UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
Monongahela Power Company, )
Allegheny Energy Supply Company, LLC, ) Docket No. EC00-____________
MP Transferring Agent, LLC, and )
MP Genco, LLC )
JOINT APPLICATION
UNDER SECTIONS 203 OF THE FEDERAL POWER ACT
FOR THE DISPOSITION OF JURISDICTIONAL FACILITIES
Pursuant to Section 203 of the Federal Power Act
("FPA"), 16 U.S.C. 824b (1994), and Part 33 of the Commission's
regulations thereunder, 18 C.F.R. Part 33 (2000), Monongahela
Power Company ("Mon Power"), Allegheny Energy Supply Company, LLC
("AE Supply"), MP Transferring Agent, LLC, ("Transferring Agent")
and MP Genco, LLC ("Genco") (together, the "Applicants")
respectfully request expeditious Commission approval of the intra-
corporate transfers of jurisdictional assets summarized here and
described in more detail below. The proposed transactions are
essentially the same as transactions authorized by the Commission
in the past year involving Mon Power's affiliates, West Penn
Power Company ("West Penn") and The Potomac Edison Company
("Potomac").<F1>
In summary, Mon Power proposes to transfer the
following jurisdictional assets to AE Supply in a three-step
intra-corporate realignment: (1) the shares of jurisdictional
step-up transformers allocable to Mon Power's Ohio and West
Virginia service areas; (2) securities evidencing Mon Power's
ownership share of Allegheny Generating Company ("AGC"), (3)
certain wholesale power purchase and supply agreements, including
those jurisdictional agreements Mon Power may enter into between
the date of this Application and the date of the proposed
<F1> The Potomac Edison Company, 91 FERC 62,245 (2000);
Allegheny Energy Supply Company, 89 FERC 62,063 (1999).
<PAGE>
corporate reorganization, and (4) Mon Power's pollution control
and solid waste bonds associated with the transferred generating
assets, and private placement debt to be issued in the fourth
quarter of 2000. Mon Power proposes to transfer these assets
temporarily to Transferring Agent, and then to Genco, before the
final disposition to AE Supply. Closing on the transaction is
planned for not later than January 15, 2001, to be effective as
of January 1, 2001, assuming all necessary regulatory approvals
have been obtained. In further support, the Applicants show as
follows:
I. Introduction
The proposed transactions implement Ohio and West
Virginia restructuring initiatives which anticipate Mon Power
providing retail choice to customers in Mon Power's Ohio and West
Virginia service areas in 2001. As discussed below, the
Applicants submit the proposed transactions will not adversely
affect competition, rates or regulation, and are, therefore,
consistent with the public interest.
II. Description of the parties
Mon Power is a wholly-owned public utility subsidiary
of Allegheny Energy, Inc. ("AE"), a registered public utility
holding company. Mon Power provides retail electric service to
its franchised customers in portions of Ohio and West Virginia.
In addition to Mon Power, AE has two other wholly-owned
franchised public utility subsidiaries: West Penn, which serves
customers in portions of western and central Pennsylvania, and
Potomac, which serves customers in portions of Maryland, West
Virginia and Virginia.
AE Supply is another wholly-owned public utility
subsidiary of AE, but AE Supply has no franchised service
territory. Rather, AE Supply owns and operates electric
generation facilities and markets power in competitive wholesale
and retail markets. The Commission has authorized AE Supply to
<PAGE>
sell power at wholesale at market-based rates. Allegheny Energy
Supply Company, 88 FERC 61,303 (1999).
Transferring Agent is a soon-to-be-formed wholly-owned
limited liability company subsidiary of Mon Power. Transferring
Agent will be a Delaware limited liability company.
Genco also is a soon-to-be-formed affiliate of Mon
Power that will be a wholly-owned subsidiary of Transferring
Agent. Genco will be a Delaware limited liability company.
III. Description of the proposed transaction
Mon Power proposes to transfer to AE Supply (1) the
shares of Mon Power's generator step-up transformers listed on
Schedule 1 and allocable to service in its Ohio and West Virginia
service areas identified on Schedule 2, (2) 270 shares of equity
securities in AGC, (3) certain wholesale power purchase and
supply contracts (including those Mon Power enters into prior to
consummating the intra-corporate reorganizations described
herein), and (4) the pollution control and solid waste bonds
issued by Mon Power and listed on Schedule 3 which are related to
the transferred generation, and $100 million of private placement
debt to be issued by Mon Power in the fourth quarter of 2000
subject to the approval of the Securities and Exchange Commission
("SEC").
