File No. 70-9677
(General Financing)
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT NO. 1 TO FORM U-1
APPLICATION / DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
___________________________________
Allegheny Energy, Inc. Allegheny Energy Supply
Company, LLC
10435 Downsville Pike R.R. 12, P.O. Box 1000
Hagerstown, MD 21740 Roseytown, Penna. 15601
West Penn Power Company Allegheny Energy Service
Corporation
800 Cabin Hill Drive 10435 Downsville Pike
Greensburg, PA 15601 Hagerstown, MD 21740
Monongahela Power Company The Potomac Edison Company
1310 Fairmont Avenue 10435 Downsville Pike
Fairmont, West Virginia 26554 Hagerstown, MD 21740
Allegheny Ventures, Inc.
10435 Downsville Pike
Hagerstown, MD 21740
_____________________________
Allegheny Energy, Inc.
10435 Downsville Pike
Hagerstown, MD 21740
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 and General Counsel
Allegheny Energy, Inc.
10435 Downsville Pike
Hagerstown, MD 21740
Anthony Wilson, Esq.
Senior Attorney
Allegheny Energy Service Corporation
10435 Downsville Pike
Hagerstown, MD 21740
<PAGE>
1. Applicants hereby amend the application replacing Items 1
through 7 with the following:
TABLE OF CONTENTS Page
Item 1. Description of the Proposed Transaction . . . . . 3
A. Summary . . . . . . . . . . . . . . . . . . . . . 3
B. Discussion . . . . . . . . . .. . . . . 4
1. Short-Term Debt . . . . . . . . . . . . . . . 4
(a) Money Pool . . . . . . . . . . . . . . . . 4
(b) Commercial Paper Program . . . . . . . . . 4
(c) Parent Loans . . . . . . . . . . . . . . . 4
2. Long-Term Debt . . . . . . . . . . . . . . 5
3. Guarantees . . . . . . . . . . . . . . . . . 5
B. Application of Proceeds. . . . . . . . . . . . 5
1. Genco . . . . . . . . . . . . . . . . . . 5
2. Allegheny Energy . . . . . . . . . . . . . . 5
Item 2. Fees, Commissions and Expenses . . . . . . . . . . 6
Item 3. Applicable Statutory Provisions . . . . . . . . . 6
Item 4. Regulatory Approvals . . . . . . . . . . . . . . . 6
Item 5. Procedure . . . . . . . . . . . . . . . . . . . . 6
Item 6. Exhibits and Financial Statements . . . . . . . . 6
A. Exhibits . . . . . . . . . . . . . . . . . . . . 6
B. Financial Statements . . . . . . . . . . . . . . 6
Item 7. Information as to Environmental Effects . . . . . 7
Exhibit H . . . . . . . . . . . . . . . . . . . . . . . . . 8
<PAGE>
Item 1. Description of Proposed Transactions
A) Summary and Background
Allegheny Energy, Inc. ("Allegheny"), seeks authorization to
increase from $100 million to $300 million the loans (Parent
Loans) that Allegheny may make to Allegheny Energy Supply Company,
LLC ("Genco").<F1> Additionally, Genco seeks authority to
increase
from $200 million to $300 million the aggregate commercial paper
("Commercial Paper") that Genco may issue. Finally, Genco seeks
authority to be a lender to and a borrower from the Money Pool in
outstanding amounts up to $300 million provided that short-term
debt from Parent Loans, Commercial Paper, and the Money Pool
borrowings not exceed, in the aggregate, $300 million.
Allegheny and Genco request that the Commission: 1) authorize
Genco to issue long-term debt up to an aggregate amount of $400
million; 2) authorize Allegheny to issue unsecured long-term debt
up to an aggregate amount of $138 million; and 3) authorize
Allegheny to increase its existing guarantee authority from $150
million up to $250 million. All authority is requested through
July 31, 2005. In support of these requests, Applicants submits
the following.
