UNITED STATES OF AMERICA
BEFORE THE SECURITIES AND EXCHANGE COMMISSION
_____________________________________________
:
In the Matter of :
:
AMERICAN ELECTRIC POWER COMPANY, INC. : CERTIFICATE OF
1 Riverside Plaza : NOTIFICATION
Columbus, Ohio 43215 : NO. 1
:
(70-8779) :
:
(Public Utility Holding Company Act of 1935) :
_____________________________________________:
AMERICAN ELECTRIC POWER COMPANY, INC. ("American"), in
accordance with the terms and conditions of, and for the purposes
represented by, the Application - Declaration herein and the Order
of the Securities and Exchange Commission with respect thereto,
dated September 13, 1996, HCAR No. 35-26572, certifies that:
1. In connection with two New Subsidiaries, AEP Power
Marketing, Inc. and AEP Energy Solutions, Inc., formed by American,
the following exhibits are filed herewith:
1(a) AEP Power Marketing, Inc. charter and bylaws
1(b) AEP Energy Solutions, Inc. charter and bylaws
1(c) Application to the FERC relating to AEP Power
Marketing, Inc.
1(d) Order of the FERC relating to AEP Power Marketing,
Inc.
1(e) Joint Application of Appalachian Power Company and
Wheeling Power Company, associate companies of
American, to the West Virginia Public Service
Commission regarding transactions with the New
Subsidiaries
1(f) Application of Appalachian Power Company, an
associate company of American, to the Virginia
State Corporation Commission regarding transactions
with the New Subsidiaries
2. Quarter-end balance sheets, three-month and twelve-month
income and cash flow statements are not available because neither
company was active during the quarter.
3. American has neither issued guarantees nor assumed any
liabilities on behalf of the New Subsidiaries.
4. No services were obtained from associate companies during
the quarter.
This Certificate of Notification is filed pursuant to the
Commission's Order in this proceeding.
AMERICAN ELECTRIC POWER COMPANY, INC.
By: /s/ A. A. Pena
Treasurer
November 22, 1996
Exhibit 1(a)
ARTICLES OF INCORPORATION
OF
AEP POWER MARKETING, INC.
I, the undersigned subscriber, desiring to form a
corporation pursuant to Chapter 1701 of the Ohio Revised Code and
the acts amendatory thereof and supplemental thereto, do hereby
subscribe the following Articles of Incorporation:
FIRST: The name of the corporation (hereinafter called
the corporation) is AEP POWER MARKETING, INC.
SECOND: The place in the State of Ohio where the
principal office of the corporation is to be located is 1 Riverside
Plaza, Columbus, Franklin County, Ohio 43215.
THIRD: The purpose or purposes for which the
corporation is formed is to engage in any lawful act or activity
for which corporations may be formed under Chapter 1701 of the Ohio
Revised Code.
FOURTH: The authorized number of shares of the
corporation is eight hundred fifty (850), all of which are of a par
value of One Dollar ($1.00) and are of the same class and are to be
common shares. The holders of the common shares shall be entitled
to one vote per share upon all matters presented to the
shareholders. Any action to be taken by the shareholders of the
corporation under any provision of Chapter 1701 of the Ohio Revised
Code which would require the affirmative vote of two-thirds of the
voting power of the corporation unless otherwise provided in the
Articles of Incorporation may be taken by the affirmative vote of
the majority of the voting power of the corporation.
FIFTH: Any regular or special meeting of the
shareholders or of the directors of the corporation may be held
within or without the State of Ohio.
IN WITNESS WHEREOF, I have subscribed these Articles of
Incorporation this 22nd day of July, 1996.
/s/ David C. House
David C. House
CODE OF REGULATIONS
OF
AEP POWER MARKETING, INC.
ARTICLE I
OFFICES
SECTION 1. Principal Office. The principal office of the
corporation shall be located at 1 Riverside Plaza, Columbus, Ohio
43215.
SECTION 2. Other Offices. In addition to its principal office,
the corporation may also have offices at such other places within
or without the State of Ohio as the Board of Directors may from
time to time determine.
ARTICLE II
PLACE OF MEETINGS
Special meetings of the shareholders and regular and special
meetings of the Board of Directors may be held at any place or
places within or without the State of Ohio.
ARTICLE III
MEETINGS OF SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the
shareholders of the corporation for the purpose of electing
directors and transacting such other business as may properly come
before the meeting shall be held at the principal office of the
corporation on the second Tuesday in February of each year, if not
a legal holiday, but if a legal holiday, then on the next business
day following.
Upon due notice there may also be considered and acted upon at
an annual meeting any matter which could properly be considered and
acted upon at a special meeting.
At the annual meeting, or any other meeting of the
stockholders at which directors are to be elected, the officers of
the corporation shall lay before the shareholders a statement of
profit and loss and a balance sheet containing a summary of the
assets and liabilities, a summary of profits earned, dividends paid
and other changes in the surplus account of the corporation, made
up to a date not more than four months before said meeting, from
the date up to which the last preceding statement, account and
balance sheet were made up. A certificate, signed by the Chairman
of the Board, the President or a Vice-President and by the
Treasurer or an Assistant Treasurer, or by a public accountant or
firm of public accountants, shall be appended to such statement of
profit and loss and such balance sheet, stating that they are true
and correct and that they exhibit a fair view of the state of the
corporation's affairs according to its books.
The officers of the corporation shall, upon the written
request of any shareholder made after notice of any such meeting,
forthwith mail to such requesting shareholder a copy of such
statement of profit and loss and balance sheet.
SECTION 2. Special Meetings. After notice given pursuant to
Section 3 of this Article III, special meetings of the shareholders
may be held at any time upon call of the Chairman of the Board, the
President, a Vice-President, the Secretary, an Assistant Secretary,
a majority of the Board of Directors acting with or without a
meeting, or of the persons who hold shares entitling them to
exercise twenty-five percent (25%) of the voting power of all the
shares outstanding and entitled to vote thereat or as provided in
the Articles of Incorporation. Such call shall state the time,
place and purposes of the meeting.
SECTION 3. Notice of Meeting. Notice in writing of each annual or
special meeting of shareholders shall be given by the Secretary or
the officer performing his duties, stating the time and place and
the purposes thereof, and a copy of such notice shall be served
upon or mailed to each shareholder of record entitled to vote or
entitled to notice, not more than sixty (60) days nor less than ten
(10) days before any such meeting. If mailed, it shall be directed
to a shareholder at his address as it appears upon the records of
the corporation.
All notices with respect to any shares issued to persons as
joint tenants may be given to whichever of such persons is named
first on the books of the corporation and notice so given shall be
sufficient notice to all such persons.
Every person who by operation of law, transfer, or by any
other means whatsoever shall become entitled to any share shall be
bound by every notice in respect of such share which previously to
the entry of his name and address upon the books of the corporation
as the registered holder of such share shall have been given to the
person from whom he derives the title to such share. In the event
of the transfer of shares after notice has been given and prior to
the holding of the meeting, it shall not be necessary to serve
notice upon the transferee. If any meeting, annual or special, is
adjourned to another time or place, no further notice as to such
adjourned meeting need be given other than by announcement at the
meeting at which such adjournment is taken.
SECTION 4. Waiver of Notice. Any shareholder, either before or
after any meeting, may waive in writing any notice required to be
given by law or under the Articles or under these Regulations; and
whenever all of the shareholders entitled to vote shall meet in
person or by proxy, such meeting shall be valid for all purposes
without call or notice, and at such meeting any action may be
taken.
SECTION 5. Record Date. Closing Books. The Board of Directors may
fix a date not exceeding sixty (60) days preceding the date of any
meeting of shareholders or any dividend payment date or any date
for the allotment of rights as a record date for the determination
of the shareholders entitled to notice of such meeting or to vote
thereat or to receive such dividends or rights as the case may be,
and may close the books of the corporation against transfer of
shares during the whole or any part of such period including the
time of such meeting of the shareholders and any adjournments
thereof. If the Board of Directors shall not fix such record dates
as aforesaid or close the books against transfer, the shareholders
of record at the close of business on the 15th day prior to the
date of such meeting or the date fixed to receive a dividend or
right shall be the shareholders entitled to notice of such meeting
and entitled to vote thereat and/or to receive such dividends or
rights as the case may be.
At any meeting of shareholders a list of shareholders entitled
to vote, alphabetically arranged, showing the number and classes of
shares held by each on the date fixed or established for closing
the books against transfers or the record date fixed or
established, as provided in this Section, certified by the
Secretary of the corporation, may be produced by such Secretary,
and shall be produced on the request of any shareholder, and such
list shall be prima facie evidence of the ownership of shares and
of the right of shareholders to vote at such meeting.
SECTION 6. Quorum. At any meeting, the holders of shares
entitling them to exercise a majority of the voting power of the
corporation, present in person or represented by proxy, shall
constitute a quorum for all purposes, except as set forth in the
Articles or as otherwise provided by law. At any meeting at which
a quorum is present, all questions and business which shall come
before the meeting shall be determined by the vote of the holders
of shares entitling them to exercise a majority of the voting power
of the shares represented by shareholders present in person or by
proxy except when a different proportion is required by law, the
Articles or these Regulations. At any meeting, whether a quorum is
present or not, the holders of shares entitling them to exercise a
majority of the voting power of the shares represented by
shareholders present in person or by proxy may adjourn from time to
time and from place to place without notice other than by
announcement at the meeting; provided, however, that such
adjournment shall not preclude any class of shareholders from
taking any action which they may be entitled to take pursuant to
the provisions of the Articles.
SECTION 7. Proxies. Any shareholder of record, entitled to
attend a shareholders' meeting or to vote thereat or to assent or
give consents in writing, may be represented at such meeting or
vote thereat or assent or give consents in writing, as the case may
be, or exercise any other of his rights, by proxy or proxies which,
executed as hereinafter provided, shall be filed with the Secretary
of the corporation at or before such meeting.
The instrument appointing a proxy shall be in writing and
signed by the person making the appointment. A copy of a telegram,
cablegram, wireless message or photogram appearing to have been
transmitted by a shareholder, or a photographic, photostatic or
other reproduction of a writing appearing to have been signed by a
shareholder, appointing a proxy or proxies, shall be deemed to be
and may be accepted and recognized as a sufficient proxy writing.
No appointment of a proxy shall be valid after the expiration
of eleven months after it is made, unless the writing specifies the
date on which it is to expire or the length of time it is to
continue in force.
The person so appointed need not be a shareholder. A vote in
accordance with the terms of a proxy shall be valid notwithstanding
the previous death or incapacity of the principal or revocation of
his appointment or the transfer of shares voted, unless notice in
writing of such death, incapacity, revocation or transfer shall
have been received at the office of the corporation at least
twenty-four hours before the meeting. The presence of a
shareholder at a meeting shall not operate to revoke a proxy given
by him unless and until notice of such revocation is given to the
corporation in writing or in open meeting.
SECTION 8. Inspectors of Election. The Board of Directors of the
corporation may, by resolution adopted at a meeting of the Board of
Directors held in advance of any meeting of shareholders, appoint
three Inspectors of Election to act at such meeting of shareholders
or any adjournment thereof. If Inspectors of Election are not so
appointed, the officer or person acting as chairman of any such
shareholders' meeting shall make such appointment. In case any
person appointed as an Inspector of Election shall fail or refuse
to appear or to act, the vacancy may be filled by appointment made
at the shareholders' meeting by the officer or person acting as
chairman.
The decision, act or certificate of a majority of the
Inspectors of Election shall be effective in all respects as the
decision, act or certificate of all.
The Inspectors of Election shall determine the number of
shares outstanding, the voting power of each, the shares
represented at the meeting, the existence of a quorum, the
authenticity, validity and effect of proxies, receive votes,
ballots, assents or consents, hear and determine all challenges and
questions in any way arising in connection with the vote, count and
tabulate all votes, assents and consents, determine and announce
the result, and do such as may be proper to conduct the election or
vote with fairness to all shareholders of the corporation.
On request, the Inspectors of Election shall make a report in
writing of any challenge, question or matter determined by them and
make and execute a certificate of any fact found by them.
Any certificate of the Inspectors of Election shall be prima
facie evidence of the facts stated therein and of the vote as
certified by them.
No Inspector of Election need be a shareholder of the
corporation.
ARTICLE IV
DIRECTORS
SECTION 1. Number of Directors. The number of directors of the
corporation shall be not less than three (3), provided that where
all shares of the corporation are owned of record by one or two
shareholders, the number of directors may be less than three but
not less than the number of shareholders. The number of directors
determined within the limits aforesaid may be increased or reduced
by action of the Board of Directors upon the vote of a majority of
the Board at a meeting or by action without a meeting or by the
vote of the holders of record of shares entitling them to exercise
a majority of the voting power present in person or by proxy at any
meeting for the election of directors.
SECTION 2. Election of Directors. The election of directors shall
take place at the annual meeting of shareholders, but if the annual
meeting is not held or directors are not elected thereat or if a
class of shareholders become entitled to the election of directors
pursuant to the provisions of the Articles, they may be elected at
a special meeting called and held for that purpose.
Within sixty days after his election, each director shall
qualify either (a) by accepting in writing his election as a
director, or (b) by acting at a meeting of the Board of Directors.
SECTION 3. Term of Office. Subject to the provisions of the
Articles, directors shall hold office for one year and until their
successors are elected and qualified.