To facilitate this transaction, Mon Power proposes to
form a new, wholly-owned subsidiary (Transferring Agent) and
transfer to Transferring Agent the jurisdictional assets
described above. Transferring Agent will then form a new, wholly-
owned subsidiary (Genco), transfer all of the jurisdictional
assets it receives from Mon Power to Genco, and then
Transferring Agent will dissolve. Finally, Genco will merge into
AE Supply and cease to exist as a separate corporate entity, with
AE Supply being the surviving company. The end result of the
<PAGE>
corporate realignment will be to transfer Mon Power's
jurisdictional assets identified above to AE Supply.
Mon Power owns or has an interest in the generating
assets located in Pennsylvania and West Virginia and listed on
Schedule 1. Mon Power's interests in the output of these
facilities are allocated approximately 132 percent to Ohio and
878 percent to West Virginia. These allocation percentages
ordinarily fluctuate slightly over time because of variations in
load; however, Mon Power has fixed the percentages at [May March
31, 2000]. Mon Power proposes to apply these fixed percentage
allocations to the depreciated net book value of the assets being
transferred as of the transfer date.
The jurisdictional step-up transformers covered by this
Application include 100 percent of Mon Power's ownership shares
in each of the following generating assets: (1) 66 percent
undivided interest in the Albright Power Station located in
Albright, West Virginia; (2) 25 percent undivided interest in
Fort Martin Power Station No. 1 located in Maidsville, West
Virginia; (3) 20 percent undivided interest in Fort Martin Power
Station No. 2 located in Maidsville, West Virginia; (4) 25
percent undivided interest in the Harrison Power Station, located
in Shinnston, West Virginia; (54) 27.5 percent undivided interest
in the Hatfield's Ferry Power Station, located in Masontown,
Pennsylvania; (65) 25 percent undivided interest in the Pleasants
Power Station, located in Saint Mary's, West Virginia; (76) 100
percent undivided interest in the Willow Island Station located
in Willow Island, West Virginia; and (87) 100 percent undivided
interest in the Rivesville Station located in Rivesville, West
Virginia.
Mon Power also owns 270 shares (27 percent) of the
stock of AGC, a Virginia corporation which it jointly owns with
AE Supply. AGC owns a 40 percent undivided interest in the Bath
County pumped storage hydroelectric generating facility and
related 500 kV transmission line ("Bath County"). Mon Power
<PAGE>
also has a 27 percent interest in a wholesale power agreement
among Mon Power, Potomac, West Penn and AGC, dated August 24,
1981 ("APS Power Agreement"), governing the distribution of the
power produced by the Bath County facility. Pursuant to prior
Commission authorization, Potomac's and West Penn's entitlements
to this power have been assigned to AE Supply.
Finally, Mon Power has the right to receive 3.5 percent
of the power participation benefits under the Inter-Company Power
Agreement, dated July 10, 1953 ("OVEC Agreement"). The OVEC
Agreement obligates Mon Power to provide the Ohio Valley Electric
Corporation ("OVEC") with supplemental power (as defined in the
agreement), and entitles Mon Power to receive surplus power (also
as defined in the agreement).
IV. The proposed transactions satisfy the requirements
of Section 203 of the Federal Power Act
The proposed transactions are consistent with the
public interest standard of Section 203 of the FPA because they
will have no measurable adverse affect on competition, rates or
regulation. To the contrary, the transaction will promote the
Commission's competition and comparability objectives through the
corporate separation of Mon Power's generation from its
transmission and distribution functions.
A. Legal Standard
Section 203 of the FPA provides in pertinent part that:
No public utility shall sell, lease, or
otherwise dispose of the whole of its
facilities subject to the jurisdiction of the
Commission, or any part thereof of a value in
excess of $50,000, or by any means whatsoever,
directly or indirectly, merge or consolidate
such facilities or any part thereof with those
of any other person . . . without first having
secured an order of the Commission authorizing
it to do so. . . . After notice and an
opportunity for hearing, if the Commission
finds that the proposed disposition,
consolidation, acquisition, or control will be
consistent with the public interest, it shall
approve the same.