In a series of orders issued in File No. 70-7888, dated
January 29, 1992, February 28, 1992, July 14, 1992, November 5,
1993, November 28, 1995, April 18, 1996, December 23, 1997, May
19, 1999, and October 8, 1999 (Holding Co. Act Release Nos. 25462,
25481, 25581, 25919, 26418, 26506, 26804, 27030, and 27084
("Financing Orders"), among other things, the Allegheny system
companies were authorized to establish and participate in a Money
Pool. In File No. 70-9483 (Holding Co. Act Release No. 27101,
dated November 12, 1999), the Commission authorized the formation
of and transfer of generating related assets to Genco.
Additionally, in the same order Genco was authorized to issue up
to $200 million of short-term debt in the form of Commercial
Paper, Allegheny was authorized to issue up to $100 million in
Parent Loans to Genco and to enter into counterparty support
agreements ("Guarantees") up to $150 million. The authorization
for the Commercial Paper and Parent Loans were effective through
July 31, 2005 ("Genco Order").
Since the issuance of the Financing Orders and Genco Order
several events have occurred which now require Applicants to
request additional authority. Specifically, deregulation of
generation has continued and competition at the retail level is
now a reality in Pennsylvania; and is coming to Maryland on July
1, 2000; and to Ohio, Virginia and West Virginia over the course
of the next two years. In the face of deregulation, and the
limits it imposes on existing revenues, the Allegheny system has
moved aggressively to expand its energy holdings and customer
base. The Allegheny system has: formed a generating company -
Genco; acquired West Virginia Power;<F2> moved to acquire
Mountaineer
Gas;<F3> and filed an application to transfer The Potomac Edison
Company's ("Potomac Edison") generating assets to Genco.<F4>
<F1> Genco is a public utility as defined under the Act.
However,
for purposes of state regulation Genco is not regulated as a
public utility. Accordingly, Genco's financing requests do not
qualify for Rule 52 treatment as no state has, or will, authorize
the financing requested herein.
<F2> See Holding Co. Act Release No. 27121, Order Authorizing
Retention of Assets (December 23, 1999).
<F3> See File No. 70-9625, Application of Monongahela Power
Company
to Acquire 100% of the Securities of Mountaineer Gas (filed Feb.
4, 2000).
<F4> See File No. 70-9627, Application of The Potomac Edison
Company
to Transfer Assets (filed Feb. 11, 2000).
<PAGE>
The Allegheny system has established a goal of increasing its
investment in regulated and non-rate regulated businesses. As the
Allegheny system grows, the needs of its subsidiaries for capital
also grows, specifically Genco's. In the Allegheny system, Genco
has been assigned the role of acquiring additional non-regulated
generation sources to supply the Allegheny system as well as
participate in various unregulated energy market activities.
Genco must have access to cash through short-term and long-term
borrowings to take advantage of energy market opportunities or to
address financial emergencies that may arise. Currently, Genco
primarily uses its short-term financing, guarantees and parent
support to support its capital expenditure program and ongoing
operations. To remain a competitive corporation with strong
corporate earnings and shareholder value, Allegheny and its
subsidiaries must continue to grow both within and outside the
energy industry. For these reasons the authorizations below are
sought.
B) Discussion
1. Short-Term Financing
(a) Money Pool
Genco seeks authority to participate in the Money Pool.
Specifically, Genco requests authority to be a lender to and a
borrower from the Money Pool up to an aggregate of Genco's to be
authorized short-term debt ceiling of $300 million. Participation
in the Money Pool will enhance Genco's ability to participate
effectively in evolving energy markets by giving it access to
financing in an amount not to exceed $300 million in the aggregate
- the amount of short-term debt financing limit sought by Genco.
Genco will lend and borrow on the same terms and under the same
conditions as authorized for other Money Pool participants under
the Financing Orders.<F5>
(b) Commercial Paper Program
Genco seeks authority to increase short-term debt by an
additional $100 million from $200 million to up to $300 million.
This increase will provide Genco with access to financing through
short-term borrowings to take advantage of opportunities that
arise, to maintain its assets, and to expand its ongoing
operations as additional states restructure and funding needs
arise. The aggregate shot-term debt authorized will remain
unchanged at $300 million and remain subject to the same terms and
conditions as contained in the original application, as amended,
and adopted in Holding Co. Act Release No. 27101. Together with
Allegheny's loan request (as set forth in the following
paragraphs) short-term debt will not exceed an aggregate of $300
million including Money Pool borrowings.
