WHEREAS, the Parties desire to enter into this Agreement for
the purpose, among others, of setting forth certain of the
obligations and rights of the Companies with respect to the
capacity and power of the Project.
NOW, THEREFORE, in consideration of these premises and the
mutual covenants set forth herein, the Parties agree as follows:
-2-
<PAGE>
ARTICLE I
Definitions
1.1. Definitions. Except as otherwise expressly
provided in Section 1.2 or elsewhere herein or unless the
context otherwise requires, the terms used in this Agreement
shall have the same meanings set forth in the Purchase Agree-
ment.
1.2. Additional Definitions. Unless the context
otherwise requires, the following terms, whenever used in this
Agreement, shall have the following respective meanings:
"Agreement" means this APS Power Agreement as it may
from time to time be amended or supplemented.
"Capacity Responsibility" of a Company for a Period
means the average of the Company's three highest Demands
occurring in different months during the 24 month period ending
at the end of such Period.
"Capacity Responsibility Ratio" of a Company for a
Period means the ratio of its Capacity Responsibility for such
Period to the Total Capacity Responsibility for such Period.
"Demand" means, in general, the expression in
kilowatts of the energy requirement of a system or systems,
stated in kilowatthours per hour, occurring in any one hour
-3-
<PAGE>
interval beginning on the clock hour during any period. As
applied to any Company, Demand means the demand attributable to
the energy required by that Company for retail sales to its
customers, for its own use other than in the operation of its
generating facilities, and for sales to local distributing and
other electric utility systems that are regularly dependent upon
that Company for a part of their power supply. Demands
attributable to interruptible power and other scheduled sales
shall be included to the extent determined by the Power Supply
Committee in the light of the effect of such sales on the need
for generating capacity. In cases where hourly meter records are
not available for certain components of a Company's Demand, the
amounts of such components shall be estimated in the manner
prescribed by the Power Supply Committee.
"FERC" means the Federal Energy Regulatory Commission.
"Period" means a calendar year during the term of this
Agreement, except that the Initial Period and Final Period, if
any, may be less than a calendar year in duration. The initial
Period will commence with the Commercial Operation Date and end
on the next succeeding December 31. The Final Period with respect
to any Company will commence with the January 1 immediately
following the last full calendar year during which such Company
shall have purchased capacity
-4-
<PAGE>
from AGC pursuant to this Agreement and end on the day on which
the obligation of such Company to purchase capacity from AGC
pursuant to this Agreement ceased.
"Power Supply Agreement" means the Power Supply
Agreement, dated January 1, 1968, among the Companies, as
amended from time to time thereafter, or any agreement that
replaces or supersedes such Power Supply Agreement.
"Power Supply Committee" has the meaning set forth
in the Power Supply Agreement.
"Purchase Agreement" means the Project Construction
and Purchase Agreement, dated June 17, 1981, between VEPCO, on
the one hand, and the Parties, on the other, as such Agreement
may from time to time be amended or supplemented.
"System" has the meaning set forth in the Power
Supply Agreement.
"Total Capacity Responsibility" for any Period means
the sum of the Capacity Responsibilities of all the Companies
for such Period.
ARTICLE II
Purchase of Capacity
2.1 Purchase and Sale of Capacity. On and after the
Commercial Operation Date AGC shall sell to the Companies, and
the Companies, severally and not jointly, shall
-5-
<PAGE>
purchase, in proportion to their respective Capacity Respon
sibility Ratios then in effect, (A) such number of megawatts of
capacity of the Project as is equal to AGC's Ownership Share of
the megawatt capacity of the Project plus (B) such megawatts of
capacity of the Project as AGC shall have purchased from VEPCO
pursuant to the Capacity Agreement. If some portion or all of the
capacity of the Project is unavailable because of maintenance,
scheduled or forced, or for any other reason, then each Company's
entitlement to capacity shall be reduced in proportion to the
ratio of unavailable Project capacity to total Project capacity,
but each Company's payments hereunder shall not be reduced.
2.2 Purchase Price for Capacity. The price for
capacity purchased pursuant to Section 2.1 shall be the rate set
forth in Appendix I and accepted for filing by the FERC and such
other regulatory agencies, if any, having jurisdiction with
respect to such rate; provided, however, that if AGC and any one
or more of the Companies are unable to agree on a change in the
rate or in the interpretation of Appendix I, AGC may make an
appropriate filing with the FERC and such other regulatory
agencies, and any one or more of the Companies may contest or
seek modification of such filing in any appropriate proceeding or
proceedings.