<PAGE>
16 U.S.C. 824b(a) (1994).
The Commission is required to approve proposed
transactions under Section 203 when it finds them to be
compatible with the public interest. Pacific Power & Light
Company v. FPC, 111 F.2d 1014, 1016-17 (9th Cir. 1940).
Applicants, however, need not demonstrate that transactions will
positively benefit the public interest to satisfy the Section 203
standard. Northeast Utilities Service Company v. FERC, 993 F.2d
937, 950 (1st Cir. 1993).
The Commission has taken the position that dispositions
of jurisdictional facilities that involve generating assets must
satisfy the Section 203 public interest standard as set forth in
the Commission's Merger Guidelines.<F2> E.g., Cambridge Electric
Light Company, 85 FERC 61,217 (1998); New England Power
Company, 82 FERC 61,179 (1998). In applying this policy, the
Commission has stated that it seeks to determine the impact a
proposed transaction will have on competition, rates, and
regulation. Cambridge, 85 FERC at p. 61,893.
B. The Proposed Transaction Is Consistent With the Public Interest.
1. The proposed transaction promotes important State and
Federal objectives.
The proposed transaction furthers the objectives of
Ohio and West Virginia to implement retail competition.
On January 28, 2000 the West Virginia Public Service
Commission ("WVA PSC") issued an order adopting a retail
restructuring plan, which was confirmed by the West Virginia
legislature on March 11, 2000, although the legislature made
final implementation contingent upon the later passage of
necessary tax legislation and final authorization by the
legislature. West Virginia House Concurrent Resolution No. 27
(Mar. 11, 2000). On August 14, 2000, Mon Power filed an
<F2> Inquiry Concerning the Commission's Merger Policy Under the
Federal Power Act: Policy Statement, Order No. 592, 61 Fed.
Reg. 68,595 (1996).
<PAGE>
application with the WVA PSC requesting authorization to transfer
its West Virginia generating assets to AE Supply, consistent with
West Virginia's retail access initiative. Copies of the WVA
PSC's retail restructuring order, the ratifying legislation, and
Mon Power's asset transfer application are attached at Appendix
G.
Similarly, in July 1999 the Ohio legislature passed
restructuring legislation which deregulated all generation in
Ohio beginning January 1, 2001, and permitted the transfer of
generation to an affiliate without further Ohio approval. On
June 22, 2000, Mon Power filed a proposed stipulation and
agreement with the Public Utilities Commission of Ohio ("PUCO")
for approval of a plan for transitioning to deregulation,
including the functional separation of Mon Power's generating
assets from its transmission and distribution assets to implement
Ohio's retail restructuring legislation. Among other things, the
parties to the stipulation agreed and recommended to the PUCO
that Mon Power should be permitted to transfer its generating
assets to AE Supply at net book value on or after January 1,
2001. A Copy of Mon Power's proposed Ohio stipulation is
attached at Appendix G.
The proposed transactions also further the Commission's
objectives in Order 888.<F3> The Commission decided in Order 888
not to require full corporate unbundling of generation and
wholesale merchant functions from transmission functions, but
instead ordered public utilities to implement only functional
unbundling of these activities to ensure that they would provide
open access transmission service on a non-discriminatory basis.
The Commission, however, encouraged utilities "to explore whether
corporate unbundling or other restructuring mechanisms may be
appropriate in particular circumstances." Order 888 at p.
31,655.
<F3> Promoting Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities;
Recovery of Stranded Costs by Public Utilities and
Transmitting Utilities, Order No. 888, FERC Stats. & Regs.
(Regulations Preambles) 31,036 (1996).
<PAGE>
The proposed transaction substantially reduces the
amount of generation directly controlled by Mon Power, a
transmission provider, and thereby achieves a corporate
separation of assets that goes beyond the requirements of Order
888. The structural separation of Mon Power's generation and
wholesale merchant activities from its transmission function
provides added assurance that Mon Power will provide transmission
service on a comparable, non-discriminatory basis.
2. The proposed transaction will have no adverse effect on
competition.
