BEFORE THE PUBLIC SERVICE COMMISSION
OF WEST VIRGINIA
In the Matter of the Petition of *
Monongahela Power Company * Case No. _______________
for Transfer of Generation Assets *
PETITION
NOW COMES Monongahela Power Company, dba Allegheny
Power, ("Mon Power") and hereby petitions the Public Service
Commission of West Virginia ("Commission") for consent and
approval to transfer, at book value, its West Virginia
jurisdictional generation assets to its affiliate, Allegheny
Energy Supply Company, LLC, its successors and assigns, on
or after January 1, 2001. In support of this petition, Mon
Power respectfully states as follows:
1. Monongahela Power Company is a public utility
corporation organized and existing under the laws of the
State of Ohio, providing retail electric service to
customers in West Virginia, and has its principal place of
business at 1310 Fairmont Avenue, Fairmont, West Virginia
26555-1392.
2. Allegheny Energy Supply Company, LLC ("Allegheny Energy
Supply") is a Delaware limited liability company and is an
unregulated energy supply affiliate of Mon Power. Allegheny
Energy Supply owns about 6200 megawatts of generation,
including generation previously owned by its affiliates,
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West Penn Power Company, The Potomac Edison Company ("PE")
and AYP Energy.
3. On May 26, 2000, Mon Power and PE filed a petition to
transfer their West Virginia jurisdictional generation
assets to Allegheny Energy Supply, Case No. 00-801-E-PC. On
June 16, 2000, the Commission issued an Order in that
proceeding and found that the filing was unnecessary for the
PE jurisdictional generation assets because the Commission
had approved the transfer of PE jurisdictional generation
assets on or after July 1, 2000, in its Order of January 28,
2000, in Case No. 98-0452-E-GI. The Commission made no such
finding with regard to the Mon Power jurisdictional
generation assets and dismissed that proceeding for both
companies.
4. On June 19, 2000, the Consumer Advocate Division of the
Public Service Commission filed a petition to intervene, to
reopen proceedings and for the Commission to reconsider its
June 16 decision. In addition to reopening and
intervention, the CAD asked that the Commission assert
jurisdiction over the petition by Mon Power and PE and that
the Commission grant the petitions subject to certain
conditions.
5. On June 23, 2000, Mon Power, PE, CAD and Commission
Staff filed a Stipulation and Recommendation
("Stipulation"), attached hereto as Exhibit A, agreeing to a
resolution of Case No. 00-801-E-PC. The Stipulation
recommended that the Commission conduct a post-transfer
review of the PE assets and a pre-transfer review of the Mon
Power assets.
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6. The PE post-transfer review filing is being made this
same day by separate petition.
7. With regard to Mon Power, the parties agreed in
paragraph 4 of the Stipulation as follows:
"The Parties agree that a similar filing as
referenced above in paragraph 3 [of the
Stipulation] should occur for Mon Power
generation before any transfer of Mon Power's
generation assets may occur, including any
transfer after the starting date of the
Commission's Plan for Restructuring of
Electric Utilities and Customer Choice. Mon
Power shall file with the Commission similar
information as referenced in paragraph 3
above detailing the Mon Power generation
assets and related assets to be transferred
at least sixty days before it intends to
transfer its generation assets. Any
unresolved concerns with regard to specific
assets/accounts/values will be filed by any
party within 20 days of the filing. If no
concerns are filed, the parties agree that
the Commission should issue an Order
approving the transfer, with appropriate
conditions as herein stipulated below in this
paragraph, on or before the 60th day
following the filing. Should a concern be
filed, then the Commission should establish a
procedural schedule to rule on such matter on
or before the 60th day following the filing.
The parties agree that the Mon Power asset
transfer may occur on or prior to January 1,
2001 or anytime thereafter. Whether such
transfer occurs before or after the starting
date of the Commission's "Plan", the rate
protections, consumer protections, capacity
protections and tax neutrality protections to
state and local governments in the Commission-
approved deregulation plan will be adhered to
by Mon Power as a condition of the transfer.
The parties also agree that this stipulation
is consistent with the deregulation plan and
the protections therein."
8. By Commission Order dated June 23, 2000 ("Order"), the
Commission granted the CAD's request for intervention and
reopening and reopened the case for the purpose of issuing a
further order. The Commission noted in the Order that it
has no objection if Mon Power and the signatory parties
proceed pursuant to the Stipulation. The Commission also
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noted that the procedure outlined in the Stipulation for Mon
Power to follow before any transfer of its generation assets
was not dispositive of the issue of approval of transfer of
generation assets in advance of the starting date.<F1>
9. The Order also stated that the Mon Power filing should
contain a full and complete description of the assets to be
transferred and a detail of the book value of the transfer
of assets.