-6-
<PAGE>
ARTICLE III
Project Energy
3.1 Pumping and Taking Energy. Each Company shall
have the right to furnish its share, in proportion to its
Capacity Responsibility Ratio, of the pumping energy furnished
by AGC pursuant to the Capacity Agreement and shall have the
concomitant right to receive its share, in proportion to its
Capacity Responsibility Ratio, of the energy generated from the
Project and received by AGC. Subject to the terms of the Basic
Agreements, the pumping and taking of energy of the Project by
the Companies shall be conducted under the direction of the
Power Supply Committee in accordance with the Power Supply
Agreement.
ARTICLE IV
Metering
4.1 Metering Facilities. Arrangements with respect to
location, type and ownership of metering facilities required for
purposes of controlling the pumping and taking of energy of the
Project by the Companies hereunder shall be made by the Power
Supply Committee, subject to the provisions of Article V of the
Operating Agreement.
4.2 Testing and Reading of Meters. All Project meters
belonging to a Party shall be inspected and tested by the owner
thereof at such intervals as may be specified
-7-
<PAGE>
by the Power Supply Committee. Any inaccuracy disclosed by such
tests shall be promptly corrected by the owner. Additional
inspections and tests at particular installations shall be made
by the owner upon request of any Company. Representatives of
the requesting Company shall be afforded an opportunity to be
present at all such additional inspections and tests. If in any
test a meter is found to be inaccurate by more than one percent,
fast or slow, an adjustment shall be made in payments hereunder
to compensate for
such inaccuracy over such period, not more than two months, as
the inaccuracy is determined to have existed. It at any time a
meter should fail to register or its registration should be so
erratic as to be meaningless, the estimated correct registration
for billing purposes shall be based upon records of check
meters, if available, or otherwise from the best obtainable
data. Arrangements with respect to the reading of Project meters
belonging to VEPCO shall be made by the Power Supply Committee.
ARTICLE V
General
5.1 Uncontrollable Forces. No Party shall be
considered to be in default in respect of any obligation
hereunder if prevented from fulfilling such obligations by,
reason of any cause beyond the reasonable control or such
-8-
<PAGE>
Party, including, without limitation, strikes or labor disputes.
5.2 Waivers. Any waiver at any time of any rights as
to any default hereunder or any other matter arising hereunder
shall not be deemed a waiver as to any subsequent default or
matter.
5.3 Regulatory Authority. This Agreement is made
subject to the jurisdiction of any governmental authority or
authorities having jurisdiction in the premises.
5.4 Duration. The term of this Agreement shall
commence on the Commercial Operation Date and this Agreement
shall continue in effect until (1) AGC shall cease to own an
undivided interest in the Project and shall cease to be obligated
to purchase any capacity of the Project, or (2) the Project is
retired, whichever shall first occur.
5.5 Successors and Assigns. This Agreement shall inure
to and bind the successors and assigns of the Parties. This
Agreement shall not be assigned by any Party without the written
consent of the others except to Allegheny Power System, Inc. (if,
at the time of such assignment, Allegheny Power System, Inc.
shall own directly an undivided interest in the Project or shares
of stock of AGC) or to a corporation into which such Party shall
be merged or with which it shall be consolidated or to a
corporation resulting from any merger
-9-
<PAGE>
or consolidation to which such Party. shall be a party or to a
person or corporation to which substantially all the business and
assets of such Party shall be transferred.
IN WITNESS WHEREOF, the Parties have caused this
Agreement to be
duly executed.
MONONGAHELA POWER COMPANY
By/s/ FRANK J. EPPPICH
Vice President
THE POTOMAC EDISON COMPANY
By/s/ JOHN ADAMS
Vice President
WEST PENN POWER COMPANY
By/s/ KLAUS BERGMAN
Vice President
ALLEGHENY GENERATING COMPANY
By/s/ ALAN J. NOIA
Vice President
-10-
<PAGE>
Appendix I
SECTION 1. CAPACITY PURCHASE CHARGE
1.1 The Capacity Purchase Charge shall equal the sum
of the following two parts. Part A Shall be the charge for the
capacity purchased by a Company which is attributable to AGC's
Ownership Share of the Project ("Part A Capacity Purchase
Charge"). Part B shall be the charge for capacity of the Project
which AGC shall have purchased pursuant to the Capacity Agreement
("Part B Capacity Purchase Charge").
1.2 The Part A Capacity Purchase Charge shall be
determined as follows:
(a) AGC shall calculate a capacity charge per kilowatt
("Capacity Charge per Kilowatt") in accordance with subsection
(b) of this Section 1.2 for each Period, during the term of this
Agreement.