The Commission has already determined that the
Allegheny Power companies collectively lack generation market
power, Allegheny Power Service Corporation, 82 FERC 61,245
(1998), and that AE Supply would not acquire generation market
power as a result of the transfer of West Penn's generating
assets to AE Supply. Allegheny Energy Supply Company, 88 FERC
61,303 (1999). Similarly, the proposed intra-corporate transfer
of generating assets, power supply agreements, and securities in
AGC from Mon Power to its affiliate, AE Supply, will not result
in a change in generation market concentration levels. See
Delmarva Power & Light Company, 91 FERC 61,046, mimeo at 7
(Apr. 13, 2000) ("The proposed transaction is a transfer of
jurisdictional facilities within a family of corporations and
will not result in a net loss of competitors from the generation
market."); Public Service Electric and Gas Company, 88 FERC
61,299, at 61,916 (1999) (finding no increase to market
concentration resulting from an intra-corporate transfer of
generating assets). Thus, the proposed transaction will not
adversely affect competition.
3. The proposed transaction will not adversely effect Mon
Power's rates.
Mon Power's wholesale requirements customers and retail
customers will not be adversely affected by the proposed
dispositions. These customers are served under fixed rate
<PAGE>
contracts which expire November 30, 2000___________ and have no
fuel clauses. Thus, any costs which may arise as a result of the
proposed dispositions will not be passed through these
requirements contracts.<F4>
Pursuant to West Virginia's restructuring plan, Mon
Power's rates for retail customers in West Virginia are frozen
for the first four years of retail access, with rates thereafter
permitted to escalate in pre-set increments until the eleventh
year, at which time rates will be set by market prices. WVA PSC
January 28, 2000 order, Appendix A at 10. Thus, the proposed
transaction will not adversely affect rates to Mon Power's retail
customers in West Virginia.
Similar to West Virginia, Mon Power's proposed
restructuring stipulation in Ohio includes a three year rate
freeze (January 1, 2001 through December 31, 2003) for large
commercial and industrial customers, and a five year rate freeze
(January 1, 2001 through December 31, 2005) for residential
customers. Residential customers will also receive a five
percent discount on generation and regulatory asset charges.
Ohio Stipulation at 3-5. Ohio retail ratepayers, therefore, will
not be adversely affected by the proposed dispositions.
4. The proposed transaction will have no adverse effects
on regulation.
Mon Power and AE Supply will remain subject to rate
regulation by this Commission. Both Mon Power's and AE Supply's
retail services will be subject to the jurisdiction of the PUCO
and the WVA PSC, as applicable. Therefore, the proposed
transaction will not adversely affect regulation.
V. Requirement Under Part 33 of the Commission's Regulations
In accordance with Section 33.2 of the Commission's
regulations (18 C.F.R. 33.2 (2000)), the Applicants show as
follows:
<F4> Mon Power provides requirements service in West Virginia to
Harrison Rural Electric Association, the CityTown of
Philippi, and the CityTown of New Martinsville.
<PAGE>
A. Section 33.2(a)
The exact names and addresses of the principal business
offices.
Monongahela Power Company
1310 Fairmont Avenue
Fairmont, West Virginia 26554
Allegheny Energy Supply Company, LLC
RR 12, Box 1000
Roseytown Road
Greensburg, PA 15601
B. Section 33.2(b)
Name and address of the persons authorized to receive
notices and communication in respect to application.
David C. Benson
Allegheny Energy Supply Company, LLC
RR 12, Box 1000
Roseytown Road
Greensburg, PA 15601
Patricia J. Clark Raymond B. Wuslich
Deborah J. Henry Winston & Strawn
Allegheny Power 1400 L Street, N.W.
800 Cabin Hill Drive Washington, D.C. 20005
Greensburg, PA 15601 (202) 371-5700
(724) 838-6217
(724) 838-6894
C. Section 33.2(c)
Designation of the territories served by counties and
States.
Mon Power was incorporated in Ohio in 1924, and
operates in northern West Virginia and an adjacent portion of
Ohio in the service areas listed on Schedule 2. Mon Power serves
about 350,000 customers in a service area of about 11,900 square
miles with a population of about 700,000. There are two
municipal electric distribution systems and two rural electric
<PAGE>
cooperative associations in Mon Power's service area. Except for
one of the cooperatives, they all purchase their power
requirements from Mon Power.