10. Attached hereto as Exhibit B is a summary listing of
the jurisdictional generation assets to be transferred and
their book values.
11. The pollution control debt related to Mon Power
generation facilities will be transferred to Allegheny
Energy Supply and will become an obligation of Allegheny
Energy Supply. Additionally, at the time of transfer, $100
million of then-existing other Mon Power debt will transfer
to Allegheny Energy Supply.
12. Attached hereto as Exhibit C is a pro forma balance
sheet for Mon Power that shows the balance of assets,
capitalization and liabilities on Mon Power's books before
the transfer, the generation-related amounts to be
transferred, and the balances that will remain on Mon
Power's books after the transfer.
13. Attached hereto as Exhibit D is the detail by FERC
subledger account of the asset costs. Exhibits B, C and D
are as of May 31, 2000.
<F1> Pursuant to the Stipulation, Mon Power has agreed to make
a filing with the Commission before any such transfer.
Section 4 of the Deregulation Plan , however, provides that
"an incumbent generation electric utility shall [after the
starting date] have full right and authority, without
seeking any further Commission approval, to sell, transfer
or assign all or any portion of its generating assets,
including to an affiliate of the incumbent electric utility
at book value."
<PAGE>
14. Attached hereto as Exhibit E are the proposed and
likely journal entries to reflect the transfer of the Mon
Power jurisdictional generation assets and associated
balance sheets accounts at book value.
15. Actual values transferred will be those at the time of
transfer but should not be substantially different than
those shown in the Exhibits. Mon Power will provide an
informational filing after the proposed transfer to all
parties of the actual balances transferred.
16. With regard to the Ohio jurisdictional portion of Mon
Power's generation, the Ohio Legislature passed Amended
Substitute SB3 in July, 1999, which deregulated all
generation in Ohio beginning January 1, 2001, and permitted
the transfer of generation to an affiliate without further
Ohio approval. Mon Power has additionally entered into a
Stipulation resolving its restructuring case in Ohio which
confirms the transfer of Mon Power Ohio jurisdictional
generation on or after January 1, 2001. Accordingly, Mon
Power intends to make such transfer of its Ohio portion of
generation assets on or after January 1, 2001. Mon Power
represents that it is important to transfer its West
Virginia jurisdictional generation assets at the same time
as the Ohio jurisdictional generation assets, since they are
portions of the same physical assets, in order to avoid
duplicative and additional closings and financings, and the
expenses associated therewith.
17. The Order in Case No. 00-0801-E-PC also stated Mon
Power must seek a finding by the Commission that its
proposed disposition of generation assets complies with the
terms and conditions of the Deregulation Plan. Mon Power
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asserts that the proposed transfer is in compliance with the
Deregulation Plan for the following reasons:
A. Section 4 of the West Virginia Plan for
Customer Choice of Electric Power suppliers, Open
Access to Electricity Transport Systems and
Deregulation of Power Supply Plan ("Deregulation Plan")
entitled "Deregulation of Generation" states:
"Effective with the starting date for
any incumbent generation electric
utility, the Commission shall cease to
have any jurisdiction or authority over
the generating assets of such incumbent
generation electric utility, and such
incumbent electric generating utility
shall thereafter have full right and
authority, without seeking any further
Commission approval, to sell, transfer
or assign all or any portion of its
generating assets, including to an
affiliate of the incumbent electric
utility at book value."
It was contemplated by the parties that the
starting date would be January 1, 2001, or very close
thereto, and that transfer would occur at that time.
B. Protections will be in place, such as power
supply agreements or a lease arrangement, to insure a
reliable energy supply to meet the energy needs of Mon
Power customers. After the transfer, the Mon Power
West Virginia customer load will be met by an
arrangement between Allegheny Energy Supply and Mon
Power to make available to West Virginia customers
power supply sufficient to meet load requirements at
the existing established rates. The transfer of assets
will be invisible to customers. Allegheny Energy
Supply would be free to satisfy the West Virginia
regulated service load requirements either by dispatch
of generation facilities or purchases in the market.
Allegheny Energy Supply will own and operate the
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generation facilities and will incur all operating
costs and capital addition costs for the transferred
generation assets.
C. Extensive rate protections are in place to
insure providing electricity to West Virginia customers
at existing established rates and maintaining those
stable rates for customers through a long transition
period. Mon Power agreed to a long term rate freeze as
detailed in Section 9 of the Deregulation Plan, with
some possible modification beginning in year five or
due to financial integrity issues. Additionally, Mon
Power agreed to implement, as part of the overall plan,
a rate decrease of 3% for large commercial and
industrial customers beginning July 1, 2000. Mon Power
further agreed to contribute to a rate stabilization
deferral account in the amount of $56.75 million.