(b) The Capacity Charge per Kilowatt for any Period
during which any Company is obligated to purchase capacity shall
be calculated as follows:
(i) Total the amount of AGC's net investment
in production and transmission plant at the Project
in commercial service and in materials and supplies
applicable to the Project at the end of the month
immediately preceding the Period (or on the Commercial
Operation Date if the calculation is for the Initial
<PAGE>
Period) and at the end of each month during the Period and
divide by the sum of the number of months (partial months,
if any, in the Initial Period and the Final Period shall be
reflected as an appropriate fraction) in the Period plus
one. The net investment in production and transmission plant
at the Project shall be the difference between AGC's cross
investment therein that is recorded in Account 101, Account
106 and Account 107 of the Uniform Systems of Accounts
(electric plant accounts 330 through 346,350 through 359,
and 389 through 398) and the sum of (1) the accumulated
provisions for depreciation applicable to the Project
recorded in Account 108 of the Uniform Systems of Accounts
and (2) accumulated deferred income taxes applicable to the
Project then recorded in Accounts 281, 282 and 283 of the
Uniform Systems of Accounts to the extent reflected as such
by the FERC in ratemaking decisions. The net investment in
materials and supplies applicable to the Project shall be
those recorded in Account 154 of the Uniform Systems of
Accounts.
(ii) Determine the weighted monthly average number of
kilowatts of the Project's capacity owned by AGC and in
commercial service during such Period.
(iii) Determine the actual investment per kilowatt by
dividing the amount determined under (i) by the amount
determined under (ii).
(iv) Determine the rate, which, after provision for
federal and state income taxes, (1) provides AGC with an
overall return of 15 1/2% on its common equity and (2)
reimburses AGC for its cost of preferred stock and debt
securities applicable to the financing of its Ownership
Share of the Project and outstanding during the Period. The
computation of income taxes shall reflect interest as a
deduction and shall reflect interperiod income tax
allocations to the extent reflected as such by the FERC in
ratemaking decisions and reflected in AGC's accounting
records.
(v) Determine the total amount of all expenses incurred by
AGC during the Period in connection with its Ownership Share
and recorded in the accounts listed in Exhibit 1. Indirect
expenses incurred by AGC but
-2-
<PAGE>
nonetheless attributable to its Ownership Share shall be
included and if an allocation is necessary such indirect
expenses shall be allocated to such Ownership Share by a
method customarily used by the FERC and considered rea
sonable in the circumstances.
(vi) Determine the expenses per kilowatt incurred by AGC
during the Period by dividing the amount determined under
(v) by the amount determined under (ii).
(vii) Complete the following table:
(1) Return in dollars per kilowatt = item (iv) x
item (iii) $_______
(2) Annual expenses in dollars per kilowatt = item
(vi)
$_______
(3) Subtotal
$_______
(4) Virginia Gross Receipts Tax = (line (3) x * )
$_______
(5)Capacity Charge per Kilowatt
$_______
(*The rate from time to time which will reimburse
AGC for its liability, if any, for this tax.)
(c) The Part A Capacity Purchase Charge for a Company
for any Period shall be the product of the Capacity Charge per
Kilowatt for such Period and the kilowatts or capacity of the
Project owned by AGC which such Company is obligated to purchase
during such Period.
1.3The Part B Capacity Purchase Charge for a Company for
any Period shall be the amount paid by AGC pursuant to the
Capacity Agreement for such Period times such Company's Capacity
Responsibility Ratio for such Period.
-3-
<PAGE>
SECTION 2. PAYMENT
2.1 The payment for the Part A Capacity Purchase
Charge shall be determined as follows:
(a) AGC shall calculate, in accordance with Section
1.2 of this Appendix I, an estimated Part A Capacity Purchase
Charge for each Company for each Period using such estimates,
where actual amounts are not known, which in AGC's best judgment
shall reasonably approximate actual amounts called for in such
section. AGC shall inform each Company of the result of such
calculation no later than 45 days before the Period to which the
estimated billing shall apply.
(b) Each Company shall pay its estimated Part A
Capacity Purchase Charge for any Period in equal monthly
installments beginning with the first month of such Period.
Payment by each Company is due on the 15th of each month.
(c) Within 90 days following the close of any Period,
AGC shall render an invoice to each Company for its Part A
Capacity Purchase Charge less such amounts as shall have been
paid by such Company pursuant to subsection (b) of this Section
2.1. Within 10 days after the date of such invoice each Company
shall pay AGC the deficiency of such payments by such Company, if
any, or AGC shall refund to such Company the excess of such
payments by it, if any.