AE Supply has no franchised service territory. The
Commission has authorized AE Supply to sell power at market-based
rates. See Allegheny Energy Supply Company, 88 FERC 61,303
(1999). Similarly, Transferring Agent and Genco will not have
franchised service territories.
D. Section 33.2(d)
A general statement briefly describing the facilities owned
or operated for transmission of electric energy in
interstate commerce or the sale of electric energy at
wholesale in interstate commerce.
Mon Power. Mon Power owns and operates generation,
transmission, and distribution facilities to serve customers
located in Ohio and West Virginia. Mon Power also owns a portion
of the securities of AGC (27 percent), which owns the Bath County
generating station located in Virginia. Mon Power's interests in
generating facilities are listed on Schedule 1 hereto. Mon Power
also has various tariffs and rate schedules on file with the
Commission, and is a party to numerous wholesale power sales
agreements.
Mon Power also owns and operates approximately 2,547
pole miles of transmission lines in West Virginia and Ohio. This
includes 281 miles of 500-kV, 11 miles of 345-kV, 1,342 miles of
138-kV, 307 miles of 69-kV, and 606 miles of 44-kV or less. Mon
Power owns and operates 17,695 miles of distribution lines in
West Virginia and Ohio.
AE Supply. AE Supply owns and operates generation
facilities to serve customers in competitive retail and wholesale
markets. See Allegheny Energy Supply Company, 89 FERC 62,063
(1999). AE Supply also has market-based rate schedules on file
with the Commission. Allegheny Energy Supply Company, 88 FERC
61,303 (1999).
<PAGE>
AGC. AGC is a Virginia corporation that is jointly
owned by AE Supply (73 percent) and Mon Power (27 percent). AGC
has 1,000 shares of common stock outstanding, and Mon Power owns
270 of those shares.
AGC's only asset is a 40 percent undivided interest in
the 2100 MW Bath County, Virginia, pumped storage hydroelectric
station and its connecting 85-mile 500 kV transmission line. The
remaining 60 percent interest in the station and transmission
line is owned by Virginia Electric and Power Company ("VEPCO").
The Bath County facility was placed into commercial operation in
December 1985. AGC sells its 840 MW share of the facility to its
two parent owners in proportion to their respective interests in
AGC. AE Supply's 73 percent interest in AGC entitles AE Supply
to about 613 MW of output from Bath County. AGC sells the
remainder of its share of Bath County to Mon Power.
E. Section 33.2(e)
Whether the application is for disposition of facilities by
sale, lease, or otherwise, a merger or consolidation of
facilities, or for purchase or acquisition of securities of
a public utility, also a description of the consideration,
if any, and the method of arriving at the amount thereof.
The application is for Commission approval of the
transfer by Mon Power to, and acquisition by, AE Supply of the
following: (1) step-up transformers associated with the Mon
Power generating facilities identified on Schedule 1 hereto; (2)
Mon Power's interests in wholesale power supply and purchase
agreements included in Exhibit H, as well as those Mon Power may
enter into after the date of this Application, but before the
proposed disposition takes place; (3) Mon Power's share of the
securities of AGC; and (4) Mon Power's pollution control and
solid waste bonds listed on Schedule 3 hereto which are
associated with Mon Power's transferred generating facilities,
and $100 million of private placement debt to be issued in the
fourth quarter of 2000, subject to SEC approval.
<PAGE>
The depreciated net book value of Mon Power's step-up
transformers allocable to Mon Power's Ohio, West Virginia and
wholesale requirements service as of May 31, 2000 was
$4,200,27011,018,797. [This is from the West Virginia asset
transfer application. Does it include only the West Virginia
share? If so, will need to adjust for Ohio and FERC
jurisdictional shares.] There is no consideration associated
with Mon Power's assignment of its rights and obligations under
the power purchase agreements to AE Supply. The value of Mon
Power's share of the common stock of AGC to be transferred to AE
Supply is $41,970,000. Finally, AE Supply is assuming Mon
Power's obligations under the pollution control and solid waste
bonds totaling $106,910,000, and $100,000,000 of private
placement debt to be issued by Mon Power in the fourth quarter of
2000.
F. Section 33.2(f)
A statement of facilities to be disposed of, consolidated,
or merged, giving a description of their present use and of
their proposed use after disposition, consolidation, or
merger. State whether the proposed disposition of
facilities or plan for consolidation or merger includes all
the operating facilities of the parties to the transaction.
