<PAGE> File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________
APPLICATION OR DECLARATION
ON
FORM U-1
__________________________________
APPLICATION OR DECLARATION
under the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
* * *
AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
(Name of company or companies filing this statement
and addresses of principal executive offices)
* * *
AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
(Name of top registered holding company
parent of each applicant or declarant)
* * *
G. P. Maloney, Executive Vice President
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
John F. Di Lorenzo, Jr., Associate General Counsel
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
(Names and addresses of agents for service)
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION
American Electric Power Company, Inc. ("American"), a holding
company registered under the Public Utility Holding Company Act of
1935 ("1935 Act") requests authority to form one or more direct or
indirect new subsidiaries ("New Subsidiaries") to engage in the
business of brokering and marketing energy commodities ("Energy
Commodities").
A. New Business
The New Subsidiaries propose to engage in the businesses of
brokering and marketing Energy Commodities. Energy Commodities
include, but are not limited to, natural and manufactured gas,
electric power, emission allowances, coal, oil, refined petroleum,
refined petroleum products, natural gas liquids and other tangible
or intangible assets that have electrical or chemical energy or are
used to produce such energy. Their brokering business will involve
arranging the sale and purchase, transportation, transmission and
storage of Energy Commodities for a commission. Their marketing
business will involve entering into contracts to sell, purchase,
exchange, pool, transport, transmit, distribute, store and
otherwise deal in Energy Commodities. The New Subsidiaries may
from time to time have an inventory of Energy Commodities; however,
they will not own or operate facilities used for the production,
generation, processing, storage, transmission, transportation, or
distribution of Energy Commodities.
Although they will not sell electric power to retail customers
if such sales are not permitted by law, the New Subsidiaries
propose to broker and market Energy Commodities to retail and
wholesale customers. In order to manage the risk associated with
brokering and marketing Energy Commodities, the New Subsidiaries
may enter into futures, forwards, swaps and options contracts
relating to Energy Commodities. No New Subsidiary will be a public
utility company under the 1935 Act.
In addition to forming New Subsidiaries, American may acquire
a direct or indirect interest in a business that brokers or
markets, or both brokers and markets, Energy Commodities.
B. Service Agreements with New Subsidiaries
The New Subsidiaries propose to enter into Service Agreements
with American Electric Power Service Corporation ("AEPSC") and the
operating company subsidiaries of American ("Operating
Subsidiaries") pursuant to which personnel and other resources of
AEPSC and the Operating Subsidiaries may be made available to the
New Subsidiaries, upon request, to support the New Subsidiaries in
connection with their authorized activities. The Service
Agreements will require that AEPSC and the Operating Subsidiaries
provide, account for and bill their services to the New
Subsidiaries, utilizing a work order system, on a full cost
reimbursement basis in accordance with Rules 90 and 91 under the
1935 Act. The reimbursed cost of services identified through the
work order system will include all direct charges and a prorated
share of other related costs.
The Service Agreements also will provide that AEPSC and the
Operating Subsidiaries make warranties of due care and compliance
with applicable laws to the New Subsidiaries with respect to the
performance of the services requested, but failure to meet these
obligations will not subject them to any claim or liability, other
than to reperform the work at cost in accordance with the work
order. Furthermore, AEPSC and the Operating Subsidiaries will be
indemnified by the New Subsidiaries against liabilities to or
claims of third parties arising out of the performance of work on
behalf of the New Subsidiaries.
Under the Service Agreements, AEPSC and each Operating
Subsidiary will make available personnel or resources requested by
the New Subsidiaries, if it has or can have available such
personnel or resources. AEPSC and each Operating Subsidiary will
determine the availability of its personnel and resources.
Initially, the New Subsidiaries are not expected to have
employees. They will use the personnel and resources of AEPSC and
of the Operating Subsidiaries to broker and market Energy
Commodities on their behalf and to administer their businesses.
C. Guaranties by American
American requests authority to guarantee the debt and other
obligations of the New Subsidiaries. The maximum amount of debt
that American proposes to guarantee is $50,000,000. The maximum
amount of other obligations that American proposes to guarantee is
$200,000,000.
Debt financing of the New Subsidiaries which is guaranteed by
American will not (i) exceed a term of 15 years or (ii)(a) bear a
rate equivalent to a floating interest rate in excess of 2.0% over
the prime rate, London Interbank Offered Rate or other appropriate
index, in effect from time to time or (b) bear a fixed rate in
excess of 2.50% above the yield at the time of issuance of United
State Treasury obligations of a comparable maturity. Any
commitment and other fees on the debt will not exceed 50 basis
points per annum on the total amount of debt financing.
Obligations of the New Subsidiaries (other than debt
guaranteed by American) may take the form of bid bonds or
performance or other direct or indirect guarantees of contractual
or other obligations. Such arrangements may be necessary in order
for the New Subsidiaries to satisfy a customer that they have the
support for their contractual obligations.