-4-
<PAGE>
2.2 The payment for the Part B Capacity Charge
shall be determined as follows:
(a) Before the beginning of any Period, AGC shall furnish the
Companies with a payment schedule showing the estimated amount
(which shall also be apportioned among them in accordance with
their estimated Capacity Responsibility Ratios) and due date of
each payment required during such Period pursuant to the Capacity
Agreement.
(b) Each Company will make payments to AGC in
accordance with such payment schedule, as such
schedule may be modified from time to time by AGC
to reflect changes in the estimated amounts
required pursuant to the Capacity Agreement or in
the Companies' estimated Capacity Responsibility
Ratios.
(c) As soon as practicable after receiving VEPCO's invoice
showing the billing amount (determined in accordance with the
Capacity Agreement) for the Period, AGC shall render the
Companies an invoice showing their respective shares, in
proportion to their respective Capacity Responsibility Ratios,
less such amounts as shall have been paid by them pursuant to
subsection (b) of this Section 2.2. Each Company shall pay AGC
the deficiency of such payments by such Company, if any, or AGC
shall refund to such Company the excess of such payments, if any.
-5-
<PAGE>
SECTION 3. OTHER PROVISIONS
3.1 Nothing contained herein shall be construed as
affecting in any way the right of AGC to unilaterally make
application to the FERC (or any other regulatory authority having
jurisdiction with respect to the price for capacity purchased
pursuant to this Agreement) for a change in rates or charges
under Section 205 of the Federal Power Act (or otherwise) and
pursuant to the applicable rules and regulations of the FERC (or
such other regulatory authority).
-6-
<PAGE>
Operation and maintenance expenses for the Project
recordable in the following accounts:
535 Operation supervision and engineering
536 Water for power
537 Hydraulic expenses
538 Electric expenses
539 Miscellaneous hydraulic power generation expenses
540 Rents
541 Maintenance supervision and engineering
542 Maintenance of structures
543 Maintenance of reservoirs, dams and waterwavs
544 Maintenance of electric plant
545 Maintenance of miscellaneous hydraulic plant
546 Operation supervision and engineering
547 Fuel
548 Generation expenses
549 Miscellaneous other power generation
550 Rents
551 Maintenance supervision and engineering
552 Maintenance of structures
553 Maintenance of generating and electric equipment
554 Maintenance of miscellaneous other power generation plant
560 Generation supervision and engineering
562 Station expenses
563 Overhead line expenses
566 Miscellaneous transmission expenses
567 Rents
568 Maintenance supervision and engineering
569 Maintenance of structures
570 Maintenance of station equipment
571 Maintenance of overhead lines
573 Maintenance of miscellaneous transmission plant
920 Administrative and general salaries
921 Office supplies and expenses
922 Administrative expenses transferred - Cr.
923 Outside services employed
924 Property insurance
925 Injuries and damages
926 Employee pensions and benefits
928 Regulatory commission expenses
930.2 Miscellaneous general expenses
931 Rents
932 Maintenance of general plant
PROPOSED
SERVICE AGREEMENT
BETWEEN THE
ALLEGHENY ENERGY SERVICE CORPORATION
AND
______________________________
THE SERVICE AGREEMENT, between Allegheny Energy
Service Corporation, a corporation formed under the laws of
the State of Maryland (the "Service Company") and
__________________________, a corporation formed under the
laws of _______________________ (the "Company").
WITNESSETH:
WHEREAS, pursuant to a service agreement dated
November 22, 1963, the Service Company was created to
perform certain management duties on behalf of Allegheny
Power System, Inc. (currently known as Allegheny Energy,
Inc. and sometimes hereinafter referred to as the "System")
and its utility subsidiary companies (the "Subsidiaries");
and
WHEREAS, the Service Company offers to provide a
central organization to furnish to the System and the
Subsidiaries, including Company, certain advisory,
supervisory and other services in accordance with said
current practices and procedures; and
WHEREAS, the Company wishes to accept the offer
proposed by the Service Company;
NOW, THEREFORE, in consideration of the mutual
covenants and agreements herein contained, and for other
good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto, intending to be
reasonably bound, hereby agree as follows:
<PAGE>
1. The Service Company hereby offers to furnish
to the Company the services detailed on Exhibit I attached
hereto and made a part hereof.