The proposed dispositions do not include all of the
operating facilities of Mon Power, but only those described
below:
Step-up Transformers. Mon Power proposes to transfer
the step-up transformers associated with its share of the
generating facilities it is transferring to AE Supply listed on
Schedule 1. These facilities are necessary to step up the output
of the generating facilities to transmission level voltage and
transmit this power to the grid. AE Supply will continue to use
the transformers for this purpose following the proposed
disposition.
Power Purchase Agreements. Mon Power proposes to
transfer its rights under various power purchase agreements to AE
Supply included in Exhibit H. These agreements include the
following:
<PAGE>
The APS Power Agreement dated August 4, 1981 among Mon
Power, Potomac, West Penn and AGC provided for purchases by Mon
Power, Potomac, and West Penn of capacity and energy from AGC's
ownership share of the Bath County Pumped Storage Project.
Purchases of AGC's entitlements are permitted up to the "Capacity
Responsibility Ratio" of each company (as defined in the
Agreement) which is the ratio of the three highest hours of a
company's retail demand during a calendar year to the highest
hourly demands for all three companies. Rates for such purchases
have been accepted for filing by the Commission. Potomac and
West Penn have assigned their interests in this agreement to AE
Supply pursuant to Commission authorization.
Mon Power is also a party to an Inter-Company Power
Agreement ("OVEC Agreement") dated July 10, 1953 among numerous
utilities.<F5> The OVEC Agreement provides for participating
companies (including Mon Power) to provide supplemental power to
enable OVEC to meet its requirements to the United States Atomic
Energy Commission ("AEC") under a separate agreement. In return,
the participating companies obtain the right to purchase surplus
power from the OVEC project generating stations if and when power
is available in excess of the power needed by OVEC to supply AEC.
Rates for all transactions under the OVEC Agreement are on file
with the Commission.
AGC Securities. Mon Power proposes to transfer 270
shares of AGC common stock to AE Supply, which entitles Mon Power
to approximately 227 MW of the output from the Bath County pumped
storage hydroelectric facility as described in Section 33.2(d)
above. A copy of the Equity Agreement - Bath County Pumped
<F5> Other parties to the agreement include AE Supply, Ohio
Valley Electric Corporation, Appalachian Power Company, The
Cincinnati Gas & Electric Company, Columbus Southern Power
Company, The Dayton Power and Light Company, Indiana
Michigan Power Company, Kentucky Utilities Company,
Louisville Gas and Electric Company, Ohio Edison Company,
Ohio Power Company, Pennsylvania Power Company, Southern
Indiana Gas and Electric Company, the Toledo Edison Company.
<PAGE>
Storage Project ("AGC Equity Agreement"), which reflects Mon
Power's share, is attached at Exhibit H. Potomac and West Penn
have already transferred their interests in the Equity Agreement
to AE Supply pursuant to prior Commission authorization. Mon
Power uses its share of the output from Bath County in part to
serve the needs of its retail and wholesale power supply
customers and to provide ancillary services in support of
transmission service provided by Allegheny Power.
Following the proposed dispositions, AE Supply will use
its power entitlements to serve the needs of its retail and
wholesale power supply customers and to provide ancillary
services to Allegheny Power in support of transmission. These
services may include sales for resale to Mon Power or other
franchised or non-franchised public utility affiliates and to
unaffiliated power suppliers pursuant to the terms of Commission-
approved rate schedules. In addition, AE Supply may make retail
sales to ultimate consumers consistent with applicable State law.
New Power Purchase Agreements and Futures Contracts.
Mon Power may enter into additional power purchase or supply
agreements, including futures contracts, prior to closing the
proposed transactions. Mon Power proposes to transfer these
agreements to AE Supply as well.