These rate decreases and rate stabilization/freezes go
hand in hand with the transfer of generation assets.
D. Tax protections to state and local
governments are a precondition to transfer and have
been agreed to by Mon Power.
E. The transfer is consistent with the
Legislature's Resolution 27 that passed the
Deregulation Plan. The Legislature found no concern
with the transfer of generation assets but delayed the
implementation of customer choice for necessary tax
changes. The Resolution passed by the West Virginia
Legislature found that the Deregulation Plan was
consistent with the legislative findings set forth in
West Virginia Code 24-2-18a, that it prescribed
procedures and standards for marketing of power supply
<PAGE>
in the state, and further it resolved all issues
necessary to provide for an orderly transition from the
current regulated structure to a system of direct
retail access in a fully workable competitive power
supply market in a manner that is fair to customers,
electric utilities and other affected parties
(Resolution at pp. 2 and 3). The Legislature's
condition of necessary tax changes is fully consistent
with the Commission's previous intent and desire to
submit to the West Virginia Legislature, in the 2001
session, the necessary tax changes to preserve tax
revenue. Mon Power represents that the transfer of its
jurisdictional generation assets is consistent with the
West Virginia resolution HCR 27 and will preserve tax
revenues for state and local governments and not
adversely impact said tax revenues.
F. The other parties to the Stipulation, Staff
and CAD, have represented that the Stipulation,
including transfer of Mon Power generation assets
before the starting date, is consistent with the
Deregulation Plan and the protections therein. (See
paragraph 4 above.)
18. Mon Power has partial ownership in an affiliated
company, Allegheny Generating Company ("AGC"), that owns
generating capacity in the Bath County pumped storage
generating station. Mon Power's stock in AGC will be
transferred to Allegheny Energy Supply, along with any
obligations Mon Power has to AGC. Mon Power's investment in
AGC is included in FERC Account 123, Investments in
Subsidiary Companies. This transfer is shown on Exhibit C.
Also, there may be assignments of contractual obligations
for the power supply business from Mon Power to Allegheny
<PAGE>
Energy Supply, not represented by assets or liabilities on
Mon Power's books. These could include purchased power
contracts (non-PURPA), non-affiliated sales contracts, fuel
contracts, rights and obligations under the Ohio Valley
Electric Cooperative Power Agreement, and other items
related to power supply.
19. Mon Power represents that the proposed transfer of Mon
Power generation assets to Allegheny Energy Supply, is
consistent with the Plan, was contemplated by the parties to
occur on or after January 1, 2001, and should be approved by
the Commission.
20. Mon Power represents that the terms and conditions
hereof are reasonable, that neither party is given any
advantage over the other, and that the transaction does not
adversely affect the public in this State. In fact, the
transaction promotes restructuring the electric generation
supply market in West Virginia and assists the development
of a competitive market for power supply.
21. Mon Power further represents that no purpose will be
served by the giving of formal notice or the conducting of a
hearing concerning the approval and confirmation sought
herein and that Mon Power and its customers would be
convenienced by the waiving of formal notice and hearing in
regard thereto.
22. Mon Power respectfully requests that the Commission
adhere to the procedural schedule agreed to among Staff, CAD
and Mon Power to the greatest extent feasible. That
Stipulation regarding the procedural schedule established a
20-day period after Mon Power's filing for a party to file
<PAGE>
any concerns, and, further, that the Commission would rule
on the Mon Power petition within 60 days of the filing.
(See paragraph 4 of Stipulation set forth infra on page 2.)
WHEREFORE, Monongahela Power Company hereby requests
consent and approval for it to transfer its West Virginia
portion of electric generation assets to its affiliate,
Allegheny Energy Supply, its successors and assigns, at book
value on or after January 1, 2001, pursuant to the
Commission's plan to restructure the electric generation
supply market in West Virginia.
Respectfully submitted,
MONONGAHELA POWER COMPANY
dba Allegheny Power
By Counsel
_______________________________
Gary A. Jack, Esq.
Robert R. Winter, Esq.
Michael A. Albert, Esq.
Allegheny Power
1310 Fairmont Avenue
Fairmont, WV 26554
(304) 367-3423
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VERIFICATION
STATE OF WEST VIRGINIA,
COUNTY OF MARION, TO WIT
David R. Murphy, Manager, Rate Relations, Allegheny
Energy, after being duly sworn, says that the facts and
allegations set forth in the foregoing Petition are true,
except insofar as they are stated to be on information, he
believes them to be true.
__________________________
David R. Murphy
Taken, sworn to and subscribed before me this ______
day of __________________________, 2000.
__________________________________
Notary Public in and for said County
My commission expires __________________________.