D. Compliance with Rule 54
Rule 54 provides that in determining whether to approve
certain transactions other than those involving exempt wholesale
generators ("EWG") or foreign utility companies ("FUCO"), as
defined in the 1935 Act, the Commission will not consider the
effect of the capitalization or earnings of any subsidiary which is
an EWG or FUCO if Rule 53(a), (b) and (c) are satisfied. The
requirements of Rule 53(a), (b) and (c) are satisfied.
Rule 53(a)(1). AEP Resources International, Limited
("AEPRI"), an indirect subsidiary of American, is an EWG.
American, through its subsidiary, AEP Resources, Inc., invested
$115,000 in AEPRI. This investment represents less than 1% of
$1,356,255,000, the average of the consolidated retained earnings
of American reported on Form 10-K or Form 10-Q, as applicable, for
the four consecutive quarters ended September 30, 1995.
Rule 53(a)(2). AEPRI will maintain books and records and make
available the books and records required by Rule 53(a)(2).
Rule 53(a)(3). No more than 2% of the employees of the
Operating Subsidiaries will, at any one time, directly or
indirectly, render services to AEPRI.
Rule 53(a)(4). American has submitted and will submit a copy
of Item 9 and Exhibits G and H of American's Form U5S to each of
the public service commissions having jurisdiction over the retail
rates of American's operating utility subsidiaries.
Rule 53(b). (i) Neither American nor any subsidiary of
American is the subject of any pending bankruptcy or similar
proceeding; (ii) American's average consolidated retained earnings
for the four most recent quarterly periods ($1,356,255,000)
represented an increase of approximately $51,777,000 (or 4.0%) in
the average consolidated retained earnings from the previous four
quarterly periods ($1,304,478,000); and (iii) for the year ended
December 31, 1994, there were no losses attributable to American's
investments in AEPRI other than $4,000 in start-up costs.
Rule 53(c). Rule 53(c) is inapplicable because the
requirements of Rule 53(a) and (b) have been satisfied.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
The expenses of the New Subsidiaries in connection with the
proposed transactions are estimated not to exceed $52,000,
consisting of $25,000 to be billed at cost by AEPSC, $25,000 of
fees for legal services and the $2,000 filing fee to this
Commission.
ITEM 3. APPLICABLE STATUTORY PROVISIONS
American considers Sections 6, 7, 9(a), 9(c)(3), 12(b) and
13(b) of the 1935 Act and Rules 45 and 52 thereunder to be
applicable to the proposed transactions. See Release No. 35-26313,
dated June 20, 1995, proposing Rule 58, which would permit a
registered holding company to acquire the securities of an energy-
related company, including one that derives substantially all of
its revenues from the brokering and marketing of energy
commodities.
ITEM 4. REGULATORY APPROVAL
In addition to the Securities and Exchange Commission, the
following commissions have jurisdiction over aspects of the
proposed businesses of the New Subsidiaries:
(1) Marketing, but not brokering, of electric power at
wholesale is subject to the jurisdiction of the Federal Energy
Regulatory Commission ("FERC") under the Federal Power Act;
(2) Marketing, but not brokering, of natural gas at wholesale
is subject to the jurisdiction of the FERC under the Natural Gas
Act; and
(3) Transactions between Appalachian Power Company ("APCo")
and the New Subsidiaries are subject to the jurisdiction of the
West Virginia Public Service Commission ("WVPSC") and State
Corporation Commission of Virginia ("VSCC") and transactions
between Wheeling Power Company ("WPCo") and the New Subsidiaries
are subject to the jurisdiction of the WVPSC.
The marketing and brokering of electric power at retail is an
evolving regulatory area. With few exceptions, it is not permitted
in any state. As these regulations change, the New Subsidiaries
expect to enter into this business; they, however, will not do so
unless permitted by law.
No other commissions have jurisdiction over the proposed
transactions.
An application to market electric power at wholesale will be
filed with the FERC together with a request for the waiver of
certain provisions of the Federal Power Act and the rules
thereunder. A copy will be filed by amendment as Exhibit D-1.
In 18 C.F.R. Pt. 284.402, FERC has granted to any person who
is not an interstate pipeline a blanket certificate of public
convenience and necessity authorizing the holder to make sales for
resale at negotiated rates in interstate commerce of any category
of gas that is subject to the FERC's Natural Gas Act jurisdiction.
Applications for approval of affiliate transactions will be
filed with the WVPSC and VSCC. Copies will be filed by amendment
as Exhibits D-2, D-3 and D-4, respectively.
ITEM 5. PROCEDURE
It is requested, pursuant to Rule 23(c) of the Rules and
Regulations of the Commission, that the Commission's order
granting, and permitting to become effective this Application or
Declaration be issued on or before March 29, 1996. American waives
any recommended decision by a hearing officer of or by any other
responsible officer of the Commission and waive the 30-day waiting
period between the issuance of the Commission's order and the date
it is to become effective, since it is desired that the
Commission's order, when issued, becomes effective forthwith.
American 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.
