File No. 70-________
Allegheny Energy Supply Company EWG Application
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM U-1
APPLICATION / DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
___________________________________
Allegheny Energy, Inc. Allegheny Energy Service Corporation
10435 Downsville Pike 10435 Downsville Pike
Hagerstown, MD 21740 Hagerstown, MD 21740
Allegheny Energy Supply Company,LLC
R.R. 12, P.O. Box 1000
Roseytown, PA 15601
_____________________________
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
Patricia J. Clark, Esq.
Deputy General Counsel
Allegheny Energy Supply Company
800 Cabin Hill Drive
Greensburg, Pennsylvania 15601
Anthony Wilson, Esq.
Senior Attorney
Allegheny Energy Service Corporation
10435 Downsville Pike
Hagerstown, MD 21740
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TABLE OF CONTENTS Page
Item 1. Description of the Proposed Transaction . . . . . 3
A. Summary . . . . . . . . . . . . . . . . . . . . . 3
B. Background . . . . . . . . . . . . . . . . . . . 3
C. Discussion . . . . . . . . . . . . . . . . . . . . 4
D. Service Agreements . . . . . . . . . . .. . . . . . 4
Item 2. Fees, Commissions and Expenses . . . . . . . . . . 5
Item 3. Applicable Statutory Provisions . . . . . . . .. 5
Item 4. Regulatory Approvals . . . . . . . . . . . . . . . 5
Item 5. Procedure . . . . . . . . . . . . . . . . . . . . 5
Item 6. Exhibits and Financial Statements . . . . . . . . 5
A. Exhibits . . . . . . . . . . . . . . . . . . . . . 5
B. Financial Statements . . . . . . . . . . . . . . . . 6
Item 7. Information as to Environmental Effects . . . . . . 6
Exhibit H . . . . . . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>
Item 1. Description of Proposed Transactions
A. Summary
Allegheny Energy, Inc. ("Allegheny"), a registered public
utility holding company, and its wholly-owned service company
subsidiary Allegheny Energy Service Corporation ("AESC"), along
with Allegheny Energy Supply Company, LLC, a non-utility
generating company subsidiary of Allegheny ("Allegheny Supply"),
have filed an application - declaration pursuant to Sections 6(a),
7, 9(a), 10, 12(b), 13, 32 and 33 of the Act and Rules 44, 45, 53,
and 54.
Now comes Allegheny Supply seeking authorization to organize
and finance one or more special purpose subsidiaries ("Exempt
Subsidiaries") to engage in Rule 58 activities within the United
States and abroad and for the Exempt Subsidiaries to invest,
directly or indirectly, in development activities with respect to
exempt wholesale generators ("EWGs") and foreign utility
companies ("FUCOs"). Allegheny Supply also seeks authorization to
organize one or more special project entities ("Intermediate
Companies") to facilitate the development and consummation of
investments in EWGs and FUCOs.<F1> Intermediate Companies would
enhance the ability of Allegheny Supply to respond quickly to
investment opportunities.
B. Background
In File No. 70-9483, the Commission authorized the
formation and financing of an electric generating company -
Allegheny Supply.<F2> In a series of orders issued July 14, 1994,
February 3, 1995, October 27, 1995, and October 9, 1996 (Holding
Co. Act Release Nos. 26085, 26229, 26401, and 26590, respectively)
Allegheny then d.b.a. Allegheny Power Systems, was authorized,
among other things, to organize and finance Allegheny Ventures,
Inc. ("Allegheny Ventures"), then d.b.a. AYP Capital, and to
engage and invest, directly or indirectly, in development
activities with respect to: (i) qualifying cogeneration facilities
and small power production facilities ("SPPs"); (ii) non-
qualifying cogeneration facilities, non-qualifying SPPs, and
independent power production facilities located within the service
territories of Allegheny regulated companies; (iii) EWGs; (iv)
companies involved in new technologies related to the core
business; (v) FUCOs; (vi) consulting, energy management, and
demand-side management services.
Since the issuance of the aforementioned orders,
several events have occurred which now require Allegheny Supply and
Allegheny to seek the aforementioned authorizations. Specifically,
deregulation of generation and competition at the retail level is
now a reality in Pennsylvania; is coming to Maryland on July 1, 2000;
and thereafter is coming to Ohio, Virginia and West Virginia over
the course of the next two years. In the face of deregulation
Allegheny has: formed a generating company - Allegheny Supply;<F3>
acquired West Virginia Power;<F4> moved
_______________________________
<F1> As defined in the Public Utility Holding Company Act of 1935,
as amended ("Act") at sections 32 and 33, respectively.
<F2> See Holding Co. Act Release No. 27101 (November 12, 1999).
<F3> 3 Id.
<F4> See Holding Co. Act Release No. 27121, Order Authorizing
Retention of Assets(December 23, 1999).
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to acquire Mountaineer Gas;<F5> and moved to transfer The Potomac
Edison Company's ("Potomac Edison") generating assets to Allegheny
Supply.<F6> To remain competitive the Allegheny system must have the
flexibility to develop a diverse mix of generation assets and
continue to grow and serve energy needs of both the customers
within Allegheny's traditional service territory and develop and
serve new customers inside and outside traditional service
territory as opportunities arise.