(c) Parent Loans
Allegheny seeks authority to increase Parent Loans to Genco from
an authorized level of $100 million to an authorized level of $300
million. In Holding Co. Act Release No. 27101, among other
things, Allegheny was authorized to provide short-term debt
financing to Genco in the form of Parent Loans in an amount not to
exceed $100 million. In the aggregate, the total Parent Loans
requested hereunder, when combined with Genco's Commercial Paper
program and Money Pool borrowings will not exceed $300 million.
As with the Commercial Paper program, Genco primarily uses its
<F5> See Holding Co. Act Release No. 25481, Authorizing Formation
of
Money Pool (February 28, 1992).
<PAGE>
short-term parent support to support its capital expenditure
program and ongoing operations.
2. Long-Term Debt
Genco seeks authority to issue long-term debt up to an
aggregate amount of $400 million. The long-term debt will be
limited to issuing notes and debentures to banks and
institutions. <F6> The interest rates, fees, and expenses will
be comparable to those obtainable by comparable utilities issuing
comparable securities with
the same or similar terms and maturities.
Allegheny seeks authority to issue up to $138 million in
unsecured long-term debt. The request is consistent with prior
Commission orders to issue unsecured long-term debt.<F7>
The
financing will include, but not be limited to, bank financing
and/or guarantees, bank credit support, project financing, sales
of secured or unsecured debt, notes, and, debentures
3. Guarantees
In Holding Co. Act Release No. 27101, among other things,
Allegheny was authorized to provide Guarantees in an amount not to
exceed $150 million. Allegheny now seeks authority to increase the
Guarantees from the currently authorized level of $150 million up
to $250 million. The guarantee will be for both performance and
financial guarantees. The guarantees will be issued without
recourse to the operating companies. In the aggregate, the
guarantees will not exceed $250 million.
B. Application of Proceeds
1. Genco
Genco will continue to use the proceeds of its proposed short-
term debt financing to support operations, supplement daily cash
flow fluctuations, and for temporary stop-gap financing measures
until other financing transactions are completed. Genco may use
the proceeds of its proposed $400 million long-term debt to
finance strategic purchases, construction, to replace or retire
short-term debt, or for other strategic corporate purposes. A
portion of the proceeds may be used by Genco as capital
contributions to non-utility subsidiaries including exempt
wholesale generators ("EWGs") and foreign utility companies
("FUCOs") to the extend permissible under the Act and the Rules of
this Commission. Absent application and request and the
Commission's grant of specific authority, investments in EWGs and
FUCOs will not exceed the limits imposed under Rules 53 and 54.
2. Allegheny Energy
Allegheny proposes to use the proceeds of the $138 million
long-term debt financing to meet a combination of capital needs,
including financing strategic purchases, construction, to replace
or retire short-term debt, or for other strategic corporate
purposes. Allegheny may use some of the proceeds as capital
contributions to non-utility subsidiaries including EWGs and FUCOs
to the extent permissible under the Act and the Rules under the
Act. Absent application and request and the Commission's grant of
<F6> Guarantees may take the form of Allegheny agreeing to
undertake
reimbursement obligations, assume liabilities or assume other
obligations with respect to, or act as surety on, bonds. Letters
of credit, evidences of indebtedness, equity commitments,
performance and other obligations undertaken by Genco.
<F7> See Holding Co. Release No. 27134, Southern Financing Order
(February 9, 2000).
<PAGE>
specific authority, investments in EWGs and FUCOs will not exceed
the limits imposed under Rules 53 and 54.
Except as described herein, no associate company or
affiliate of the Applicants or any affiliate of any such associate
company has any material interest, directly or indirectly, in the
proposed transactions.
Item 2. Fees, Commissions, and Expenses
Fees and expenses in the estimated amount of $100,000 are
expected to be incurred in connection with the proposed
transactions plus ordinary expenses not over $500 in connection
with the preparation of this Application. None of the fees,
commissions or expenses is to be paid to any associate or
affiliate company of Allegheny or any affiliate of any such
associate company except for legal, financial and other services
to be performed at cost.