American agrees to file the following:
(1) Quarterly, within 60 days after the end of
each quarter:
(a) a balance sheet and income statement for each New
Subsidiary;
(b) a narrative description of the activities of the
New Subsidiaries during the quarter just ended;
(c) a listing of any guarantees or assumption of
liabilities by American on behalf of the New
Subsidiaries; and
(d) a description of services obtained from associate
companies, specifying the type of service, the
number of personnel from each associate company
providing services during the quarter and the total
dollar value of such services.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
Exhibit B-1 Proposed form of Service Agreement
between New Subsidiaries and AEPSC (to be
filed by amendment)
Exhibit B-2 Proposed form of Service Agreement
between New Subsidiaries and Operating
Subsidiaries (to be filed by amendment)
Exhibit D-1 Application to the FERC relating to power
marketing (to be filed by amendment)
Exhibit D-2 Application of APCo to the State
Corporation Commission of Virginia (to be
filed by amendment)
Exhibit D-3 Application of APCo to the West Virginia
Public Service Commission (to be filed by
amendment)
Exhibit D-4 Application of WPCo to the West Virginia
Public Service Commission (to be filed by
amendment)
Exhibit D-5 Order of FERC relating to power marketing
(to be filed by amendment)
Exhibit D-6 Order of State Corporation Commission of
Virginia (to be filed by amendment)
Exhibit D-7 Order of West Virginia Public Service
Commission as to APCo (to be filed by
amendment)
Exhibit D-8 Order of West Virginia Public Service
Commission as to WPCo (to be filed by
amendment)
Exhibit F Opinion of Counsel (to be filed by
amendment)
Exhibit G Proposed Form of Notice
It is believed that financial statements are not necessary or
relevant to the disposition of this proceeding.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
It is believed that the proposed transactions will not have
any environmental effects which would require an environmental
impact statement under Section 102(c)(2) of the National
Environmental Policy Act. No other federal agency has prepared or
is preparing an environmental impact statement with respect to the
proposed transactions.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused
this statement to be signed on their behalf by the undersigned
thereunto duly authorized.
AMERICAN ELECTRIC POWER COMPANY, INC.
By__/s/ G. P. Maloney____________________
Vice President
Dated: January 22, 1996
Exhibit G
UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Release No. /January , 1996
_____________________________________________
:
In the Matter of :
:
AMERICAN ELECTRIC POWER COMPANY, INC. :
1 Riverside Plaza :
Columbus, OH 43215 :
:
(70- ) :
_____________________________________________:
American Electric Power Company, Inc. ("American"), a
registered holding company, has filed an Application or Declaration
with this Commission pursuant to Sections 6, 7, 9(a), 9(c)(3),
12(b) and 13(b) of the Public Utility Holding Company Act of 1935
(the "Act") and Rules 45 and 52 thereunder.
American has requested authority to form one or more direct or
indirect new subsidiaries to engage in the business of brokering
and marketing energy commodities, including natural and
manufactured gas, electric power, emission allowances, coal, oil,
refined petroleum, refined petroleum products, natural gas liquids
and other tangible or intangible assets that have electrical or
chemical energy or are used to produce such energy. American has
further requested authority to guarantee the debt and other
obligations of the New Subsidiaries. The maximum amount of debt
that American proposes to guarantee is $50,000,000. The maximum
amount of other obligations that American proposes to guarantee is
$200,000,000. No new subsidiary will be a public utility company
under the 1935 Act. In addition to forming new subsidiaries,
American may acquire a direct or indirect interest in a business
that brokers or markets, or both brokers and markets, energy
commodities.
The New Subsidiaries may enter into Service Agreements with
American Electric Power Service Corporation ("AEPSC"), a service
company subsidiary of American, and the operating company
subsidiaries of American pursuant to which personnel and other
resources of AEPSC and the operating company subsidiaries may be
made available to the New Subsidiaries, upon request, to support
the New Subsidiaries in connection with their authorized
activities. The Service Agreements will require that AEPSC and the
operating company subsidiaries provide, account for and bill their
services to the New Subsidiaries, utilizing a work order system, on
a full cost reimbursement basis in accordance with Rules 90 and 91
under the 1935 Act. The reimbursed cost of services identified
through the work order system will include all direct charges and
a prorated share of other related costs.
The Application or Declaration and any amendments thereto are
available for public inspection through the Commission's Office of
Public Reference. Interested persons wishing to comment or request
a hearing should submit their views in writing by March , 1996 to
the Secretary, Securities and Exchange Commission, Washington, D.C.
20549, and serve a copy on the applicants at the addresses
specified above. Proof of service (by affidavit or, in case of any
attorney at law, by certificate) should be filed with the request.
Any request for a hearing shall identify specifically the issues of
fact or law that are disputed. A person who so requests will be
notified of any hearing, if ordered, and will receive a copy of any
notice or order issued in this matter. After said date, the
Application, as filed or as it may be amended, may be permitted to
become effective.
For the Commission, by the Office of Public Utility
Regulation, pursuant to delegated authority.
Jonathan G. Katz
Secretary