Pollution Control and Solid Waste Bonds and Private
Placement Debt. Finally, Mon Power proposes to transfer its
liabilities under approximately $106,910,000 of pollution
control and solid waste bonds identified on Schedule 3 to this
application. These pollution control and solid waste bonds are
associated with the generating facilities identified on Schedule
1 and are necessary for the operation of these generating
facilities. The tax exempt notes are issued by Mon Power to the
affected county governments. With the notes, Mon Power assumes
<PAGE>
the obligation to repay funds advanced by the county governments
for the purpose of installing pollution control and solid waste
disposal equipment for generation. Mon Power also proposes to
transfer liabilities under $100 million of private placement debt
to be issued in the fourth quarter, subject to SEC approval. The
private placement debt is to be issued for
_________________________________________________________________
G. Section 33.2(g)
A statement (in the form prescribed by the Commission's
Uniform System of Accounts for Public Utilities and
Licensees) of the cost of the facilities involved in the
sale, lease, or other disposition or merger or
consolidation. If original cost is not known, an estimate
of original cost based, insofar as possible, upon records or
data of the application or its predecessors must be
furnished, together with a full explanation of the manner in
which such estimate has been made, and a description and
statement of the present custody of all existing pertinent
data and records.<F6>
Step-up Transformers. The original cost of the Mon
Power step-up transformers being disposed of was
$11,018,797____________ [confirm], and the depreciated book value
of those transformers and lines as of May 31, 2000 was
$4,200,27011,018,797. [confirm]
Power Purchase Agreements. This requirement is not
applicable with respect to Mon Power's assignment of rights to
power purchase agreements.
AGC Securities. The value of Mon Power's 270 shares of
AGC securities was $41,970,000 as of May 31, 2000.
Pollution Control and Solid Waste Bonds and Private
Placement Debt. The total liability under Mon Power's pollution
control and solid waste bonds identified on Schedule 3 is
$106,910,000 as of May 31, 2000. In addition, Mon Power will
transfer $100 million of private placement debt to be issued in
the fourth quarter of 2000, subject to SEC approval.
H. Section 33.2(h)
<F6> The book value of the listed assets may vary slightly at the
time of actual disposition; however, the Applicants
anticipate that any such changes will not be material.
<PAGE>
A statement as to the effect of the proposed transaction
upon any contract for the purchase, sale, or interchange of
electric energy.
The proposed disposition will have no material impact
upon any contract for the purchase, sale, or interchange of
electric energy in interstate commerce. AE Supply will assume
all Mon Power's obligations under the AGC and OVEC Agreements and
the AGC Equity Agreement. Moreover, Mon Power will continue to
serve its wholesale customers under fixed rate contracts, and
once the contracts expire, these customers will be free to
purchase their supplies in the competitive wholesale power market
from the cheapest available source. Thus, Mon Power's wholesale
requirements customers will not be affected by the proposed
transaction.
Further, under West Virginia's restructuring plan,
retail access will begin in West Virginia in 2001 (subject to the
passage of necessary tax legislation). Mon Power remains
obligated to provide provider of last resort service to its West
Virginia retail customers for at least the first six years after
retail choice begins. Mon Power will meet its service
obligations to its West Virginia customers through purchases in
the competitive market, including from AE Supply. The West
Virginia's restructuring plan provides for a rate freeze through
July 1, 2005, with limited rate increases thereafter until the
eleventh year after competition begins. Beginning in 2005, and
in each of the next three years, retail power supply rates may
increase by the greater of two percent or the annual percentage
change in the Gross Domestic Product Price Index ("GDP-PI") minus
one percent. In the eighth year (2009), rates may increase by
the lesser of 10 percent or the amount necessary to bring the
rate to 90 percent of the market price for power for each rate
schedule, but in no event will the adjustment be less than zero.
In the ninth year (2010), the rate will again be escalated at the
greater of two percent or the annual percentage change in the GDP-
PI, minus one percent. The tenth years' adjustment will be
performed in the same manner as the eighth years', and beginning
<PAGE>
in the eleventh year the power supply rate will equal the market
price for comparable power for each rate schedule. As a result
of these protections, retail customers in Mon Power's West
Virginia service area will also not be adversely affected by the
proposed disposition.
Mon Power's retail restructuring stipulation filed with
the PUCO provides for retail access to begin January 1, 2001.
Rates for large commercial and industrial customers will be
frozen until December 31, 2003, and residential customers will
enjoy a five percent rate reduction and rate freeze through
December 31, 2005. Mon Power agreed to forego the recovery of
transition charges from large commercial and industrial customers
after December 31, 2003 in exchange for the shorter transition
period for these customers. Mon Power may apply to the PUCO to
shorten these transition periods, provided it can demonstrate
that at least 20 percent of its customers have elected to switch
to alternate suppliers after January 1, 2001. Accordingly, Mon
Power's Ohio retail ratepayers will not be adversely affected by
the proposed dispositions.