Item 3. Applicable Statutory Provisions
The short-term and long-term debt authorizations are subject
to Sections 6, 7, 9(a), 10, and 12(b) of the Act and Rules 45, 53,
and 54 under the Act.
Rule 54 provides that the Commission, in determining whether
to approve certain transactions by such registered holding company
or its subsidiaries other than with respect to exempt wholesale
generators ("EWG") and foreign utility companies ("FUCO"), will
not consider the effect of the capitalization or earnings of any
subsidiary which is an EWG or FUCO upon the registered holding
company system if the provisions of Rule 53(a), (b) and (c) are
satisfied. At December 31, 1999, Allegheny's average consolidated
retained earnings were approximately $897 million, and Allegheny's
aggregate investment in EWGs and FUCOs was approximately $4.2
million. Accordingly, Allegheny may invest up to approximately
$448.5 million or an additional $444.3 million (50% of Retained
Earnings less existing investment) in EWGs and FUCOs as of
December 31, 1999. When the Transaction is consummated, for
purposes of compliance with Rule 54, Allegheny's aggregate
investment in EWGs and FUCOs will not exceed 50% of its
consolidated retained earnings and the provisions of Rule 53(a)
will be satisfied.
Allegheny further states that for purposes of Rule 54, that
the conditions specified in Rule 53(a) are satisfied and that none
of the conditions set forth in rule 53(b) exist or will exist as a
result of the proposed Transaction. As a result, the Commission
will not consider the effect on Allegheny subsidiary that is an
EWG or FUCO, as each is defined in sections 32 and 33 of the Act,
respectively, in determining whether to approve the proposed
transactions.
Item 4. Regulatory Approval
No state or federal commission, other than this Commission,
has jurisdiction over the proposed transactions.
Item 5. Procedure
Allegheny waives any recommended decision by hearing officer
or by any other responsible officer of the Commission and waives
the 30-day waiting period between the issuance of the Commission's
Order and the date it is to become effective since it is desired
that the Commission's Order becomes effective upon issuance.
Allegheny consents to the Office of Public Utility Regulation
<PAGE>
assisting in the preparation of the Commission's decision and/or
Order in this matter unless the Office opposes the matter covered
by this application or declaration.
Item 6. Exhibits and Financial Statements
(a) Exhibits (to be filed by amendment)
F Opinion of Counsel (to be filed by amendment)
G Financial Data Schedules - Filed
H Form of Notice - Filed
(b) Financial Statements as of December 31, 1999
FS-1 Allegheny Energy Supply Company LLC
balance
sheet,per books and pro forma - Filed
FS-2 Allegheny Energy Supply Company LLC
statement
of income and retained earnings, per books
and pro forma - Filed
Item 7. Information as to Environmental Effects
(a) For the reasons set forth in Item 1 above, the
authorization applied for herein does not require major federal
action significantly affecting the quality of the human
environment for purposes of Section 102(2)(C) of the National
Environmental Policy Act (42 U.S.C. 4232(2)(C)).
(b) Not applicable.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, as amended, the undersigned Applicants have
duly caused this statement to be signed on their behalf by the
undersigned thereunto duly authorized.
ALLEGHENY ENERGY, INC.
/s/ THOMAS K. HENDERSON, ESQ.
Thomas K. Henderson, Esq.
ALLEGHENY VENTURES, INC.
/s/ THOMAS K. HENDERSON, ESQ.
Thomas K. Henderson, Esq.
ALLEGHENY ENERGY SUPPLY COMPANY, LLC
/s/ THOMAS K. HENDERSON, ESQ.
Thomas K. Henderson, Esq.
THE POTOMAC ELECTRIC COMPANY
/s/ THOMAS K. HENDERSON, ESQ.
Thomas K. Henderson, Esq.
MONONGAHELA POWER COMPANY
/s/ THOMAS K. HENDERSON, ESQ.
Thomas K. Henderson, Esq.
WEST PENN POWER COMPANY
/s/ THOMAS K. HENDERSON, ESQ.
Thomas K. Henderson, Esq.
ALLEGHENY ENERGY SERVICE CORPORATION
/s/ THOMAS K. HENDERSON, ESQ.
Thomas K. Henderson, Esq.
Dated: June 1, 2000