2. For all services rendered for the Company by
the Service Company, the Company agrees to pay the cost
thereof. When a service is rendered to two or more
Subsidiaries, the cost thereof shall be shared by such
Subsidiaries in proportion to the average electric operating
revenues of each (exclusive of sales to the Subsidiaries),
operating and maintenance expenses (exclusive of those costs
for fuel, deferred fuel, and purchased power and exchanges),
kilowatt hours sold to regular customers (other than the
Subsidiaries) and total electric plant in service (less
reserves for depreciation and amortization) over the three
preceding calendar years. For services rendered to one or
more Subsidiaries and the System, the allocation will be
based on the average of the prior three years' direct costs
charged by the Service Company to each Subsidiary and the
System.
3. The payment for services rendered by the
Service Company to the System and Subsidiaries shall cover
all the costs and expenses of its doing business, excluding
only a return for the use of equity capital, and that each
Subsidiary and the System shall pay its direct or fair
proportionate share.
4. Payment shall be made by the Company to the
Service Company on a monthly basis on or before the 20th day
of the succeeding month, upon receipt of a statement showing
the amount due. Certain charges billed by the Service
Company to the Company may not be due immediately and will
be so indicated on the statement of billing. Monthly
charges may be made on an estimated basis, but adjustments
will be made at the end of each calendar year so that all
charges for the calendar year will be in accordance with the
foregoing.
5. Nothing herein shall be construed to release
the officers and directors of the Company from the
performance of their respective duties or limit the exercise
of their powers as prescribed by law or otherwise.
6. This Service Agreement shall continue in full
force and effect from year to year but may be terminated by
either party upon 60 days' prior notice, and the Company may
terminate such contract at any time with or without notice
for any cause deemed by it to be sufficient.
7. The Service Agreement will be subject to
termination or modification at any time to the extent its
performance may conflict with the provisions of the Public
Utility Holding Company Act of 1935, as amended, or with any
rule, regulation or order of the Securities and Exchange
Commission adopted before or after the making of this
Service Agreement and shall be subject to the approval of
<PAGE>
any state commission or other regulatory body whose approval
is a legal prerequisite to its execution and delivery or
performance.
If your Company desires to accept this offer,
please cause it to be executed in the space provided below
by your duly authorized officers.
Very truly yours,
ALLEGHENY ENERGY SERVICE CORPORATION
By
President
Attest:
Secretary
Pursuant to authorization of the Board of Directors of this
Company, we hereby accept the above offer this _____ day of
_____,1997.
________________________________________
By
President
Assistant Secretary
<PAGE>
EXHIBIT I
Allegheny Energy Service Corporation Principal Functions
The following is a description of the principal
functions of Allegheny Energy Service Corporation ("AESC").
In accordance with the terms and conditions of the Service
Agreement dated __________, 1997, AESC may perform the
services described herein for ___________________.
1. Corporate Services
1. Accounting
(a) Payroll - Processes and verifies
timesheets and paychecks for ______________________
employees. Ensures compliance with payroll tax laws and
regulations.
(b) Asset Accounting - Maintains corporate
accounting records for Company's fixed assets in accordance
with regulatory requirements, corporate capital budget
management, and fixed asset return objectives.
(c) Taxes - Ensures compliance with all
federal, state and local tax laws (except payroll and
benefits matters). Prepares and files applicable returns,
gives instructions for timely payment of tax liabilities,
and coordinates the issuance of tax accounting instructions
to Company. Also provides tax planning services.
(d) Corporate Accounting - Gathers, reports,
and analyzes accounting and management information. Reviews
and corrects accounting data.
(e) Payment Processing - Processes invoices
from, and issues payment to, vendors for goods and services
provided to Company.
(f) Fuel Accounting - Initiates payment for
fuel receipts and compiles fuel data for report preparation
on fuel purchases and generation statistics to meet various
regulatory requirements.
2. Information Services
Provides electronic data processing services:
<PAGE>
(a) Machine related computer activity -
services such as data processing for customer accounting,
payroll and general accounting, engineering planning,
purchasing and stores studies, forecasts and various other
administrative and engineering applications.
(b) Computer applications activity -
services such as feasibility studies for new applications,
development and/or acquisition of new applications,
enhancement of existing applications and other related
activity.
3. Financial Management
Oversees annual budgeting and capital management,
long-term forecasting, and financial planning.
4. Treasury
(a) Cash Processing - Maintains relationship
with banking institutions for lines of credit. Handles
customer bill processing, money pool (internal funding among
certain Allegheny Energy, Inc. companies, external short-
term borrowing and investing), and long-term financing and
cash forecasting.
(b) Risk Management - provides risk
financing through insurance purchases and other funding
mechanisms. Provides transfer of risk via contracts and
insurance certification for all contractors, lessees,
cogenerators, and PURPA projects. Provides risk control to
protect Company's properties from loss, and provides advice
to Legal, Claims, and Human Resources relative to liability
and worker's compensation issues, including litigation.