Directors need not be shareholders of the corporation.
SECTION 4. Vacancies. Subject to the provisions of the
Articles, the remaining directors, though less than a majority of
the whole Board, may by a vote of a majority of this number fill
any vacancy in the Board of Directors and the person so elected
shall hold office until an election to fill such vacancy is had.
Subject to the provisions of the Articles, shareholders entitled to
elect directors shall have the right to fill any vacancy in the
Board (whether the same has been temporarily filled by the
remaining directors or not) at any meeting of the shareholders
called for that purpose, and any director elected at any such
meeting of the shareholders shall serve until the next annual
meeting of shareholders and until his successor is chosen.
Within the meaning of this section a vacancy or vacancies
shall be deemed to exist in case the shareholders shall increase
the authorized number of directors but shall fail at the meeting at
which such increase is authorized or an adjournment thereof, to
elect the additional directors so provided for, or in case the
shareholders fail at any time to elect the full number of
authorized directors.
ARTICLE V
POWERS AND MEETINGS OF THE BOARD OF DIRECTORS
SECTION 1. General Powers of Board. The powers and capacity of the
corporation shall be vested in and its authority shall be
exercised, its business and affairs conducted and its property
controlled by the Board of Directors, subject nevertheless to the
Articles and these Regulations.
SECTION 2. Other Powers. Without prejudice to the general
powers conferred by or implied in the last preceding section, the
directors, acting as a Board, shall have power,
(a) To fix, define and limit the powers and duties of all
officers;
(b) To fix the salaries of all officers;
(c) To appoint, and at their discretion to remove, or
suspend, such subordinate officers, assistants, managers, agents
and employees as the directors may from time to time think fit and
to determine their duties and fix their compensation;
(d) To require any officer, agent or employee of the
corporation to furnish a bond for faithful performance in such
amount and with such sureties as they may approve;
(e) To designate a depositary or depositaries of the funds of
the corporation and the officer or officers or other persons who
shall be authorized to sign notes, checks, drafts, contracts,
deeds, mortgages, and other instruments on behalf of the
corporation;
(f) To appoint and remove transfer agents and/or registrars
for the corporation's shares;
(g) To authorize the payment of compensation to the Directors
for services to the corporation, including fees for attendance at
meetings of the Board of Directors, and to determine the amount of
such compensation and fees.
SECTION 3. Meetings of the Board. A meeting of the Board of
Directors may be held immediately following the adjournment of each
shareholders' meeting at which directors are elected, and notice of
such meeting need not be given.
The Board of Directors may, by resolution, provide for other
regular meetings of the Board.
Special meetings of the Board of Directors may be held at any
time upon call of the Chairman of the Board, the President, a Vice-
President, or any two members of the Board.
Notice in writing of meetings of the Board of Directors shall
be delivered personally to each director or sent to each director
by mail, telegram, cablegram or radiogram at least two (2) days
prior to the meeting, but such notice may be waived by any director
either before or after the holding thereof. The notice need not
specify the purpose of the meeting. Unless otherwise indicated in
the notice thereof, any business may be transacted at any regular
or special meeting.
Meetings of the Board of Directors may be held at its
principal office or at any other place or places within or without
the State of Ohio.
Meetings of the Board shall be presided over the Chairman of
the Board, or, in his absence, by the President, or, in the absence
of both, by a Vice-President, or, if none of such officers is
present, by a chairman to be elected at the meeting. The Secretary
of the corporation shall act as Secretary of such meeting if
present. In his absence the chairman may appoint a Secretary.
SECTION 4. Quorum. A majority of the Board of Directors shall
constitute a quorum for the transaction of business, provided that
whenever less than a quorum is present at the time and place
appointed for any meeting of the Board, a majority of those present
may adjourn the meeting from time to time without notice other than
by announcement at the meeting until a quorum shall be present.
ARTICLE VI
OFFICERS
SECTION 1. General Provisions. The Board of Directors shall
choose a President, a Secretary and a Treasurer and may also choose
a Chairman of the Board, one or more Vice Presidents, Assistant
Secretaries and Assistant Treasurers and such other officers as may
be deemed necessary. The Chairman of the Board, if any, shall be,
but the other officers may or may not be, chosen from among the
members of the Board of Directors. Any two or more of such
offices, other than that of President and Vice President, Secretary
and Assistant Secretary, or Treasurer and Assistant Treasurer, may
be held by the same person, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity.
SECTION 2. Term of Office. The officers of the corporation shall
hold office during the pleasure of the Board of Directors and
unless sooner removed by the Board of Directors, until the
organization meeting of the Board of Directors following the date
of their election or until their successors are chosen and
qualified.
The Board of Directors may remove any officer at any time with
or without cause, by a majority vote.
A vacancy in any office, however created, shall be filled by
the Board of Directors.
SECTION 3. Duties of Officers. The officers of the corporation
shall have such duties as usually pertain to their offices, except
as modified by the Board of Directors and shall also have such
other powers and duties as may be conferred or enjoined upon them
by the Board of Directors or by law.
ARTICLE VII
EXECUTIVE AND OTHER COMMITTEES
The Board of Directors may create an executive committee or
any other committee or committees of the Board, and may authorize
the delegation to any such committee of any of the powers of the
Board and may define the extent to which such powers may be
delegated.
Any such committee shall be composed of members of and shall
be appointed by the Board of Directors to serve until otherwise
ordered, and any such committee shall act only in the intervals
between meetings of the Board of Directors and shall be subject at
all times to the control and direction of the Board of Directors.
Unless otherwise provided in the Regulations or ordered by the
Board of Directors, any such committee may act by a majority of its
members at a meeting or by a writing signed by all its members.
An act, or authorization of an act, by any such committee
within the scope of the power delegated to it, shall be as
effective for all purposes as the act or authorization of the Board
of Directors.
ARTICLE VIII
TRANSACTIONS OF DIRECTORS
A director of this corporation shall not be disqualified by
his office from dealing or contracting with this corporation either
as a vendor, purchaser, or otherwise, nor shall any transaction,
action or contract of this corporation be void or voidable with
respect to the corporation by reason of the fact that any director
or any firm of which any director is a member or any corporation of
which any director is a shareholder or director, is in any way
interested in such transaction, action or contract, provided that
such transaction, action or contract is or shall be authorized,
ratified or approved either (1) by a vote of a majority of a quorum
of the Board of Directors without counting in such majority of a
quorum any director so interested or member of a firm so interested
or a shareholder or director of a corporation so interested, or (2)
by a vote at any stockholders' meeting of the holders of record of
shares entitled to exercise a majority of the voting power of all
the outstanding shares of stock of this corporation entitled to
vote or by writing or writings signed by holders of shares entitled
to exercise such a majority of voting power, or if such
transaction, action or contract is fair as to the corporation as of
the time it is authorized or approved by the directors or the
shareholders; nor shall any director be liable to account to this
corporation for any profits realized by him from or through any
such transaction, action or contract of this corporation
authorized, ratified or approved as aforesaid by reason of the fact
that he or any firm of which he is a member or any corporation of
which he is a shareholder or director, was interested in such
transaction, action or contract. Nothing herein contained shall
create any liability in the events above described or prevent the
authorization, ratification or approval of such transactions,
actions or contracts in any other manner provided by law; nor shall
anything herein be considered as in any way affecting the rights of
the corporation or of any person interested, on account of any
fraud in connection with any such transaction, action or contract.
ARTICLE IX
INDEMNIFICATION
SECTION 1. Actions by Third Parties. To the fullest extent permitted
by law, the corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding (formal or
informal), whether civil, criminal, administrative, or
investigative, including all appeals (other than an action, suit or
proceeding by or in the right of the corporation) by reason of the
fact that such person, such person's testator or intestate, is or
was a director, officer, employee or agent of the corporation, or
of any subsidiary or affiliate of the corporation, or is or was
serving at the request of the corporation as a director, trustee,
officer, partner, employee, member, manager, or agent of another
corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust,
employee benefit plan, or other enterprise, against expenses
(including attorney's fees), judgments, decrees, fines (including
excise taxes), penalties, and amounts paid in settlement actually
and reasonably incurred by such person in connection with such
action, suit, or proceeding and all expenses and attorney's fees
incurred in successfully asserting a claim for indemnification
pursuant to this Section 1, if such person acted in good faith and
in a manner such person reasonably believed to be in or not opposed
to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. The termination of any action,
suit, or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good
faith and in a manner such person reasonably believed to be in or
not opposed to the best interest of the corporation, and, with
respect to any criminal action or proceeding, that such person had
reasonable cause to believe that his or her conduct was unlawful
SECTION 2. Actions By or In the Right of the Corporation. To the fullest
extent permitted by law, the corporation shall indemnify any person
who was or is a party or is threatened to be made a party, to any
threatened, pending, or completed action or suit, including all
appeals, by or in the right of the corporation to procure a
judgment in its favor, by reason of the fact that such person, such
person's testator or intestate, is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer,
partner, employee, member, manager or agent of another corporation,
domestic or foreign, nonprofit or for profit, a limited liability
company, or a partnership, joint venture, trust, employee benefit
plan, or other enterprise, against expenses (including attorney's
fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit and all
expenses and attorney's fees incurred in successfully asserting a
claim for indemnification pursuant to this Section 2, if such
person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in
respect of any of the following:
(a) any claim, issue, or matter as to which such person is
finally adjudged to be liable for negligence or misconduct in the
performance of his or her duty to the corporation unless, and only
to the extent that, the court of common pleas or the court in which
such action or suit was brought determines upon application that,
despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as the court of common
pleas or such other court shall deem proper;
(b) any action or suit in which the only liability asserted
against a director is pursuant to Section 1701.95 of the Ohio
Revised Code.
SECTION 3. Method of Determining Whether Standards for Indemnification
Have Been Met. In any case in which a director, officer, employee or
agent of the corporation (or a representative of the estate of such
director, officer, employee or agent) requests indemnification,
upon such person's request the Board of Directors shall meet within
sixty (60) days thereof to determine whether such person is
eligible for indemnification in accordance with the standards set
forth in Sections 1 and 2 of this Article IX. Such determination
shall be made as follows:
(a) by a majority vote of a quorum consisting of directors of
the indemnifying corporation who were not and are not parties to or
threatened with the action, suit or proceeding in respect of which
indemnification is sought; or
(b) if the quorum described in division (a) of this Section
3 is not obtainable or if a majority vote of such quorum so
directs, in a written opinion by independent legal counsel other
than an attorney, or a firm having associated with it an attorney,
who has been retained by or who has performed services for the
corporation, or any person to be indemnified, within the past five
years; or
(c) by the shareholders; or
(d) by the court of common pleas or the court in which such
action, suit or proceeding was brought; or
(e) if the person seeking indemnification is neither a
director nor an officer of the corporation, by the Chairman of the
Board.
Notification of any determination made by the disinterested
directors under division (a) of this Section 3 or by independent
legal counsel under division (b) of this Section 3 shall be
delivered as required by the Ohio Revised Code. Notwithstanding
the foregoing, a determination of eligibility for indemnification
may be made in any manner permitted by law.
SECTION 4. Advancement of Expenses. To the fullest extent
permitted by law, the corporation shall promptly advance expenses,
including attorney's fees, as they are incurred by any person who
was or is a party or threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding
(formal or informal), whether civil, criminal, administrative or
investigative, including all appeals and whether by or in the right
of the corporation or otherwise, by reason of the fact that such
person, such person's testator or intestate, is or was a director,
officer, employee or agent of the corporation, or of any subsidiary
or affiliate of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer,
partner, employee, member, manager or agent of another corporation,
domestic or foreign, nonprofit or for profit, a limited liability
company, or a partnership, joint venture, trust, employee benefit
plan, or other enterprise, upon request of such person and receipt
of an undertaking by or on behalf of such director, officer,
employee or agent to repay amounts advanced to the extent that is
ultimately determined that such person was not eligible for
indemnification in accordance with the standards set forth in
Sections 1 and 2 of this Article IX.
SECTION 5. Contract rights; Non-exclusivity of Indemnification;
ContractualIndemnification. The foregoing provisions of this Article IX
shall be deemed to be a contract between the corporation and each director,
officer, employee or agent of the corporation, or its subsidiaries
or affiliates, and any modification or repeal of this Article IX or
such provisions of the Ohio General Corporation Law shall not
diminish any rights or obligations existing prior to such
modification or repeal with respect to any action or proceeding
theretofore or thereafter brought; provided, however, that the
right of indemnification provided in this Article IX shall not be
deemed exclusive of any other rights to which any director,
officer, employee or agent of the corporation may now be or
hereafter become entitled apart from this Article IX, under any
applicable law including the Ohio General Corporation Law.
Irrespective of the provisions of this Article IX, the Board of
Directors may, at any time or from time to time, approve
indemnification of directors, officers, employees or agents to the
full extent permitted by the Ohio General Corporation Law at the
time in effect, whether on account of past or future actions or
transactions. Notwithstanding the foregoing, the corporation shall
enter into such additional contracts providing for indemnification
and advancement of expenses with directors, officers or employees
of the corporation or its subsidiaries or affiliates as the Board
of Directors shall authorize, provided that the terms of any such
contract shall be consistent with the provisions of the Ohio
General Corporation Law.