C. Discussion
Allegheny and Allegheny Supply seek authorization for the
Intermediate Companies to issue and for Allegheny and Allegheny
Supply to: (1) acquire securities; (2) guarantee the indebtedness
or other obligations of one or more Exempt Subsidiaries; (3)
assume the liabilities of one or more Exempt Subsidiaries; and (4)
enter into guarantees, letters of credit, and reimbursement
agreements in support of equity contribution obligations or
otherwise in connection with project development activities for
one or more Exempt Subsidiaries. Investments may be made from
Allegheny to Allegheny Supply or to Intermediate Companies
directly or indirectly. The investment by Allegheny or Allegheny
Supply in the Exempt Subsidiaries may take the form of capital
stock or shares, debt securities, trust certificates, capital
contributions, open account advances and partnership interests or
other equity or participation interests, bid bonds or other credit
support to secure obligations incurred by Allegheny Supply and/or
the Intermediate Companies in connection with the Exempt
Subsidiaries investments or of Allegheny Supply's undertaking to
contribute equity to Intermediate Companies.
Allegheny and Allegheny Supply also seek authorization for
the Intermediate Companies to issue equity securities and debt
securities to persons other than Allegheny Supply or Allegheny
(and with respect to which there will be no recourse to
Allegheny), including banks, insurance companies and other
financial institutions, exclusively for the purpose of financing
(including any refinancing) investments in EWGs and FUCOs. The
aggregate limit on all credit support by Allegheny and Allegheny
Supply will be up to the then available financing limit. 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.
D. Service Agreements
The Exempt Subsidiaries and Intermediate Companies will not
have paid employees. Services will be provided by personnel
employed by AESC, a wholly owned subsidiary of Allegheny, pursuant
to service agreements. Under the service agreements, AESC will be
reimbursed for the cost of services provided in accordance with
Rules 90 and 91 of the Act. AESC will account for, allocate and
charge its costs of these services provided on a full cost
reimbursement basis under a work order system consistent with the
Uniform System of Accounts for Mutual and Subsidiary Service
Companies. The time of AESC employees will be billed to the
Exempt Subsidiaries and Intermediate Companies., Allegheny
Advantages, or the to-be-formed subsidiaries and paid by each on a
monthly basis based upon time records. Allegheny Supply will
maintain separate financial records and detailed supporting
records.
_______________________________
<F5> See File No. 70-9625, Application of Monongahela Power Company
to Acquire 100% of the Securities of Mountaineer Gas (filed Feb.
4, 2000).
<F6> See File No. 70-9627, Application of The Potomac Edison Company
to Transfer Assets (filed Feb. 11, 2000).
<PAGE>
Item 2. Fees, Commissions, and Expenses
Fees and expenses in the estimated amount of $_____ (to be
filed by amendment) 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
This application is subject to Sections 6(a), 7, 9(a), 10, 32
and 33 of the Public Utility Holding Company Act of 1935, as
amended, and rules 44, 45, 53, 54, and 58 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 EWGs and FUCOs,
will not consider the effect of the capitalization or earnings of
any subsidiary which is an EWGs or FUCOs 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 $897million, 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 none of the
conditions set forth in rule 53(b) exist or will exist as a result
of the proposed Transaction. Therefore, Rule 53(c) is
inapplicable.
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
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)
H Form of Notice - filed May 25, 2000
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(b) Financial Statements as of March 31, 2000
FS-1 Allegheny Energy Supply Company, LLC. balance
sheet, per books and pro forma - to be filed
by amendment
FS-2 Allegheny Energy Supply Company, LLC. statement
of income and retained earnings, per books and
pro forma - to be filed by amendment
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 ENERGY SERVICE CORPORATION
\S\ THOMAS K. HENDERSON, ESQ.
Thomas K. Henderson, Esq.
ALLEGHENY ENERGY SUPPLY COMPANY,LLC
\S\ THOMAS K. HENDERSON, ESQ.
Thomas K. Henderson, Esq.
Dated: May 25, 2000
<PAGE>
EXHIBIT H
a) Draft Notice
Allegheny Energy, Inc., et. al. (70-9483)
Notice Requesting Authority to Form and Invest in Special Purpose
Subsidiaries, Intermediate Subsidiaries, EWGs, FUCOs, and to
Engage in Rule 58 Activities
Allegheny Energy, Inc. ("Allegheny"), a registered public
utility holding company, and its direct and indirect wholly owned
subsidiaries Allegheny Ventures, Inc., and Allegheny Energy
Service Corporation, all located at 10435 Downsville Pike,
Hagerstown, MD 21740-1766, along with Allegheny Energy Supply
Company, LLC ("Allegheny Supply") located at R.R. 12, P.O. Box
1000, Roseytown, PA., 15601, have filed a Post Effective Amendment
to an Application - Declaration pursuant to Sections 6(a), 7,
9(a), 10, 13, 32 and 33 of the Act and Rules 44, 45, and 54.
In a series of orders issued in dated July 14, 1994, February
3, 1995, October 27, 1995, and October 9, 1996 (Holding Co. Act
Release Nos. 26085, 26229, 26401, and 26590 respectively),
Allegheny was authorized, among other things, to organize and
finance Allegheny Ventures, Inc., then d.b.a. AYP Capital, to
engage and invest, directly or indirectly, in development
activities with respect to: (i) qualifying cogeneration facilities
and small power production facilities ("SPPs"); (ii) non-
qualifying cogeneration facilities, non-qualifying SPPs, and
independent power production facilities located within the service
territories of Allegheny regulated companies; (iii) exempt
wholesale generators ("EWGs"); (iv) companies involved in new
technologies related to the core business of Allegheny; (v)
foreign utility companies ("FUCOs"); (vi) provide consulting,
energy management, and demand-side management services. In File
No. 70-9483 (Holding Co. Act Release No. 27101, dated November 12,
1999), the Commission authorized the formation and financing of an
electric generating company - Allegheny Supply.
Now comes Allegheny Supply seeking authorization, directly or
indirectly, through one or more exempt subsidiaries or
intermediate companies, to: engage in Rule 58 activities; acquire
interests in, finance the acquisition of, and hold the securities
of one or more EWGs or FUCOs.
<PAGE>