(c) Electronic Commerce - Provides guidance,
implementation, and oversight of Electronic Commerce (EC)
activities. EC is defined as any binding business
transaction conducted or consummated over an electronic
network between Company and its customers, suppliers,
financial institutions, or other entities.
5. Audit Services
Performs independent appraisals of significant
activities carried out within, and/or related to, Company
through application of financial, contract, operational and
compliance audit techniques. Provide consulting services
upon management request.
6. Legal
<PAGE>
(a) Legal Services - Renders services
relating to financings, financial reporting, shareholders'
meetings, rates and other regulatory proceedings,
environmental matters, litigation, marketing, human
resources, contracts, real estate, leasing, corporate and
other legal matters.
(b) Corporate Secretary - Responsible for
creation, maintenance, and retention of corporate records;
liaison with Board of Directors; administration of
indentures (performed by Assistant Secretaries); support for
long-term financing, regulatory filings; handles
shareholder/bondholder relations and relationship with stock
transfer agent and bond trustee (records kept, checks sent,
etc., by outside agents.)
(c) Claims - Responsible for investigating
and taking other appropriate actions concerning claims made
against Company by third parties. Also responsible for
activities involved with collecting monies owed to Company
by third parties for property damage.
7. Regulation & Pricing
(a) Costing & Pricing - Provides cost of
service analysis. Identifies usage pattern trends to assist
marketing effort. Performs special studies requesting
internally or by regulatory agencies. Provides analyses
such as separation, cost of service and loss studies.
(b) Financial Analysis - Assembles and
provides primary support for regulatory filings. Maintains
contacts with state commission staff members. Performs
special financial studies.
(c) Fuel & Capital Recovery - Assembles and
provides primary support for fuel and depreciation
regulatory filings.
8. Human Resources
Initiates, maintains, supervises and administers
the human resources policies of Company. Assists Company's
management in maximizing the results from their employees.
This is accomplished by developing and administering
programs and policies, and consulting in five primary
functions. They are:
(a) Employee Relations - labor relations,
litigation/regulatory compliance, employee communications,
and employee policies.
<PAGE>
(b) Employee Development - training program
development and delivery, performance evaluation and
management development.
(c) Medical Services - workers'
compensation, employee assistance program, and employee
wellness/awareness programs.
(d) Rewards - design and administration of
compensation, benefits, and recognition programs.
(e) Staffing - employment/placement,
succession planning and EEO/affirmative action.
In addition, Business Practices is a group within
HR which coordinates and participates in the development
and/or documentation of new and revised policies, business
practices, procedures, references and forms.
9. Governmental Affairs
Analyzes and provides views and recommendations on
state and federal legislation to assure fair and equitable
treatment of Company. Provides information to assist
management decision-making on company strategy and policy.
10. System Security
Originates, establishes, and administers security
standards, procedures and policies. Provides investigative
and loss prevention services in reference to the protection
of assets and its employees. Acts as liaison with federal,
state and local law enforcement agencies.
11. Procurement
Provides services and gives functional direction
in connection with the procurement of goods and services,
including market research, preparation of commitments,
requests for quotations, preparation of bid summaries, and
materials management.
12. Corporate Communications
Responsible for media relations, including the
financial and trade press, production of stockholder
publications, advertising, and numerous internal and
customer communications.
<PAGE>
13. AYP Capital
Oversees the business development and operations
of and investments in products, services and ventures that
are not regulated as public utility services. Included are
unregulated power generators, power marketing and relating
activities.
2. Business Units
1. Operating Business Unit (OBU)
(a) Customer Service Center - Answers all
incoming calls to Company via one toll-free number, responds
to customer inquiries, initiates new service, dispatches
service and line crews in response to power outages, handles
credit and collection activities, responds to customer and
public service/utility commission complaints, and manages
the meter reading and billing activities.
(b) Operations Services - Operations
Services provides the following services in the indicated
areas: Stores - Centralizes materials supply and
distribution; Technical Services - Provides electrical
equipment repair and testing; Transportation - Handles fleet
management and repair services; Safety, Quality and
Training - Develops safety and training programs; Building
Services - provides building maintenance and management, and
offices services; Substations - Builds, operates, and
maintains substations and equipment; T & D Operation -
Performs switching functions for all facilities above
distribution voltage; Forestry - Provides maintenance
services for electrical facilities rights-of-way; Planning -
Provides planning services for all non-network electrical
facilities; Lines Services - Provides lines support for
lines teams in service centers; and Telecommunications -
Provides support and maintenance for the telecommunications
systems.