SECTION 6. Miscellaneous Provisions. As used in this Article IX,
the term "employee" shall include, without limitation, any
employee, including any professionally licensed employee, of the
corporation. Such term shall also include, without limitation, any
employee, including any professionally licensed employee, of a
subsidiary or affiliate of the corporation who is acting on behalf
of the corporation.
The indemnification provided by this Article IX shall be
limited with respect to directors, officers and controlling persons
to the extent provided in any undertaking entered into by the
corporation or its subsidiaries or affiliates, as required by the
Securities and Exchange Commission pursuant to any rule or
regulation of the Securities and Exchange Commission now or
hereafter in effect.
The corporation may purchase and maintain insurance or furnish
similar protection, including, but not limited to, trust funds,
letters of credit, or self-insurance, on behalf of or for any
person described in this Article IX against any liability which may
be asserted against such person and incurred by such person in any
such capacity, or arising out of such person's status as such,
whether or not the corporation would have the power to indemnify
such person against such liability under the provisions of this
Article IX or otherwise.
If any provision of this Article IX shall be found to be
invalid or limited in application by reason of any law, regulation
or proceeding, it shall not affect any other provision or the
validity of the remaining provisions hereof.
The provisions of this Article IX shall be applicable to
claims, actions, suits or proceedings made, commenced or pending
after the adoption hereof, whether arising from acts or omissions
to act occurring before or after the adoption hereof.
ARTICLE X
CERTIFICATES FOR SHARES
SECTION 1. Form and Execution. Certificates for shares,
certifying the number and class of fully paid shares owned, shall
be issued to each shareholder in such form as shall be approved by
the Board of Directors. Such certificates shall be signed by the
Chairman of the Board, the President or a Vice-President and by the
Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer; provided, however, that if such certificates
are countersigned by a transfer agent, who is not an employee of
the corporation, and by a registrar, the signatures of any such
officers of the corporation and the seal of the corporation upon
such certificates may be facsimiles, engraved, stamped or printed.
In case any officer or officers who shall have signed or whose
facsimiles signature or signatures shall have been used, printed or
stamped on any such certificate or certificates shall cease to be
such officer or officers of the corporation, whether because of
death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the corporation, such
certificate or certificates, when authenticated by the endorsement
thereon of the signature of a transfer agent or registrar, may
nevertheless be adopted and used by the corporation and be issued
and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or
signatures shall have been used thereon had not ceased to be such
officer or officers of the corporation.
SECTION 2. Lost, Mutilated or Destroyed Certificates: If any certificate
for shares is lost, mutilated or destroyed, the Board of Directors
may authorize the issue of a new certificate in place thereof upon
such terms and conditions as it may deem advisable. The Board of
Directors in its discretion may refuse to issue such new
certificate, save upon the order of a court having jurisdiction.
ARTICLE XI
FISCAL YEAR
The fiscal year of the corporation shall end on the thirty-
first day of December in each year, or on such other day as may be
fixed from time to time by the Board of Directors.
ARTICLE XII
SEAL
The seal of the corporation shall be circular in form with the
words "AEP Power Marketing, Inc.", and the date "1996" surrounding
the words "Corporate Seal". If deemed advisable by the Board of
Directors, duplicate seals may be provided and kept for the
necessary purposes of the corporation.
ARTICLE XIII
AMENDMENTS
This Code of Regulations may be changed, added to, amended, or
repealed at any meeting of shareholders called for that purpose by
the affirmative vote of the holders of record of shares entitling
them to exercise a majority of the voting power on such proposal,
or without a meeting, by the written consent of holders of record
of shares entitling them to exercise two-thirds (2/3) of the voting
power on such proposal.
Exhibit 1(b)
ARTICLES OF INCORPORATION
OF
AEP ENERGY SOLUTIONS, INC.
I, the undersigned subscriber, desiring to form a
corporation pursuant to Chapter 1701 of the Ohio Revised Code and
the acts amendatory thereof and supplemental thereto, do hereby
subscribe the following Articles of Incorporation:
FIRST: The name of the corporation (hereinafter called
the corporation) is AEP ENERGY SOLUTIONS, INC.
SECOND: The place in the State of Ohio where the
principal office of the corporation is to be located is 1 Riverside
Plaza, Columbus, Franklin County, Ohio 43215.
THIRD: The purpose or purposes for which the
corporation is formed is to engage in any lawful act or activity
for which corporations may be formed under Chapter 1701 of the Ohio
Revised Code.
FOURTH: The authorized number of shares of the
corporation is eight hundred fifty (850), all of which are of a par
value of One Dollar ($1.00) and are of the same class and are to be
common shares. The holders of the common shares shall be entitled
to one vote per share upon all matters presented to the
shareholders. Any action to be taken by the shareholders of the
corporation under any provision of Chapter 1701 of the Ohio Revised
Code which would require the affirmative vote of two-thirds of the
voting power of the corporation unless otherwise provided in the
Articles of Incorporation may be taken by the affirmative vote of
the majority of the voting power of the corporation.
FIFTH: Any regular or special meeting of the
shareholders or of the directors of the corporation may be held
within or without the State of Ohio.
IN WITNESS WHEREOF, I have subscribed these Articles of
Incorporation this 24th day of September, 1996.
/s/ David C. House
David C. House
CODE OF REGULATIONS
OF
AEP ENERGY SOLUTIONS, INC.
ARTICLE I
OFFICES
SECTION 1. Principal Office. The principal office of the
corporation shall be located at 1 Riverside Plaza, Columbus, Ohio
43215.
SECTION 2. Other Offices. In addition to its principal office,
the corporation may also have offices at such other places within
or without the State of Ohio as the Board of Directors may from
time to time determine.
ARTICLE II
PLACE OF MEETINGS
Special meetings of the shareholders and regular and special
meetings of the Board of Directors may be held at any place or
places within or without the State of Ohio.
ARTICLE III
MEETINGS OF SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the
shareholders of the corporation for the purpose of electing
directors and transacting such other business as may properly come
before the meeting shall be held at the principal office of the
corporation on the second Tuesday in February of each year, if not
a legal holiday, but if a legal holiday, then on the next business
day following.
Upon due notice there may also be considered and acted upon at
an annual meeting any matter which could properly be considered and
acted upon at a special meeting.
At the annual meeting, or any other meeting of the
stockholders at which directors are to be elected, the officers of
the corporation shall lay before the shareholders a statement of
profit and loss and a balance sheet containing a summary of the
assets and liabilities, a summary of profits earned, dividends paid
and other changes in the surplus account of the corporation, made
up to a date not more than four months before said meeting, from
the date up to which the last preceding statement, account and
balance sheet were made up. A certificate, signed by the Chairman
of the Board, the President or a Vice-President and by the
Treasurer or an Assistant Treasurer, or by a public accountant or
firm of public accountants, shall be appended to such statement of
profit and loss and such balance sheet, stating that they are true
and correct and that they exhibit a fair view of the state of the
corporation's affairs according to its books.
The officers of the corporation shall, upon the written
request of any shareholder made after notice of any such meeting,
forthwith mail to such requesting shareholder a copy of such
statement of profit and loss and balance sheet.
SECTION 2. Special Meetings. After notice given pursuant to
Section 3 of this Article III, special meetings of the shareholders
may be held at any time upon call of the Chairman of the Board, the
President, a Vice-President, the Secretary, an Assistant Secretary,
a majority of the Board of Directors acting with or without a
meeting, or of the persons who hold shares entitling them to
exercise twenty-five percent (25%) of the voting power of all the
shares outstanding and entitled to vote thereat or as provided in
the Articles of Incorporation. Such call shall state the time,
place and purposes of the meeting.
SECTION 3. Notice of Meeting. Notice in writing of each annual or
special meeting of shareholders shall be given by the Secretary or
the officer performing his duties, stating the time and place and
the purposes thereof, and a copy of such notice shall be served
upon or mailed to each shareholder of record entitled to vote or
entitled to notice, not more than sixty (60) days nor less than ten
(10) days before any such meeting. If mailed, it shall be directed
to a shareholder at his address as it appears upon the records of
the corporation.
All notices with respect to any shares issued to persons as
joint tenants may be given to whichever of such persons is named
first on the books of the corporation and notice so given shall be
sufficient notice to all such persons.
Every person who by operation of law, transfer, or by any
other means whatsoever shall become entitled to any share shall be
bound by every notice in respect of such share which previously to
the entry of his name and address upon the books of the corporation
as the registered holder of such share shall have been given to the
person from whom he derives the title to such share. In the event
of the transfer of shares after notice has been given and prior to
the holding of the meeting, it shall not be necessary to serve
notice upon the transferee. If any meeting, annual or special, is
adjourned to another time or place, no further notice as to such
adjourned meeting need be given other than by announcement at the
meeting at which such adjournment is taken.
SECTION 4. Waiver of Notice. Any shareholder, either before or
after any meeting, may waive in writing any notice required to be
given by law or under the Articles or under these Regulations; and
whenever all of the shareholders entitled to vote shall meet in
person or by proxy, such meeting shall be valid for all purposes
without call or notice, and at such meeting any action may be
taken.
SECTION 5. Record Date. Closing Books. The Board of Directors may
fix a date not exceeding sixty (60) days preceding the date of any
meeting of shareholders or any dividend payment date or any date
for the allotment of rights as a record date for the determination
of the shareholders entitled to notice of such meeting or to vote
thereat or to receive such dividends or rights as the case may be,
and may close the books of the corporation against transfer of
shares during the whole or any part of such period including the
time of such meeting of the shareholders and any adjournments
thereof. If the Board of Directors shall not fix such record dates
as aforesaid or close the books against transfer, the shareholders
of record at the close of business on the 15th day prior to the
date of such meeting or the date fixed to receive a dividend or
right shall be the shareholders entitled to notice of such meeting
and entitled to vote thereat and/or to receive such dividends or
rights as the case may be.
At any meeting of shareholders a list of shareholders entitled
to vote, alphabetically arranged, showing the number and classes of
shares held by each on the date fixed or established for closing
the books against transfers or the record date fixed or
established, as provided in this Section, certified by the
Secretary of the corporation, may be produced by such Secretary,
and shall be produced on the request of any shareholder, and such
list shall be prima facie evidence of the ownership of shares and
of the right of shareholders to vote at such meeting.
SECTION 6. Quorum. At any meeting, the holders of shares
entitling them to exercise a majority of the voting power of the
corporation, present in person or represented by proxy, shall
constitute a quorum for all purposes, except as set forth in the
Articles or as otherwise provided by law. At any meeting at which
a quorum is present, all questions and business which shall come
before the meeting shall be determined by the vote of the holders
of shares entitling them to exercise a majority of the voting power
of the shares represented by shareholders present in person or by
proxy except when a different proportion is required by law, the
Articles or these Regulations. At any meeting, whether a quorum is
present or not, the holders of shares entitling them to exercise a
majority of the voting power of the shares represented by
shareholders present in person or by proxy may adjourn from time to
time and from place to place without notice other than by
announcement at the meeting; provided, however, that such
adjournment shall not preclude any class of shareholders from
taking any action which they may be entitled to take pursuant to
the provisions of the Articles.
SECTION 7. Proxies. Any shareholder of record, entitled to
attend a shareholders' meeting or to vote thereat or to assent or
give consents in writing, may be represented at such meeting or
vote thereat or assent or give consents in writing, as the case may
be, or exercise any other of his rights, by proxy or proxies which,
executed as hereinafter provided, shall be filed with the Secretary
of the corporation at or before such meeting.
The instrument appointing a proxy shall be in writing and
signed by the person making the appointment. A copy of a telegram,
cablegram, wireless message or photogram appearing to have been
transmitted by a shareholder, or a photographic, photostatic or
other reproduction of a writing appearing to have been signed by a
shareholder, appointing a proxy or proxies, shall be deemed to be
and may be accepted and recognized as a sufficient proxy writing.
No appointment of a proxy shall be valid after the expiration
of eleven months after it is made, unless the writing specifies the
date on which it is to expire or the length of time it is to
continue in force.
The person so appointed need not be a shareholder. A vote in
accordance with the terms of a proxy shall be valid notwithstanding
the previous death or incapacity of the principal or revocation of
his appointment or the transfer of shares voted, unless notice in
writing of such death, incapacity, revocation or transfer shall
have been received at the office of the corporation at least
twenty-four hours before the meeting. The presence of a
shareholder at a meeting shall not operate to revoke a proxy given
by him unless and until notice of such revocation is given to the
corporation in writing or in open meeting.
SECTION 8. Inspectors of Election. The Board of Directors of the
corporation may, by resolution adopted at a meeting of the Board of
Directors held in advance of any meeting of shareholders, appoint
three Inspectors of Election to act at such meeting of shareholders
or any adjournment thereof. If Inspectors of Election are not so
appointed, the officer or person acting as chairman of any such
shareholders' meeting shall make such appointment. In case any
person appointed as an Inspector of Election shall fail or refuse
to appear or to act, the vacancy may be filled by appointment made
at the shareholders' meeting by the officer or person acting as
chairman.
The decision, act or certificate of a majority of the
Inspectors of Election shall be effective in all respects as the
decision, act or certificate of all.
The Inspectors of Election shall determine the number of
shares outstanding, the voting power of each, the shares
represented at the meeting, the existence of a quorum, the
authenticity, validity and effect of proxies, receive votes,
ballots, assents or consents, hear and determine all challenges and
questions in any way arising in connection with the vote, count and
tabulate all votes, assents and consents, determine and announce
the result, and do such as may be proper to conduct the election or
vote with fairness to all shareholders of the corporation.