I. Section 33.2(i)
A statement as to whether or not any application with
respect to the transaction or any part thereof is required
to be filed with any other federal or state regulatory body.
The Applicants have filed an application for approvals
from the Securities and Exchange Commission and a copy of that
filing is attached as Exhibit G hereto. Also attached as Exhibit
G is a copy of Mon Power's proposed stipulation in Ohio, the WVA
PSC's January 28 order adopting a retail restructuring plan, and
Mon Power's August 14, 2000 application to the WVA PSC for
permission to unbundle its generation from transmission and
distribution assets and transfer the unbundled generation to AE
Supply. The Applicants do not believe they require any further
authorizations (other than authorization from this Commission) to
implement the proposed transaction; however, in the event they
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determine that further authorizations are required, the
Applicants will supplement Appendix G with copies of those
filings.
J. Section 33.2(j)
The facts relied upon by applicants to show that the
proposed disposition, merger, or consolidation of facilities
or acquisition of securities will be consistent with the
public interest.
The Applicants have provided an explanation of why
their proposed dispositions are consistent with the public
interest under Section IV above.
K. Section 33(k)
A brief statement of franchises held, showing date of
expiration if not perpetual.
Mon Power. Mon Power is authorized to provide
generation, transmission and distribution service to portions of
Ohio and West Virginia as shown on Schedule 2. Mon Power's
franchised service obligation for bundled retail service in West
Virginia terminates effective on January 1, 2001 (subject to the
passage of necessary tax legislation by the legislature) pursuant
to the terms of the WVA restructuring plan adopted by the WVA PSC
and ratified by the West Virginia legislature (Exhibit G). Mon
Power's obligation to provide bundled retail service in Ohio will
also terminate effective on January 1, 2001, pursuant to the
terms Ohio's restructuring legislation. Mon Power will continue
to provide transmission, distribution, and supplier of last
resort services to retail customers in Ohio and West Virginia, as
well as functional wholesale transmission service to its
wholesale requirements customers.
AE Supply. AE Supply does not have a franchised
service area.
L. Section 33.2(l)
A form of notice suitable for publication in the Federal
Register, as well as a copy of the same notice in electronic
format (in either ASCII text, Word Perfect 5.1 for DOC or
Word Perfect 5.2 for windows format) on a 3 1/2" diskette
marked with the name of the applicant and the words "Notice
of Filing" which will briefly summarize the facts contained
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in the application in such way as to acquaint the public
with its scope and purpose.
A draft notice suitable for publication in the Federal
Register which briefly summarizes the facts of the proposed
disposition is attached as Schedule 4. An electronic version of
the draft notice is separately enclosed on a 3 1/2" computer
diskette.
CONCLUSION
For the foregoing reasons, Mon Power, AE Supply,
Transferring Agent, and Genco respectfully request expeditious
Commission approval under Section 203 of the Federal Power Act of
the transactions described above.
Respectfully submitted,
Raymond B. Wuslich
Winston & Strawn
1400 L Street, N.W.
Washington, D.C. 20005
phone: (202) 371-5700
fax: (202) 371-5950
email: [email protected]
Patricia J. Clark
Deborah J. Henry
Allegheny Energy Service Corporation
800 Cabin Hill Drive
Greensburg, PA 15601
phone: (724) 838-6217
fax: (724) 830-5184
e-mail: [email protected]
[email protected]
Attorneys for the Applicants
August 31, 2000
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Schedule 1
Monongahela Power Company's
Generating Assets
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Monongahela Power Company - Generation Assets
Mon Power
Power Station Ownership Share Location
Albright Power Station 66% WVA
Fort Martin Power Station No. 1 25% WVA
Fort Martin Power Station No. 2 20% WVA
Harrison Power Station 25% WVA
Hatfield's Ferry Power Station 27.5% WVA
Pleasants Power Station 25% WVA
Rivesville Power Station 100% WVA
Willow Island Station 100% WVA
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Schedule 2
Monongahela Power Company's
Franchised Service Areas
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Schedule 3
Monongahela Power Company's
Pollution Control and Solid Waste Bonds
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Schedule 4
Form of Federal Register Notice