(c) Various Regions - Each region supports
the processes for responding to electric service requests,
ensuring reliable service, and restoration of service.
2. Retail Marketing
Executes the marketing and sales of the products
and services of Company. Also performs economic development
activities which affect areas served by the Company.
3. Corporate Affairs
<PAGE>
Maintains relationships with state regulatory
commissions, municipal and county governments and is
responsible for identifying state-level regulatory issues.
4. Transmission Business Unit (TBU)
Responsible for ensuring that adequate high-
voltage network facilities are available and on-line to
convey power produced from the power production operations
run by, or procured by, the Generation Business Unit (GBU)
to serve native load and to engage in wholesale transmission
sales to nonaffiliates. Will engage in marketing efforts
for sales of bundled and unbundled transmission services to
nonaffiliates and will be responsible for accommodating
requests for transmission service submitted by nonaffiliates
who qualify as customers for that service under federal
regulations. Finally, is responsible for maintaining the
optimal economic balance on a real-time basis between native
customer load and the output of the generation resources
supplied by the GBU.
5. Generation Business Unit (GBU)
Responsible for ensuring that adequate generation
is available to serve the native load customers of Company
by using its own generating facilities and the third-party
generation obtained through its marketing efforts. Primary
responsibilities include ensuring the cost-effective
operation and maintenance of our generating units, and
providing the most economic mix of generation by available
generating units and off-system purchases and sales. It
also provides advisory and supervisory services as needed.
The GBU will also broker energy services.
6. Planning and Compliance Business Unit (P&CBU)
Forecasts electric demand and energy requirements
for Company and develops plans to provide and integrate the
production and transmission facilities needed to serve the
electricity requirements of customers of the Company.
Oversees compliance with state and federal regulatory and
legal requirements.
3. Additional Services
Certain other services in addition to the above as
AESC may be able to provide to the Company.
EXHIBIT F
412-838-6770
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Referring to the Application or Declaration on Form U-1
previously filed by Allegheny Energy, Inc. ("Allegheny"), West
Penn Power Company ("West Penn") and AYP Energy, Inc. ("AYP
Energy") under the Public Utility Holding Company Act of 1935
with respect to the proposed transfer of generation assets and
related transactions, all as described in the Application or
Declaration of which this Opinion is a part, I have examined or
caused to be examined such documents and questions of law as I
deemed necessary to enable me to render this opinion.
I understand that the actions taken in connection with
the proposed transactions will be in accordance with the
Application or Declaration; that all amendments necessary to
complete the above-mentioned Application or Declaration will be
filed with the Commission; and that all other necessary corporate
action by the Board of Directors and officers in connection with
the described transactions has been or will be taken prior
thereto.
Based upon the foregoing, I am of the opinion that if
the said Application or Declaration is permitted to become
effective and the proposed transactions are consummated in
accordance therewith:
(a) all state laws applicable to the proposed transaction will
have been complied with;
(b) Energy Sub and GENCO will be validly organized and duly
existing;
(c) the membership interests in Energy Sub and GENCO will be
validly issued, fully paid and nonassessable, and the holders
thereof will be entitled to the rights and privileges
appertaining thereto set forth in the charter or other document
defining such rights and privileges;
(d) West Penn will legally acquire the membership interests in
Energy Sub, West Penn will legally acquire the membership
interests in GENCO, and Allegheny will legally acquire the
membership interests in GENCO; and
(e) the consummation of the proposed transactions will not
violate the legal rights of the holders of any of the securities
issued by Allegheny, West Penn, AYP Energy or by any associate or
affiliate company of any of them.
This opinion does not relate to State Blue Sky or
securities laws.
I consent to the use of this Opinion as part of the
Application or Declaration which has been filed in File No. 70-
9483.