On request, the Inspectors of Election shall make a report in
writing of any challenge, question or matter determined by them and
make and execute a certificate of any fact found by them.
Any certificate of the Inspectors of Election shall be prima
facie evidence of the facts stated therein and of the vote as
certified by them.
No Inspector of Election need be a shareholder of the
corporation.
ARTICLE IV
DIRECTORS
SECTION 1. Number of Directors. The number of directors of the
corporation shall be not less than three (3), provided that where
all shares of the corporation are owned of record by one or two
shareholders, the number of directors may be less than three but
not less than the number of shareholders. The number of directors
determined within the limits aforesaid may be increased or reduced
by action of the Board of Directors upon the vote of a majority of
the Board at a meeting or by action without a meeting or by the
vote of the holders of record of shares entitling them to exercise
a majority of the voting power present in person or by proxy at any
meeting for the election of directors.
SECTION 2. Election of Directors. The election of directors shall
take place at the annual meeting of shareholders, but if the annual
meeting is not held or directors are not elected thereat or if a
class of shareholders become entitled to the election of directors
pursuant to the provisions of the Articles, they may be elected at
a special meeting called and held for that purpose.
Within sixty days after his election, each director shall
qualify either (a) by accepting in writing his election as a
director, or (b) by acting at a meeting of the Board of Directors.
SECTION 3. Term of Office. Subject to the provisions of the
Articles, directors shall hold office for one year and until their
successors are elected and qualified.
Directors need not be shareholders of the corporation.
SECTION 4. Vacancies. Subject to the provisions of the
Articles, the remaining directors, though less than a majority of
the whole Board, may by a vote of a majority of this number fill
any vacancy in the Board of Directors and the person so elected
shall hold office until an election to fill such vacancy is had.
Subject to the provisions of the Articles, shareholders entitled to
elect directors shall have the right to fill any vacancy in the
Board (whether the same has been temporarily filled by the
remaining directors or not) at any meeting of the shareholders
called for that purpose, and any director elected at any such
meeting of the shareholders shall serve until the next annual
meeting of shareholders and until his successor is chosen.
Within the meaning of this section a vacancy or vacancies
shall be deemed to exist in case the shareholders shall increase
the authorized number of directors but shall fail at the meeting at
which such increase is authorized or an adjournment thereof, to
elect the additional directors so provided for, or in case the
shareholders fail at any time to elect the full number of
authorized directors.
ARTICLE V
POWERS AND MEETINGS OF THE BOARD OF DIRECTORS
SECTION 1. General Powers of Board. The powers and capacity of the
corporation shall be vested in and its authority shall be
exercised, its business and affairs conducted and its property
controlled by the Board of Directors, subject nevertheless to the
Articles and these Regulations.
SECTION 2. Other Powers. Without prejudice to the general
powers conferred by or implied in the last preceding section, the
directors, acting as a Board, shall have power,
(a) To fix, define and limit the powers and duties of all
officers;
(b) To fix the salaries of all officers;
(c) To appoint, and at their discretion to remove, or
suspend, such subordinate officers, assistants, managers, agents
and employees as the directors may from time to time think fit and
to determine their duties and fix their compensation;
(d) To require any officer, agent or employee of the
corporation to furnish a bond for faithful performance in such
amount and with such sureties as they may approve;
(e) To designate a depositary or depositaries of the funds of
the corporation and the officer or officers or other persons who
shall be authorized to sign notes, checks, drafts, contracts,
deeds, mortgages, and other instruments on behalf of the
corporation;
(f) To appoint and remove transfer agents and/or registrars
for the corporation's shares;
(g) To authorize the payment of compensation to the Directors
for services to the corporation, including fees for attendance at
meetings of the Board of Directors, and to determine the amount of
such compensation and fees.
SECTION 3. Meetings of the Board. A meeting of the Board of
Directors may be held immediately following the adjournment of each
shareholders' meeting at which directors are elected, and notice of
such meeting need not be given.
The Board of Directors may, by resolution, provide for other
regular meetings of the Board.
Special meetings of the Board of Directors may be held at any
time upon call of the Chairman of the Board, the President, a Vice-
President, or any two members of the Board.
Notice in writing of meetings of the Board of Directors shall
be delivered personally to each director or sent to each director
by mail, telegram, cablegram or radiogram at least two (2) days
prior to the meeting, but such notice may be waived by any director
either before or after the holding thereof. The notice need not
specify the purpose of the meeting. Unless otherwise indicated in
the notice thereof, any business may be transacted at any regular
or special meeting.
Meetings of the Board of Directors may be held at its
principal office or at any other place or places within or without
the State of Ohio.
Meetings of the Board shall be presided over the Chairman of
the Board, or, in his absence, by the President, or, in the absence
of both, by a Vice-President, or, if none of such officers is
present, by a chairman to be elected at the meeting. The Secretary
of the corporation shall act as Secretary of such meeting if
present. In his absence the chairman may appoint a Secretary.
SECTION 4. Quorum. A majority of the Board of Directors shall
constitute a quorum for the transaction of business, provided that
whenever less than a quorum is present at the time and place
appointed for any meeting of the Board, a majority of those present
may adjourn the meeting from time to time without notice other than
by announcement at the meeting until a quorum shall be present.
ARTICLE VI
OFFICERS
SECTION 1. General Provisions. The Board of Directors shall
choose a President, a Secretary and a Treasurer and may also choose
a Chairman of the Board, one or more Vice Presidents, Assistant
Secretaries and Assistant Treasurers and such other officers as may
be deemed necessary. The Chairman of the Board, if any, shall be,
but the other officers may or may not be, chosen from among the
members of the Board of Directors. Any two or more of such
offices, other than that of President and Vice President, Secretary
and Assistant Secretary, or Treasurer and Assistant Treasurer, may
be held by the same person, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity.
SECTION 2. Term of Office. The officers of the corporation shall
hold office during the pleasure of the Board of Directors and
unless sooner removed by the Board of Directors, until the
organization meeting of the Board of Directors following the date
of their election or until their successors are chosen and
qualified.
The Board of Directors may remove any officer at any time with
or without cause, by a majority vote.
A vacancy in any office, however created, shall be filled by
the Board of Directors.
SECTION 3. Duties of Officers. The officers of the corporation
shall have such duties as usually pertain to their offices, except
as modified by the Board of Directors and shall also have such
other powers and duties as may be conferred or enjoined upon them
by the Board of Directors or by law.
ARTICLE VII
EXECUTIVE AND OTHER COMMITTEES
The Board of Directors may create an executive committee or
any other committee or committees of the Board, and may authorize
the delegation to any such committee of any of the powers of the
Board and may define the extent to which such powers may be
delegated.
Any such committee shall be composed of members of and shall
be appointed by the Board of Directors to serve until otherwise
ordered, and any such committee shall act only in the intervals
between meetings of the Board of Directors and shall be subject at
all times to the control and direction of the Board of Directors.
Unless otherwise provided in the Regulations or ordered by the
Board of Directors, any such committee may act by a majority of its
members at a meeting or by a writing signed by all its members.
An act, or authorization of an act, by any such committee
within the scope of the power delegated to it, shall be as
effective for all purposes as the act or authorization of the Board
of Directors.
ARTICLE VIII
TRANSACTIONS OF DIRECTORS
A director of this corporation shall not be disqualified by
his office from dealing or contracting with this corporation either
as a vendor, purchaser, or otherwise, nor shall any transaction,
action or contract of this corporation be void or voidable with
respect to the corporation by reason of the fact that any director
or any firm of which any director is a member or any corporation of
which any director is a shareholder or director, is in any way
interested in such transaction, action or contract, provided that
such transaction, action or contract is or shall be authorized,
ratified or approved either (1) by a vote of a majority of a quorum
of the Board of Directors without counting in such majority of a
quorum any director so interested or member of a firm so interested
or a shareholder or director of a corporation so interested, or (2)
by a vote at any stockholders' meeting of the holders of record of
shares entitled to exercise a majority of the voting power of all
the outstanding shares of stock of this corporation entitled to
vote or by writing or writings signed by holders of shares entitled
to exercise such a majority of voting power, or if such
transaction, action or contract is fair as to the corporation as of
the time it is authorized or approved by the directors or the
shareholders; nor shall any director be liable to account to this
corporation for any profits realized by him from or through any
such transaction, action or contract of this corporation
authorized, ratified or approved as aforesaid by reason of the fact
that he or any firm of which he is a member or any corporation of
which he is a shareholder or director, was interested in such
transaction, action or contract. Nothing herein contained shall
create any liability in the events above described or prevent the
authorization, ratification or approval of such transactions,
actions or contracts in any other manner provided by law; nor shall
anything herein be considered as in any way affecting the rights of
the corporation or of any person interested, on account of any
fraud in connection with any such transaction, action or contract.
ARTICLE IX
INDEMNIFICATION
SECTION 1. Actions by Third Parties. To the fullest extent permitted
by law, the corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding (formal or
informal), whether civil, criminal, administrative, or
investigative, including all appeals (other than an action, suit or
proceeding by or in the right of the corporation) by reason of the
fact that such person, such person's testator or intestate, is or
was a director, officer, employee or agent of the corporation, or
of any subsidiary or affiliate of the corporation, or is or was
serving at the request of the corporation as a director, trustee,
officer, partner, employee, member, manager, or agent of another
corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust,
employee benefit plan, or other enterprise, against expenses
(including attorney's fees), judgments, decrees, fines (including
excise taxes), penalties, and amounts paid in settlement actually
and reasonably incurred by such person in connection with such
action, suit, or proceeding and all expenses and attorney's fees
incurred in successfully asserting a claim for indemnification
pursuant to this Section 1, if such person acted in good faith and
in a manner such person reasonably believed to be in or not opposed
to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. The termination of any action,
suit, or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good
faith and in a manner such person reasonably believed to be in or
not opposed to the best interest of the corporation, and, with
respect to any criminal action or proceeding, that such person had
reasonable cause to believe that his or her conduct was unlawful
SECTION 2. Actions By or In the Right of the Corporation. To the fullest
extent permitted by law, the corporation shall indemnify any person
who was or is a party or is threatened to be made a party, to any
threatened, pending, or completed action or suit, including all
appeals, by or in the right of the corporation to procure a
judgment in its favor, by reason of the fact that such person, such
person's testator or intestate, is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer,
partner, employee, member, manager or agent of another corporation,
domestic or foreign, nonprofit or for profit, a limited liability
company, or a partnership, joint venture, trust, employee benefit
plan, or other enterprise, against expenses (including attorney's
fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit and all
expenses and attorney's fees incurred in successfully asserting a
claim for indemnification pursuant to this Section 2, if such
person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in
respect of any of the following:
(a) any claim, issue, or matter as to which such person is
finally adjudged to be liable for negligence or misconduct in the
performance of his or her duty to the corporation unless, and only
to the extent that, the court of common pleas or the court in which
such action or suit was brought determines upon application that,
despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as the court of common
pleas or such other court shall deem proper;
(b) any action or suit in which the only liability asserted
against a director is pursuant to Section 1701.95 of the Ohio
Revised Code.
SECTION 3. Method of Determining Whether Standards for Indemnification
Have Been Met. In any case in which a director, officer, employee or
agent of the corporation (or a representative of the estate of such
director, officer, employee or agent) requests indemnification,
upon such person's request the Board of Directors shall meet within
sixty (60) days thereof to determine whether such person is
eligible for indemnification in accordance with the standards set
forth in Sections 1 and 2 of this Article IX. Such determination
shall be made as follows:
(a) by a majority vote of a quorum consisting of directors of
the indemnifying corporation who were not and are not parties to or
threatened with the action, suit or proceeding in respect of which
indemnification is sought; or
(b) if the quorum described in division (a) of this Section
3 is not obtainable or if a majority vote of such quorum so
directs, in a written opinion by independent legal counsel other
than an attorney, or a firm having associated with it an attorney,
who has been retained by or who has performed services for the
corporation, or any person to be indemnified, within the past five
years; or
(c) by the shareholders; or
(d) by the court of common pleas or the court in which such
action, suit or proceeding was brought; or
(e) if the person seeking indemnification is neither a
director nor an officer of the corporation, by the Chairman of the
Board.
Notification of any determination made by the disinterested
directors under division (a) of this Section 3 or by independent
legal counsel under division (b) of this Section 3 shall be
delivered as required by the Ohio Revised Code. Notwithstanding
the foregoing, a determination of eligibility for indemnification
may be made in any manner permitted by law.
SECTION 4. Advancement of Expenses. To the fullest extent
permitted by law, the corporation shall promptly advance expenses,
including attorney's fees, as they are incurred by any person who
was or is a party or threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding
(formal or informal), whether civil, criminal, administrative or
investigative, including all appeals and whether by or in the right
of the corporation or otherwise, by reason of the fact that such
person, such person's testator or intestate, is or was a director,
officer, employee or agent of the corporation, or of any subsidiary
or affiliate of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer,
partner, employee, member, manager or agent of another corporation,
domestic or foreign, nonprofit or for profit, a limited liability
company, or a partnership, joint venture, trust, employee benefit
plan, or other enterprise, upon request of such person and receipt
of an undertaking by or on behalf of such director, officer,
employee or agent to repay amounts advanced to the extent that is
ultimately determined that such person was not eligible for
indemnification in accordance with the standards set forth in
Sections 1 and 2 of this Article IX.