Very truly yours,
/S/ CAROL G RUSS
Carol G. Russ
Counsel
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-1-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 5,002,934
<OTHER-PROPERTY-AND-INVEST> 114,789
<TOTAL-CURRENT-ASSETS> 623,028
<TOTAL-DEFERRED-CHARGES> 851,452
<OTHER-ASSETS> 1,481
<TOTAL-ASSETS> 6,593,684
<COMMON> 153,045
<CAPITAL-SURPLUS-PAID-IN> 1,044,085
<RETAINED-EARNINGS> 896,262
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,901,942
0
90,378
<LONG-TERM-DEBT-NET> 2,191,509
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 373,984
<LONG-TERM-DEBT-CURRENT-PORT> 26,200
79,708
<CAPITAL-LEASE-OBLIGATIONS> 858
<LEASES-CURRENT> 1,525
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,927,580
<TOT-CAPITALIZATION-AND-LIAB> 6,593,684
<GROSS-OPERATING-REVENUE> 2,636,707
<INCOME-TAX-EXPENSE> 187,946
<OTHER-OPERATING-EXPENSES> 1,982,035
<TOTAL-OPERATING-EXPENSES> 2,169,981
<OPERATING-INCOME-LOSS> 466,726
<OTHER-INCOME-NET> 6,529
<INCOME-BEFORE-INTEREST-EXPEN> 473,255
<TOTAL-INTEREST-EXPENSE> 170,924
<NET-INCOME> 302,331
9,163
<EARNINGS-AVAILABLE-FOR-COMM> 283,188
<COMMON-STOCK-DIVIDENDS> 208,081
<TOTAL-INTEREST-ON-BONDS> 95,690
<CASH-FLOW-OPERATIONS> 0<F1>
<EPS-BASIC> 2.33
<EPS-DILUTED> 2.33
<FN>
<F1>*Not calculated for Form U-1 purposes.
</FN>
</TABLE>
ALLEGHENY ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - JUNE 30, 1999 PER BOOKS
(Thousands of Dollars)
Per Books
ASSETS:
Property, Plant, and Equipment:
At original cost, including $183,674
under construction $8,511,430
Accumulated depreciation (3,508,496)
5,002,934
Investments and Other Assets:
Subsidiaries consolidated--excess of cost
over book equity at acquisition 15,077
Benefit plans' investments 88,735
Nonutility investments 10,977
Other 1,481
116,270
Current Assets:
Cash and temporary cash investments 29,112
Accounts receivable:
Electric service 341,446
Other 11,930
Allowance for uncollectible accounts (25,407)
Materials and supplies - at average cost:
Operating and construction 101,240
Fuel 65,222
Prepaid taxes 53,463
Other, including current portion of regulatory 46,022
assets 623,028
Deferred Charges:
Regulatory assets 701,422
Unamortized loss on reacquired debt 47,124
Other 102,906
851,452
Total Assets $6,593,684
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common stock $153,045
Other paid-in capital 1,044,085
Retained earnings 896,262
Treasury stock (at cost) (191,450)
1,901,942
Preferred stock 90,378
Long-term debt and QUIDS 2,217,962
Funds on deposit with trustees (26,453)
4,183,829
Current Liabilities:
Short-term debt 373,984
Long-term debt and preferred stock due within 105,908
one year
Accounts payable 168,943
Taxes accrued:
Federal and state income 42,146
Other 38,275
Interest accrued 38,119
Adverse power purchase commitments 24,138
Other 101,916
893,429
Deferred Credits and Other Liabilities:
Unamortized investment credit 121,432
Deferred income taxes 897,831
Regulatory liabilities 84,900
Adverse power purchase commitments 316,003
Other 96,260
1,516,426
Total Capitalization and Liabilities $6,593,684
ALLEGHENY ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME FOR TWELVE MONTHS ENDED
JUNE 30, 1999 PER BOOKS
(Thousands of Dollars)
Per Books
OPERATING REVENUES $2,636,707
OPERATING EXPENSES:
Operation:
Fuel 555,111
Purchased power and exchanges, net 398,668
Other 350,405
Maintenance 215,953
Depreciation and amortization 264,351
Taxes other than income taxes 193,037
Federal and state income taxes 187,946
Total Operating Expenses 2,169,981
Operating Income 466,726
OTHER INCOME AND DEDUCTIONS:
Allowance for other than borrowed funds
used during construction 1,013
Other income, net 5,516
Total Other Income and Deductions 6,529
Income Before Interest Charges and Preferred Dividends 473,255
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest on long-term debt 154,710
Other interest 20,861
Allowance for borrowed funds used during
construction (4,647)
Dividends on preferred stock of subsidiaries 9,163
Total Interest Charges and Preferred Dividends 180,087
CONSOLIDATED INCOME BEFORE EXTRAORDINARY ITEMS 293,168
Extraordinary item, net (9,980)
CONSOLIDATED NET INCOME $283,188
ALLEGHENY ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS FOR THE
TWELVE MONTHS ENDED JUNE 30, 1999
(Thousands of Dollars)
Balance at July 1, 1998 $ 821,155
Add:
Consolidated net income 283,188
1,104,343
Deduct:
Dividends on common stock of
Allegheny Energy, Inc. 208,081
Balance at June 30, 1999 $ 896,262