SECTION 5. Contract rights; Non-exclusivity of Indemnification;
Contractual Indemnification. The foregoing provisions of this Article IX
shall be deemed to be a contract between the corporation and each director,
officer, employee or agent of the corporation, or its subsidiaries
or affiliates, and any modification or repeal of this Article IX or
such provisions of the Ohio General Corporation Law shall not
diminish any rights or obligations existing prior to such
modification or repeal with respect to any action or proceeding
theretofore or thereafter brought; provided, however, that the
right of indemnification provided in this Article IX shall not be
deemed exclusive of any other rights to which any director,
officer, employee or agent of the corporation may now be or
hereafter become entitled apart from this Article IX, under any
applicable law including the Ohio General Corporation Law.
Irrespective of the provisions of this Article IX, the Board of
Directors may, at any time or from time to time, approve
indemnification of directors, officers, employees or agents to the
full extent permitted by the Ohio General Corporation Law at the
time in effect, whether on account of past or future actions or
transactions. Notwithstanding the foregoing, the corporation shall
enter into such additional contracts providing for indemnification
and advancement of expenses with directors, officers or employees
of the corporation or its subsidiaries or affiliates as the Board
of Directors shall authorize, provided that the terms of any such
contract shall be consistent with the provisions of the Ohio
General Corporation Law.
SECTION 6. Miscellaneous Provisions. As used in this Article IX,
the term "employee" shall include, without limitation, any
employee, including any professionally licensed employee, of the
corporation. Such term shall also include, without limitation, any
employee, including any professionally licensed employee, of a
subsidiary or affiliate of the corporation who is acting on behalf
of the corporation.
The indemnification provided by this Article IX shall be
limited with respect to directors, officers and controlling persons
to the extent provided in any undertaking entered into by the
corporation or its subsidiaries or affiliates, as required by the
Securities and Exchange Commission pursuant to any rule or
regulation of the Securities and Exchange Commission now or
hereafter in effect.
The corporation may purchase and maintain insurance or furnish
similar protection, including, but not limited to, trust funds,
letters of credit, or self-insurance, on behalf of or for any
person described in this Article IX against any liability which may
be asserted against such person and incurred by such person in any
such capacity, or arising out of such person's status as such,
whether or not the corporation would have the power to indemnify
such person against such liability under the provisions of this
Article IX or otherwise.
If any provision of this Article IX shall be found to be
invalid or limited in application by reason of any law, regulation
or proceeding, it shall not affect any other provision or the
validity of the remaining provisions hereof.
The provisions of this Article IX shall be applicable to
claims, actions, suits or proceedings made, commenced or pending
after the adoption hereof, whether arising from acts or omissions
to act occurring before or after the adoption hereof.
ARTICLE X
CERTIFICATES FOR SHARES
SECTION 1. Form and Execution. Certificates for shares,
certifying the number and class of fully paid shares owned, shall
be issued to each shareholder in such form as shall be approved by
the Board of Directors. Such certificates shall be signed by the
Chairman of the Board, the President or a Vice-President and by the
Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer; provided, however, that if such certificates
are countersigned by a transfer agent, who is not an employee of
the corporation, and by a registrar, the signatures of any such
officers of the corporation and the seal of the corporation upon
such certificates may be facsimiles, engraved, stamped or printed.
In case any officer or officers who shall have signed or whose
facsimiles signature or signatures shall have been used, printed or
stamped on any such certificate or certificates shall cease to be
such officer or officers of the corporation, whether because of
death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the corporation, such
certificate or certificates, when authenticated by the endorsement
thereon of the signature of a transfer agent or registrar, may
nevertheless be adopted and used by the corporation and be issued
and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or
signatures shall have been used thereon had not ceased to be such
officer or officers of the corporation.
SECTION 2. Lost, Mutilated or Destroyed Certificates: If any certificate
for shares is lost, mutilated or destroyed, the Board of Directors
may authorize the issue of a new certificate in place thereof upon
such terms and conditions as it may deem advisable. The Board of
Directors in its discretion may refuse to issue such new
certificate, save upon the order of a court having jurisdiction.
ARTICLE XI
FISCAL YEAR
The fiscal year of the corporation shall end on the thirty-
first day of December in each year, or on such other day as may be
fixed from time to time by the Board of Directors.
ARTICLE XII
SEAL
The seal of the corporation shall be circular in form with the
words "AEP Energy Solutions, Inc.", and the date "1996" surrounding
the words "Corporate Seal". If deemed advisable by the Board of
Directors, duplicate seals may be provided and kept for the
necessary purposes of the corporation.
ARTICLE XIII
AMENDMENTS
This Code of Regulations may be changed, added to, amended, or
repealed at any meeting of shareholders called for that purpose by
the affirmative vote of the holders of record of shares entitling
them to exercise a majority of the voting power on such proposal,
or without a meeting, by the written consent of holders of record
of shares entitling them to exercise two-thirds (2/3) of the voting
power on such proposal.
Exhibit 1(c)
UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
AEP Power Marketing, Inc. ) Docket No. ER96- -000
FILING BY AEP POWER MARKETING INC. OF MARKET-BASED RATES
AND APPLICATION FOR BLANKET AUTHORIZATIONS AND WAIVERS
Pursuant to Part 35 of the Commission's Rules of Practice and
Procedure, 18 C.F.R., Part 35, there is herewith tendered for
filing on behalf of a corporation currently called AEP Power
Marketing, Inc. (hereinafter "AEP Power Marketing"), proposed Rate
Schedule MR (Attachment A), which allows AEP Power Marketing to
make wholesale sales of electricity in interstate commerce at
market-based rates. In addition, pursuant to Rule 204 of the
Commission's Rules of Practice and Procedure, 18 C.F.R. 385.204,
AEP Power Marketing applies to the Commission for blanket
authorization to make such sales and for such other waivers and
authorizations as have been granted to other power marketers.
I. COMMUNICATIONS AND DOCUMENTS.
All communications regarding this matter should be addressed
to:
Dr. Charles A. Falcone
Senior Vice President
System Power Markets
American Electric Power
Service Corporation
1 Riverside Plaza
Columbus, Ohio 43215
(614) 223-2770
and
Edward J. Brady, Esq.
Kevin F. Duffy, Esq.
American Electric Power
Service Corporation
1 Riverside Plaza
Columbus, Ohio 43215
(614) 223-1617
The documents submitted with this filing are the following:
1) This application;
2) Attachment A - Proposed Rate Schedule MR
3) Attachment B - Market Analysis
4) Attachment C - Code of Conduct
5) Attachment D - Copies of Securities and Exchange
Commission Regulations and Orders
6) Attachment E - Form of Notice
II. DESCRIPTION OF AEP POWER MARKETING AND AFFILIATED
COMPANIES.
AEP Power Marketing is a subsidiary of American Electric Power
Company, Inc. ("AEP"), which is a registered public utility holding
company under the Public Utility Holding Company Act ("PUHCA").
AEP has seven operating company subsidiaries, which are public
utilities under the Federal Power Act ("FPA") and which sell
electricity at retail and wholesale. AEP's operating subsidiaries
are each authorized to do business as American Electric Power, and
may be sometimes collectively referred to in this filing, as "AEP".
Another subsidiary of AEP, American Electric Power Service
Corporation ("AEPSC"), provides to the operating companies, and
certain other AEP subsidiaries, certain services such as
accounting, engineering, tax, legal, management, maintenance,
marketing, information systems and administration. Pursuant to
PUHCA and regulations promulgated and orders issued thereunder,
such services must be performed at cost.
AEP Power Marketing is a corporation which intends to engage
in certain activities including (1) marketing power and energy at
wholesale which it purchases from others, in a restricted market
area as described later in this filing; (2) marketing power and
energy at retail; (3) brokering power and energy at wholesale or
retail; and (4) acting as an exempt wholesale generator ("EWG"), in
which case AEP Power Marketing will seek the necessary
certification from the Commission.
AEP Power Marketing will not buy power from or sell power to
any of the AEP operating companies, nor broker power and energy
produced by the AEP operating companies without specific
authorization of any such transaction by the Commission.
AEP Power Marketing proposes to restrict the market area in
which it sells power and energy at wholesale by defining as an
eligible customer under Rate Schedule MR, any electric utility,
rural electric cooperative or municipality, power authority or
agency which is not directly connected with the AEP System or with
any such entity that is directly connected with the AEP System.
Thus, AEP Power Marketing will market wholesale power and energy
only in "third tier" markets and beyond from AEP's standpoint.
III. DESCRIPTION OF PROPOSED RATE SCHEDULE MR.
Under proposed Rate Schedule MR, AEP Power Marketing would be
able to sell power or energy at wholesale in varying amounts to
eligible customers, at varying levels of firmness or priority of
service, in accordance with various delivery schedules. The rates
for such sales would be negotiated between AEP Power Marketing and
the purchaser. AEP Power Marketing will file executed service
agreements under the rate schedule with the Commission.
AEP Power Marketing requests blanket authorization to make
such sales, in the same manner that such authorization has been
granted to numerous power marketers. AEP Power Marketing requests
that the rate schedule and authorizations be made effective
immediately upon acceptance.
IV. REQUEST FOR WAIVERS.
AEP Power Marketing requests that the Commission grant it the
following authorizations and waivers of various Commission
regulations consistent with those granted other power marketers:
(A) Subparts B and C of Part 35, except Sections 35.12 (a), 35.13
(b), 35.15 and 35.16; (B) Parts 41.101 and 141; (C) Part 45, to
allow abbreviated filings with respect to interlocking
directorships; and (D) blanket approval of issuance of securities
or assumptions of liabilities pursuant to Section 204 of the FPA.
AEP Power Marketing will submit the filings, including quarterly
reports of transactions, required of other power marketers.
IV. DEMONSTRATION OF COMPLIANCE WITH COMMISSION REQUIREMENTS.
In several decisions, the Commission has allowed power
marketers affiliated with regulated public utilities to sell power
and energy at market-based rates, and has granted the waivers and
authorizations requested herein to such power marketers, where it
is demonstrated that the seller (and each of its affiliates) does
not have, or has adequately mitigated, market power in generation
and transmission, and cannot erect other barriers to entry. See,
e.g., US Gen Power Services, L.P., 73 FERC paragraph 61,302 (1995).
The Commission also examines whether there is any opportunity for
affiliate abuse or reciprocal dealing. (Id.). AEP Power Marketing
meets the Commission's standards for market-based rates and
appropriate waivers.
A. AEP Power Marketing Lacks Market Power.
AEP Power Marketing owns no generation, transmission or
distribution facilities, and has no franchised market area.
Therefore, it does not have market power in either generation or
transmission.
B. AEP Power Marketing's Affiliates Lack Generation
Market Power.
In Heartland Energy Services, Inc., 68 FERC paragraph 61,223
(1994) ("Heartland"), the Commission indicated that a marketer
affiliated with a utility can demonstrate that the utility lacks
market dominance in generation by submitting a market analysis that
indicates that the affiliated utility lacks market power over
generation in the relevant markets. In all instances in which the
Commission has examined market analyses, the relevant market has
been held to be "first-tier" utilities, that is, utilities directly
interconnected with AEP operating companies, See, e.g., Intercoast
Power Marketing Co., 61 FERC paragraph 61,248 (1994). In its
recent order implementing open access transmission nationally, the
Commission reaffirmed this "first-tier analysis, although the order
indicates that the Commission will consider evidence that open
access transmission will broaden markets and thus dilute market
power of any participant, See, Order No. 888, 611 Fed. Reg. 21,540
(1996) Slip Op., Preamble, p. 74.
Submitted along with this filing as Attachment B is a market
analysis performed by National Economic Research Associates,
("NERA"). As explained in the affidavit of Dr. John Landon
accompanying the analysis, NERA examined two product markets in the
relevant first-tier geographic market -- short-term capacity and
economy energy.
The short term capacity market is defined as the market for
firm capacity over the period ending in 1998. NERA assumes that
after that date, new capacity can be constructed. The market for
such long-term capacity is competitive, because there are no
barriers to entry and, pursuant to the Commission's action, there
is open access transmission. The Commission therefore does not
require applicants for market-based rates to submit evidence of
generation dominance in long-term bulk power markets, See,
Intercoast, supra, at p. 62,130, n. 2; LG&E Power Marketing, 68
FERC at p. 62,121, n. 5.
NERA examined AEP's share of the short-term capacity market in
terms of uncommitted summer capacity, i.e., summer capacity plus
purchases, net of firm sales, that is in excess of summer peak load
requirements plus a 6% operating reserve. Using this measure, NERA
finds that AEP's share of uncommitted capacity in the entire first-
tier market averages less than 20%.
NERA measured potential market power in economy energy in two
ways. First, since economy energy can be sold from any capacity
resource of a utility, NERA examined AEP's potential dominance in
generating capacity. For each first tier utility, NERA examined
the geographic market consisting of that utility and all of its
direct interconnections. AEP's share of generation in these
markets never exceeds 12%. As a second measure of concentration,
in the economy energy market, NERA examined historical data on
actual purchases for the period 1992-1994. This measure is a quite
restrictive indicator of market power because it examines which
utilities were actually the cheapest sellers in a given market, not
which utilities could potentially raise prices in this market. The
historic data shows only two cases where AEP had an average market
share above 35%. In one of these, economy sales to Duke Power, the
share was 42%. The other cases involve the Columbus Division of
Electricity. In this case, the municipal utility does not transact
to a significant degree in the economy energy market. If it were
to participate more actively, it has ample alternatives besides
AEP.
The Commission has used 20% of either total generating
capacity or uncommitted capacity as a benchmark, but not a "bright
line" in determining generation dominance, USGen Power Services,
supra. Since AEP averages less than 20% in uncommitted capacity
and well below 20% in total capacity, AEP clearly lacks generation
dominance in relevant markets.
With respect to transmission constraints (see, e.g., Southern
Company Services, Inc., 75 FERC paragraph 61,130 (1996), the AEP
System is among the strongest transmission systems in the nation.
NERA points out that under normal operating conditions, the only
significant transmission constraint in AEP's system is in its
Appalachian Power service territory. AEP is taking steps to
relieve this constraint, and until such time as it is relieved and
thereafter, AEP will share available capacity on a
nondiscriminatory basis in accordance with Order No. 888. On the
basis of such facts and policies, NERA sees no significant
competitive impacts arising from this transmission constraint.
C. The Proposed Market Restriction Further Reduces
Generation Market Dominance.
While the accompanying market analysis demonstrates that under
accepted Commission standards, AEP lacks generation dominance
(which would be sufficient to satisfy this criterion in an
application for authority for AEP itself to charge market-based
rates), the Commission should keep in mind that AEP Power Marketing
proposes to voluntarily limit its market activities to third-tier
utilities vis-a-vis the AEP System and those beyond the third tier.
This restriction should greatly reduce, if not totally eliminate,
any concern that any possible generation market dominance in AEP's
market area could somehow be used to influence prices in the remote
market areas in which AEP Power Marketing proposes to operate.
D. AEP Has Adequately Mitigated Transmission Market Power.
In American Electric Power Service Corp., et al., 72 FERC
paragraph 61,207 (1995), at pp. 62,059-66, the Commission held that
a utility's adoption of the non-rate terms and conditions of the
Commission's pro-forma transmission tariffs issued in accordance
with the then-pending Notice of Proposed Rulemaking in Docket No.
RM95-8-000, subject to revision in accordance with the Final Rule
adequately mitigates transmission market power. In fact, under
such circumstances, if all other requirements are met, market-based
rates will be accepted for filing without refund liability. Id.
AEP has adopted the non-price terms and conditions of the pro-forma
tariffs, and those tariffs have been accepted for filing by the
Commission in Docket No. ER93-540-000, 74 FERC 61,132 (1996). On
July 9, 1996, AEP filed an open access transmission tariff, as
required by Order No. 888, in the form of the pro-forma tariff
attached to Order No. 888 (with certain minor changes previously
approved by the Commission).
E. There Are No Other Significant Barriers to Entry.
AEP does not have the ability to erect barriers to entry to
markets for sales of power and energy. Although AEP, through
affiliates, owns some plant sites, coal supplies and coal
transportation, it does not possess significant market power with
respect to these inputs and therefore has no ability, through
ownership of such inputs, to erect any barrier to any participant
in markets for the sale of power and energy, even in AEP's market
area. It necessarily follows that any possibility of erecting such
barriers in the restricted market area sought to be served by AEP
Power Marketing, is nonexistent.
F. AEP Power Marketing Has Adopted Procedures to Guard
Against Any Possibility of Affiliate Abuse.
1. Inter-Affiliate Power Trades.
In accordance with the requirements announced in Heartland
Energy, supra, and subsequent decisions, AEP Power Marketing will
not buy power or energy from or sell power or energy to any AEP
operating company, nor broker power produced by the AEP System,
without Commission approval of the specific transaction involved.
2. Standards of Conduct.
On April 24, 1996, the Commission issued Order No. 889, which
required public utilities subject to the Commission's jurisdiction
to implement Open Access Same-time Information Networks ("OASIS"),
and to implement Standards of Conduct set forth in the Commission's
regulations. The Standards of Conduct require that employees of
the public utility engaged in transmission and reliability
functions operate independently of employees of the utility and its
affiliates engaged in merchant functions. An employee engaged in
merchant functions cannot have preferential access to facilities
such as the control room that are involved in transmission and
reliability functions. Merchant employees cannot have access to
any transmission information that is not available to other
transmission customers. Employees engaged in transmission and
reliability functions cannot disclose to merchant employees
information about the utility's transmission system or other
systems that is not published on the OASIS, or information that is
so posted, but is not contemporaneously available to all OASIS
users. A transmission provider may not disclose to merchant
employees any market information obtained in connection with its
transmission responsibilities.
Submitted with this Application (Attachment C) is a Code of
Conduct which shall govern relationships and transactions between
employees of AEP and its affiliates and those of AEP Power
Marketing. The Code of Conduct provides that:
1) All employees of AEP and AEP Power Marketing engaged in
the merchant function, i.e., the sale of power and energy at
wholesale, shall comply with the Standards of Conduct promulgated
by the Commission in Order No. 889 and set forth at Section 37.2 of
the Commission's regulations, as those Standards relate to merchant
employees.
2) No employee of AEP or its affiliates shall share market
information with any employee of AEP Power Marketing unless such
information is already publicly available or is simultaneously made
publicly available.
3) No employee of AEP Power Marketing shall share market
information with any employee of AEP or AEP's other affiliates
unless such information is already publicly available or is
simultaneously made publicly available.
4) Any employee of AEP or any of its other affiliates, who
is engaged in the merchant function who may also from time to time
be engaged in the merchant function on behalf of AEP Power
Marketing shall abide by the following restrictions:
a) Such employee shall not use any non-public market
information gained while engaging in the merchant function on
behalf of AEP for the benefit of AEP Power Marketing;
b) Such employee shall not use any non-public market
information gained while engaging in the merchant function on
behalf of AEP Power Marketing for the benefit of AEP or any of its
other affiliates.
3. Market Information.
One of the requirements of Heartland, supra, was that an
affiliated marketer must have adequate procedures in place to
assure that it does not share market information with its
affiliated utility. In Wholesale Power Services, Inc, 72 FERC
paragraph 61,284 (1995), an affiliated marketer asked for a
modification of the information sharing requirements, to require
that only information related to transmission service be subject to
the disclosure rules, because generation markets are competitive.
The Commission rejected the request as premature, noting that the
utility system involved engaged in both generation and transmission
functions, and stated that it is difficult to distinguish between
information purely related to generation and that purely related to
transmission. The Commission said "Until we are able to determine
that such a distinction can be made in a workable manner, it is
premature to grant [the] request." (Id., at p. 62,227).
The above-described Code of Conduct prohibits any employee of
AEP or its affiliates from sharing market information with any
employee of AEP Power Marketing, and vice-versa. However, inasmuch
as AEP Power Marketing may, at least initially, share employees
with AEPSC, there may be certain limited instances in which such
shared employees gain market information in their capacity of a
merchant employee for either entity that could be available to the
other. The geographical limitation on AEP Power Marketing's
activities described above (i.e., it will market wholesale power
and energy only to buyers in the third tier vis-a-vis AEP, and
beyond) is designed to avoid any such instances. Since AEP and AEP
Power Marketing will not be selling power and energy in the same
markets, there would be no opportunity for either entity to use any
specific marketing information in favor of or at the expense of the
other. Nevertheless, in order to remove whatever concern might
remain regarding the potential for affiliate abuse, the Code of
Conduct provides that no such shared employee shall use market
information obtained in his or her capacity as a merchant employee
for AEP Power Marketing for the benefit of AEP or its affiliates,
or vice-versa.
4. Non-Power Goods and Services.
The provision of non-power goods and services to AEP Power
Marketing by associated companies is governed by Section 13 of
PUHCA, 15 U.S.C. section 79m, and rules, regulations and orders
thereunder, which require such goods and services to be priced at
cost. AEP Power Marketing plans to enter into a service agreement
with AEPSC pursuant to which personnel and other resources of AEPSC
may be made available to AEP Power Marketing. The service
agreement will require that AEPSC provide, account for and bill its
services to AEP Power Marketing utilizing a work order system, on
a full cost reimbursement system in accordance with Rules 90 and 91
of the Securities and Exchange Commission ("SEC") and the Order of
the SEC dated February 19, 1981 (HCAR No. 29122). (Attachment D).
In Wholesale Power Services; Southern Company Services, Inc;
and USGen, supra, the Commission conditioned market based rates on
a requirement that the public utility not provide non power goods
and services to its affiliated marketer at a price below the
utility's cost. In later decisions, however, the Commission has
required such goods and services to be provided at the higher of
cost or market price, See, e.g, Utilicorp United, Inc., 74 FERC
paragraph 61,138 (1996). AEPSC could not comply with a higher of
cost or market standard when market price is higher than cost,
because to do so would conflict with PUHCA and SEC regulations.
Moreover, the market value of some of the services involved may be
difficult to determine. AEP requests, therefore, that the Commission
apply its "no lower than cost" standard and not its "higher of cost or
market" standard to the provision of non-power goods and services.
The Commission also prohibits the affiliated marketer from
supplying non-power goods and services to its affiliated public
utility at a price that is above market. Although such
transactions are also subject to SEC regulation, it is not
anticipated that AEP Power Marketing will provide non-power goods
and services to any associated company.
G. AEP Power Marketing Will Inform the Commission of
Any Changes.
In addition, AEP Power Marketing will inform the Commission of
any change in status which would reflect a variance from the facts
described in this filing which the Commission may rely upon in
accepting for filing proposed Rate Schedule MR and granting the
relief sought in this filing.
WHEREFORE, AEP Power Marketing respectfully requests the
Commission to:
(1) Promptly accept for filing, without suspension,
investigation or refund liability, proposed Rate Schedule MR;
(2) Make the proposed rate schedule and associated waivers
and authorization effective immediately upon acceptance for filing;
(3) Grant to AEP Power Marketing the authorizations and
waivers granted by the Commission to other power marketers;
(4) Waive all other regulations with which this filing may
not comply; and
(5) Grant such other and further relief as is necessary or
appropriate in the premises.
Respectfully submitted,
_/s/ Kevin F. Duffy____
Edward J. Brady
Kevin F. Duffy
American Electric Power
Service Corporation
1 Riverside Plaza
Columbus, Ohio 43215
(614) 223-1617
Attorneys for the AEP Companies
<PAGE>
CERTIFICATE OF SERVICE
I hereby certify that a copy of the foregoing Filing by AEP
Power Marketing, Inc. of Market-Based Rates and Application for
Blanket Authorizations and Waivers was served upon the public
service commissions of Tennessee, Kentucky, Ohio, Michigan,
Indiana, West Virginia and Virginia by regular U.S. mail, this 23rd
day of July, 1996.
_/s/ Kevin F. Duffy__
Kevin F. Duffy
Public Utilities Commission of Ohio
180 East Broad Street
Columbus, Ohio 43215
Public Service Commission
of West Virginia
State Capitol Building
Charleston, WV 25305
Tennessee Public Service Commission
460 James Robertson Parkway
Nashville, TN 37243-0505
Kentucky Public Service Commission
P. O. Box 615
Frankfort, Kentucky 40602
Michigan Public Service Commission
6545 Mercantile Way
P. O. Box 30221
Lansing, MI 48909
Indiana Utility Regulatory Commission
Indiana Government Center South
302 West Washington Street, E306
Indianapolis, IN 46204
State Corporation Commission
Document Control Center
Jefferson Bldg., Level B1
1220 Bank Street
Richmond, VA 23219
Exhibit 1(d)
UNITED STATES OF AMERICA 76 FERC 61,307
FEDERAL ENERGY REGULATORY COMMISSION
Before Commissioners: Elizabeth Anne Moler, Chair;
Vicky A. Bailey, James J. Hoecker,
William L. Massey, and Donald F. Santa, Jr.
AEP Power Marketing, Inc. Docket No. ER96-2495-000
ORDER CONDITIONALLY ACCEPTING FOR FILING
PROPOSED MARKET-BASED RATES
(Issued September 20, 1996)
In this order, we will conditionally accept for filing the
market-based power sales rates filed by AEP Power Marketing, Inc.
(AEP Marketing), an affiliate of American Electric Power Company
and its public utility operating companies (AEP Operating
Companies).
Background
On July 23, 1996, AEP Marketing filed an application for
authorization to sell power at market-based rates. It requests the
same waivers and blanket authorizations as those afforded to other
power marketers. Among other things, AEP Marketing commits not to
sell power to or purchase power from any of the AEP Operating
Companies without prior Commission authorization under section 205
of the Federal Power Act (FPA), 16 U.S.C. section 824d (1994). AEP
Marketing also commits not to sell power to customers that are
directly interconnected with any of the AEP Operating Companies or
are separated from any of the AEP Operating Companies by one
intervening system.
Notice of AEP Marketing's application was published in the
Federal Register, 61 Fed. Reg. 41,392 (1996), with comments,
protests, and interventions due on or before August 13, 1996.
On August 12, 1996, the Consumer Advocate of the Public
Service Commission of West Virginia (Consumer Advocate) filed a
motion to intervene and protest.
On August 13, 1996, Public Service Electric and Gas Company
(PSE&G), Allegheny Power Service Corporation (Allegheny Power), and
Electric Clearinghouse, Inc. (Electric Clearinghouse) filed timely
motions to intervene raising no substantive issues. Also on August
13, 1996, the Public Service Commission of West Virginia (West
Virginia Commission) filed a notice of intervention raising no
substantive issues.
Discussion
Procedural Matter
Pursuant to Rule 214 of the Commission's Rules of Practice and
Procedure, 18 C.F.R. section 385.214 (1996), the notice of
intervention of the West Virginia Commission and the timely,
unopposed motions to intervene of the Consumer Advocate, PSE&G,
Allegheny Power and Electric Clearinghouse serve to make them
parties to this proceeding.
Market-Based Rates
The Commission allows power sales at market-based rates if the
seller and its affiliates do not have, or have adequately
mitigated, market power in generation and transmission, and cannot
erect other barriers to entry. In order for a public utility's
affiliate to demonstrate the absence or mitigation of market power,
the public utility must have on file with the Commission an open
access transmission tariff for the provision of comparable
services. The Commission also considers whether there is evidence
of affiliate abuse or reciprocal dealing. E.g., Progress Power
Marketing, Inc., 76 FERC paragraph 61,155 at slip op. at 2 (1996);
Northwest Power Marketing Company, L.L.C., 75 FERC paragraph 61,281
at 61,889 (1996); accord Heartland Energy Services, Inc., et al.,
68 FERC paragraph 61,223 at 62,060-63 (1994) (Heartland).
As we explain below, we find that, with the filing of an open
access pro forma compliance tariff by the AEP Operating Companies,
AEP Marketing's market-based rate application, as modified in
certain respects, meets these standards. See Promoting Wholesale
Competition Through Open Access Non-Discriminatory Transmission
Services by Public Utilities and Transmitting Utilities and
Recovery of Stranded Costs by Public Utilities and Transmitting
Utilities, Order No. 888, 61 Fed. Reg. 21,540 (May 10, 1996), III
FERC Stats. & Regs. paragraph 31,036 (1996) (Open Access Rule).
Accordingly, we will accept the proposed market-based rates for
filing, to become effective on the date of issuance of this order,
on the condition that AEP Marketing modify its code of conduct as
discussed below.
1. Generation Market Power
AEP Marketing does not own or control any generating
resources; however, the AEP Operating Companies own generation
facilities. In support of its application, AEP Marketing has
submitted a generation dominance analysis which indicates that,
with the AEP Operating Companies open access pro forma compliance
tariff, the AEP Operating Companies' market share of installed and
uncommitted capacity will not exceed levels the Commission
previously has found to be acceptable. See, e.g., Southwestern
Public Service Company, 72 FERC paragraph 61,208 at 61,966-67
(1995), reh'g pending; Louisville Gas & Electric Company, 62 FERC
paragraph 61,016 at 61,146 (1993). Accordingly, we find that AEP
Marketing meets the Commission s generation market power standard
for approval of market-based rates.
2. Transmission Market Power
When an affiliate of a public utility seeks authorization to
charge market-based rates, the Commission has required the public
utility to have an open access transmission tariff on file before
granting such authorization. See, e.g., Open Access Rule, FERC
Stats. & Regs. at 31,656-57; accord Southern Company Services,
Inc., 71 FERC paragraph 61,392 at 62,536 (1995); Heartland, 68 FERC
at 62,059-60. The AEP Operating Companies have filed an open
access pro forma transmission compliance tariff in Docket No. OA96-
183-000. For this reason, we find that AEP Marketing meets the
Commission's transmission market power standard for approval of
market-based rates.
3. Other Barriers to Entry/Reciprocal Dealing
We are satisfied with AEP Marketing's explanation that other
barriers to entry and reciprocal dealing considerations are not of
concern here.
4. Affiliate Abuse
We find that the code of conduct between AEP Marketing and the
AEP Operating Companies is deficient in two respects. The code of
conduct prohibits the sharing of all non-public market information
between the employees of AEP Marketing and the AEP Operating
Companies. This aspect of the code is entirely consistent with the
Commission s market-based rate requirements concerning the
possibility of affiliate abuse. See, e.g., UtiliCorp United, Inc.,
et al,, 75 FERC paragraph 61,168 at 61,556-57 (1996); Wholesale
Power Services, Inc., 72 FERC paragraph 61,284 at 62,227 (1995).
Nevertheless, paragraph 4 of the code of conduct states that any
employee who is engaged in the merchant function for both AEP
Marketing and the AEP Operating Companies may not use non-public
market information gained in his or her capacity with one entity to
benefit the other entity. The Consumer Advocate requests that the
Commission direct AEP Marketing to remove paragraph 4 of the code
in its entirety.
We agree with this suggestion. Paragraph 4 would, within its
broad terms, allow AEP Marketing and the AEP Operating Companies to
employ the same person simultaneously in the same merchant
function. In this manner, the provision would allow the affiliated
companies to exchange and maintain non-public market information,
in violation of other provisions (paragraphs 2 and 3) of the code
of conduct. Accordingly we will condition market-based rate
authority on the revision of the code of conduct to delete
paragraph 4.
AEP Marketing's filing also presents a problem concerning the
pricing of non-power goods and services. In its transmittal
letter, AEP Marketing states that if any of its affiliates provides
AEP Marketing with non-power goods and services, they are bound by
section 13 of the Public Utility Holding Company Act (PUHCA), 15
U.S.C. section 79m (1994), and certain rules of the Securities and
Exchange Commission (SEC) to charge at cost even if the market
price is greater.
As a general matter, we agree that we are bound in ratemaking
to adhere to the inter-affiliate prices the SEC sets for the sale
and purchase of non-power goods and services among affiliates of
registered holding companies. See Ohio Power Company v. FERC, 954
F.2d 779 (D.C. Cir.), cert. denied, 506 U.S. 981 (1992). However,
we are not aware of any provision in PUHCA that requires any
affiliate operating company to provide any non-power goods or
services to its marketing affiliate or to purchase any non-power
goods or services from its marketing affiliate. Moreover, we must
guard against the possibility of affiliate abuse in situations
where market-based rates are requested. In approving market-based
rates, we are allowing a departure from traditional cost-based FPA
regulation. In order to satisfy ourselves that market-based rates
will not lead to unjust and unreasonable results, we condition our
approval on the inclusion of a code of conduct that prohibits: (1)
the public utility with captive ratepayers, such as any of the AEP
Operating Companies, from selling non-power goods or services to
any affiliate at a price below its cost or market price, whichever
is higher; and (2) the public utility from purchasing non-power
goods or services from any affiliate at a price above market price.
See, e.g., Peco Energy Company, 74 FERC paragraph 61,336 at 62,048
(1996); PacifiCorp Power Marketing, Inc., 74 FERC paragraph 61,139
at 61,495 (1996); USGen Power Services, L.P., 73 FERC paragraph
61,057 at 61,845 (1995). We have imposed the same requirements in
all recent cases involving requests for authorization to charge
market-based sales rates, including those involving the affiliates
of registered holding companies. See Southern Company Services,
Inc., 75 FERC paragraph 61,130 at 61,444, order granting
clarification, 75 FERC paragraph 61,353 (1996); Northeast Utilities
Service Company, 74 FERC paragraph 61,135 at 61,478, order on
compliance filing, 74 FERC paragraph 61,355 at 62,091 & n.10
(1996), reh'g pending. Accordingly, we will direct AEP Marketing
to amend its code of conduct to reflect the Commission's current
standard.
Waivers, Authorizations, and Reporting Requirements
AEP Marketing has requested the following authorizations and
waivers of various Commission regulations consistent with those
granted other power marketers: (1) Subparts B and C of Part 35,
except sections 35.12(a), 35.13(b), 35.15 and 35.16; (2) Parts 41,
101 and 141; (3) abbreviated filings under Part 45; and (4) blanket
authorization for issuances of securities or assumptions of
liabilities pursuant to FPA section 204, 16 U.S.C. section 824c
(1994). We will grant the requested authorizations and waivers to
the extent granted to other power marketers, conditioned on the
requirements discussed above concerning affiliate abuse. See,
e.g., LG&E Power Marketing, Inc., et al., 68 FERC paragraph 61,247
at 62,124 (1994).
Consistent with previous Commission decisions, we will require
AEP Marketing to file quarterly reports detailing the purchase and
sale transactions undertaken in the prior quarter. This requirement
is necessary to ensure that contracts relating to rates and
services are on file as required by section 205(c) of the FPA, 16
U.S.C. section 824d(c) (1994), and to allow the Commission to
evaluate the reasonableness of the charges and to provide for
ongoing monitoring of the marketer's ability to exercise market
power. See Heartland, 68 FERC at 62,065-66.
Additionally, we will direct AEP Marketing to inform the
Commission promptly of any change in status that would reflect a
departure from the characteristics the Commission has relied upon
in approving market-based pricing. These include, but are not
limited to: (1) ownership of generation or transmission facilities
or inputs to electric power production other than fuel supplies; or
(2) affiliation with any entity not disclosed in the filing that
owns generation or transmission facilities or inputs to electric
power production, or affiliation with any entity not disclosed in
the filing that has a franchised service area. See, e.g., Morgan
Stanley Capital Group, 69 FERC paragraph 61,175 at 61,695 (1994),
order on reh'g, 72 FERC paragraph 61,082 (1995). Alternatively,
AEP Marketing may elect to report such changes every three years in
conjunction with an updated market analysis. We reserve the right
to require such an analysis at any time.
The Commission orders:
(A) AEP Marketing is hereby directed to file, within 15 days
of the date of this order, the code of conduct revisions discussed
in the body of this order.
(B) AEP Marketing's market-based rate application is hereby
conditionally accepted for filing, effective upon the date of
issuance of this order, on the condition that AEP Marketing makes
the compliance filing directed in Ordering Paragraph (A) above.
(C) AEP Marketing's request for waiver of Parts 41, 101, and
141 of the Commission's regulations is hereby granted.
(D) Within 30 days of the date of this order, any person
desiring to be heard or to protest the Commission's blanket
approval of issuances of securities or assumptions of liabilities
by AEP Marketing should file a motion to intervene or protest with
the Federal Energy Regulatory Commission, 888 First Street, NE,
Washington, DC 20426, in accordance with Rules 211 and 214 of the
Commission's Rules of Practice and Procedure, 18 C.F.R. sections
385.211 and 385,214 (1996).
(E) Absent a request to be heard within the period set forth
in Ordering Paragraph (D) above, AEP Marketing is hereby
authorized, pursuant to section 204 of the FPA, to issue securities
and assume obligations and liabilities as guarantor, endorser,
surety, or otherwise in respect of any security of another person;
provided that such issue or assumption is for some lawful object
within the corporate purposes of AEP Marketing, compatible with the
public interest, and reasonably necessary or appropriate for such
purposes.
(F) Until further order of this Commission, the full
requirements of Part 45 of the Commission's regulations, except as
noted, are hereby waived with respect to any person now holding or
who may hold an otherwise prescribed interlocking directorate
involving AEP Marketing. Any such person instead shall file a sworn
application providing the following information:
(1) full name and business address; and
(2) all jurisdictional interlocks, identifying the
affected companies and the positions held by that
person.
(G) The Commission reserves the right to modify this order to
require a further showing that neither public nor private interests
will be adversely affected by continued Commission approval of AEP
Marketing's issuances of securities or assumptions of liabilities,
or by the continued holding of any affected interlocks.
(H) AEP Marketing's request for waiver of the provisions of
Subparts B and C of Part 35 of the Commission's regulations, with
the exception of sections 35.12(a), 35.13(b), 35.15, and 35.16, is
hereby granted.
(I) AEP Marketing is hereby directed to conform to the filing
and reporting requirements specified in this order. The first
quarterly report of transactions undertaken by AEP Marketing will
be due within 30 days of the calendar quarter ending September 30,
1996, if any transactions are undertaken in that quarter. If not,
the report will be due within 30 days of the calendar quarter
ending December 31, 1996.
(J) Absent AEP Marketing's election to file a new market
analysis every three years, as discussed in the body of this order,
AEP Marketing is hereby directed to inform the Commission promptly
of any change in status that would reflect a departure from the
characteristics that the Commission has relied upon in approving
market-based pricing. AEP Marketing shall notify the Commission of
which option it elects in its first quarterly report filed pursuant
to Ordering Paragraph (I) above.
(K) AEP Marketing is hereby informed of the following rate
schedule designation: AEP Power Marketing, Inc., Rate Schedule FERC
No. 1 -- Market-Based Rate Schedule.
By the Commission.
(SEAL)
Linwood A. Watson, Jr., Acting Secretary.
Exhibit 1(e)
PUBLIC SERVICE COMMISSION
OF WEST VIRGINIA
CHARLESTON
CASE NO. _________________
APPALACHIAN POWER COMPANY,
a corporation, and
WHEELING POWER COMPANY,
a corporation,
Petition for the Commission's consent and
approval of Appalachian Power Company and
Wheeling Power Company entering
into agreements with certain of yet-to-be formed affiliates
pursuant to the provisions of W. Va. Code, Sec. 24-2-12.
PETITION
Come now the above-named Appalachian Power Company
("Appalachian" or "APCo") and Wheeling Power Company ("Wheeling" or
"WPCo") (together, the "Petitioners), the petitioners herein, and
respectfully make the following representations to the Commission:
1. The names and addresses of the petitioners are as
follows:
Appalachian Power Company
40 Franklin Road
Roanoke, Virginia 24011
Wheeling Power Company
51 Sixteenth Street
Wheeling, West Virginia 26003
Appalachian is incorporated under the laws of the Commonwealth
of Virginia and is authorized to do business as a public utility in
the State of West Virginia. Wheeling is incorporated under the
laws of the State of West Virginia. Appalachian and Wheeling are
subsidiaries of American Electric Power Company, Inc., a public
utility holding company ("AEP" or "American").
2. Background. By Orders dated August 26, 1983 (Case No.
PUA830046) and July 13, 1983 (PUA 83-302-E-PC), this Commission
authorized Appalachian and Wheeling, respectively, to enter into
Service Agreements (the "AEPES Service Agreements") with AEP Energy
Services, Inc. (hereinafter called "AEPES") (copies of which are
attached hereto as Exhibits A-1 and A-2) pursuant to which
Appalachian and Wheeling, respectively, provide personnel and
services, if available, to AEPES. AEPES is a corporation organized
and doing business under the laws of the State of Ohio, having its
principal office at 1 Riverside Plaza, Columbus, Ohio. AEPES is a
general business corporation. It has no authority to engage in the
business of providing electric service to the public in West
Virginia.
AEPES was organized by AEP in 1982 in accordance with the
authorization of the Securities and Exchange Commission ("SEC")
under the Public Utility Holding Company Act of 1935 to sell
management, technical, operating and training expertise in the
open, competitive market to non-affiliated persons. In April 1995,
the SEC authorized AEPES also to provide project development,
construction, fuel management, energy management and demand-side
management services.
In its business, AEPES has used, and will continue to
use, personnel and other existing resources, when available, of
other AEP System companies, including personnel and resources of
Appalachian and Wheeling pursuant to the AEPES Service Agreements
as authorized by the SEC and this Commission.
By its Order dated September 13, 1996, the SEC has
authorized American to form certain direct or indirect subsidiaries
to engage in the business of marketing energy commodities in the
open market, including electricity, natural gas, oil and coal, and
in additional energy-related services ("New Energy Services
Subsidiaries").
Once the New Energy Services Subsidiaries are
established, American expects that the New Energy Subsidiaries
will, in much the same manner as AEPES, use personnel and other
existing resources, to the extent available, of other AEP-
affiliated companies, including Appalachian and Wheeling, pursuant
to service agreements with terms and conditions similar to those of
the AEPES Service Agreement.
3. New Service Agreements. Accordingly, Appalachian and
Wheeling now seek authorization to enter into service agreements
(the "New Service Agreements") with the New Energy Services
Subsidiaries on terms which are substantially the same as the
AEPES Service Agreements. A copy of the form of proposed New
Service Agreement is attached as Exhibit B hereto.
Under the proposed New Service Agreements, neither
Appalachian nor Wheeling would be under any obligation to make
personnel or other resources available to any New Energy Services
Subsidiary. The determination whether such personnel or other
resources are available to complete a work order would be entirely
within the discretion of Appalachian or Wheeling as the case may
be. Neither Appalachian nor Wheeling would be exposed to any risk
of financial loss in the event the New Energy Services Subsidiary
is unable to perform contracts with non-affiliate clients on a
profitable basis. Neither Appalachian nor Wheeling will extend
credit to any New Energy Services Subsidiary.
Each employee of Appalachian or Wheeling who is requested
pursuant to a New Service Agreement to perform services for a New
Energy Services Subsidiary will use the work order number assigned
to each specific project by the New Energy Services Subsidiary.
The work order system will enable Appalachian and Wheeling to
identify all direct costs incurred in connection with rendering
services to the New Energy Services Subsidiaries, including the
total number of hours of each employee spent during a billing
period in the performance of services for any New Energy Services
Subsidiary. Appalachian and Wheeling will bill the New Energy
Services Subsidiary on a monthly basis for all direct costs,
including an allocable portion of all payroll overheads (i.e.,
insurance, vacation, sick leave, and pension costs, among other
costs), and a portion of all of their respective indirect overhead
costs. The income received by Appalachian by the New Energy
Services Subsidiaries in connection with the performance of service
under the New Service Agreements will be credited to Petitioners'
costs-of-service revenue requirements.
The performance by Petitioners of their obligations under
the New Service Agreements will not adversely affect the service of
Petitioners to the public in West Virginia.
4. Other Regulatory Approvals. In addition to the
approval of this Commission under West Virginia Code, Section 24-2-
12, the proposed service agreements must also be approved by the
SEC and the Virginia State Corporation Commission ("SCC"). The
Service Corporation's application to the SEC for approval of the
form of agreement (the "SEC Application") was filed on January 22,
1996, amended on February 13, 1996, February 21, 1996 and May 16,
1996, and an order issued on September 13, 1996 approving the
transaction. Post-Effective Amendment No. 1 to that filing was
made on September 18, 1996 and an order was issued on September 27,
1996. The application on Form U-1, all amendments, and the orders
in this file are attached hereto as Exhibit C. Appalachian's
application to the SCC for approval of the proposed agreements has
recently been filed.
5. The terms and conditions of the arrangements
proposed herein are fair and reasonable. The arrangements do not
confer upon any party thereto an undue advantage over any other
party thereto, and do not adversely affect the public in West
Virginia.
ACCORDINGLY, the Petitioners respectfully request the
Commission to enter an order granting its consent and approval for
the Petitioners to enter into, participate in, and effect
individual transactions pursuant to the arrangements which are
proposed herein.
APPALACHIAN POWER COMPANY
By: /s/ A. A. Pena
Treasurer
WHEELING POWER COMPANY
By: /s/ A. A. Pena
Treasurer
William C. Porth, Esq.
ROBINSON & MCELWEE
600 United Center
500 Virginia Street East
Charleston, WV 25301
(304) 344-5800
Ann B. Graf, Esq.
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza
Columbus, OH 43215
(614) 223-1000
Counsel for Appalachian Power Company
and Wheeling Power Company
VERIFICATION
STATE OF OHIO
COUNTY OF FRANKLIN, to-wit:
Ann B. Graf, counsel for Appalachian Power Company and
Wheeling Power Company, the Petitioners in the foregoing Petition
of Appalachian Power Company and Wheeling Power Company, being duly
sworn, states upon her information and belief that the facts and
allegations therein contained are true.
/s/ Ann B. Graf
Ann B. Graf
Taken, sworn to and subscribed before me this 9th day of
October, 1996.
/s/ Jana Lee Brown
Notary Public
My Commission expires 3-15-2000
Exhibit 1(f)
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
APPLICATION OF
APPALACHIAN POWER COMPANY, CASE NO. PUA _______
Applicant
For Authority to Enter Into an
Affiliate Transaction Under
Title 56, Chapter 4 of the
Code of Virginia
APPALACHIAN POWER COMPANY ("Appalachian," "APCo" or
"Company"), a corporation duly organized and existing under the
laws of the Commonwealth of Virginia, represents as follows:
1. Applicant. Appalachian is a Virginia public service
corporation having a post office address of P.O. Box 2021, Roanoke,
Virginia 20422. Appalachian is subject to regulation as to rates
and service by this Commission. All of Appalachian's common stock
is owned by American Electric Power Company, Inc. ("American" or
"AEP"), a holding company registered under the Public Utility
Holding Company Act of 1935 (the "1935 Act").
2. Background. By Order dated August 26, 1983 (Case No. PUA
830046), this Commission authorized Appalachian to enter into a
Service Agreement (the "AEPES Service Agreement") with AEP Energy
Services, Inc. ("AEPES") (a copy of which is attached as Exhibit
A), pursuant to which Appalachian provides personnel and resources,
if available, to AEPES. AEPES is a corporation organized and doing
business under the laws of the State of Ohio, and, like
Appalachian, is a wholly- owned subsidiary of American.
Accordingly, AEPES and Appalachian are "affiliated interests" under
Section 56-76 of the Code of Virginia. AEPES is a general business
corporation. It has no authority to engage in the business of
providing electric service to the public in Virginia.
AEPES was organized by American in 1982 in accordance
with the authorization of the Securities and Exchange Commission
("SEC") under the 1935 Act to sell management, technical, operating
and training expertise in the open, competitive market to non-
affiliated persons. In April 1995, the SEC authorized AEPES also
to provide project development, construction, fuel management,
energy management and demand-side management services.
In its business, AEPES has used, and will continue to
use, personnel and other existing resources, when available, of
other AEP System companies, including personnel and resources of
Appalachian pursuant to the AEPES Service Agreement as authorized
by the SEC and this Commission.
The SEC has authorized American to form certain direct or
indirect subsidiaries to engage in the business of marketing energy
commodities in the open market, including electricity, natural gas,
oil and coal, and in additional energy-related services ("New
Energy Services Subsidiaries").
Once the New Energy Services Subsidiaries are
established, American expects that the New Energy Subsidiaries
will, in much the same manner as AEPES, use personnel and other
existing resources, to the extent available, of other AEP-
affiliated companies, including Appalachian, pursuant to service
agreements with terms and conditions similar to those of the AEPES
Service Agreement.
3. New Service Agreements. Accordingly, Appalachian now
seeks authorization to enter into service agreements (the "New
Service Agreements") with the New Energy Services Subsidiaries on
terms which are substantially the same as the AEPES Service
Agreement. A copy of the form of proposed New Service Agreement is
attached as Exhibit B hereto.
Under the proposed New Service Agreements, Appalachian
would be under no obligation to make personnel or other resources
available to any New Energy Services Subsidiary. The determination
whether such personnel or other resources are available to complete
a work order would be entirely within the discretion of
Appalachian. Appalachian would not be exposed to any risk of
financial loss in the event the New Energy Services Subsidiary is
unable to perform contracts with non-affiliate clients on a
profitable basis. Appalachian will not extend credit to any New
Energy Services Subsidiary.
Each employee of Appalachian who is requested pursuant to
a New Service Agreement to perform services for a New Energy
Services Subsidiary will use the work order number assigned to each
specific project by the New Energy Services Subsidiary. The work
order system will enable Appalachian to identify all direct costs
incurred in connection with rendering services to the New Energy
Services Subsidiaries, including the total number of hours of each
employee spent during a billing period in the performance of
services for any New Energy Services Subsidiary. Appalachian will
bill the New Energy Services Subsidiary on a monthly basis for all
direct costs, including an allocable portion of all payroll
overheads (i.e., insurance, vacation, sick leave, and pension
costs, among other costs), and a portion of all of Appalachian's
indirect overhead costs. The income received by Appalachian by the
New Energy Services Subsidiaries in connection with the performance
of service under the New Service Agreements will be credited to
Appalachian's costs-of-service revenue requirements.
The performance by Appalachian of its obligations under the
New Service Agreements will not adversely affect the service of
Appalachian to the public in Virginia. In addition, Appalachian
believes that the service of no other Virginia utilities subject to
the Commission's jurisdiction will be affected.
4. Transaction Summary. In accordance with the "Guidelines
for Filing Applications Under Title 56, Chapter 4 (Public Utilities
Affiliates Law) and Chapter 5 (Utility Transfers Act) of the Code
of Virginia," issued by the Commission's Division of Public Utility
Accounting on October 21, 1994 (the "Guidelines"), a Transaction
Summary - Chapter 4 is attached as Exhibit C.
5. Other Regulatory Approvals. In addition to the approval
of this Commission under Title 56, Chapter 4 of the Code, the
proposed service agreements must also be approved by the SEC and
the West Virginia Public Service Commission ("PSC"). The Service
Corporation's application to the SEC for approval of the form of
agreement (the "SEC Application") was filed on January 22, 1996,
amended on February 13, 1996, February 21, 1996 and May 16, 1996,
and an order issued on September 13, 1996 approving the
transaction. The application on Form U-1 and amendments, the order
and Post-Effective Amendment No. 1 to the U-1 are attached hereto
as Exhibit D. Appalachian's application to the PSC for approval of
the proposed agreements will be filed in the near future.
ACCORDINGLY, the Company requests the Commission to approve
the proposed form of New Service Agreement, to authorize
Appalachian to enter into the New Service Agreements with New
Energy Services Subsidiaries as the same are formed from time to
time, and to grant all other approvals as may be necessary under
Title 56, Chapter 4 of the Code and all other applicable law.
APPALACHIAN POWER COMPANY
By: /s/ A. A. Pena
Treasurer
H. Allen Glover, Jr., Esq.
George J. A. Clemo, Esq.
Michael J. Quinan, Esq.
WOODS, ROGERS & HAZLEGROVE, P.L.C.
Dominion Tower, Suite 1400
10 South Jefferson Street
P. O. Box 14125
Roanoke, VA 24038-4125
(540) 983-7600
Ann B. Graf, Esq.
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, 29th Floor
Columbus, OH 43215
(614) 223-1000
Counsel for Appalachian Power Company
STATE OF OHIO )
) To-wit:
COUNTY OF FRANKLIN )
Before me, a Notary Public in and for the aforesaid juris-
diction, personally appeared Armando A. Pena, who, being by me
first duly sworn, did depose and say that he is Treasurer of
Appalachian Power Company, that he has read the foregoing
Application and knows the contents thereof and that the facts
therein stated are true to the best of his knowledge and belief.
Subscribed and sworn to before me this 26th day of September, 1996.
/s/ Mary M. Soltesz
Notary Public
My Commission expires 7-12-99
