H Form of Notice
1. News Digest
ALLEGHENY ENERGY, INC., ET AL. A notice has been issued
giving interested persons until November__, 2000, to request
a hearing on a proposal by Allegheny Energy, Inc., a
registered public utility holding company, to: (1) form and
capitalize two single member limited liability corporations
(MP Transferring Agent LLC and MP GENCO, LLC); (2) to
indirectly transfer Monongahela Power Company's electric
generating assets and other rights and obligations to
Allegheny's affiliate Allegheny Energy Supply Company, LLC;
(3) issue notes; (4) enter into leaseback, service, and
operating agreements. (Rel. 35-27***)
2. Notice
Allegheny Energy, Inc. et al. (70-9***)
Allegheny Energy, Inc. ("Allegheny"), a registered
holding company under the Public Utility Holding Company Act
of 1935, as amended ("Act"), Allegheny Energy Service
Company ("AESC"), a service company, both located at 10435
Downsville Pike, Hagerstown, MD 21740-1766, Monongahela
Power Company ("Monongahela Power"), a wholly owned
combination gas and electric utility subsidiary of
Allegheny, located at 1310 Fairmont Avenue, Fairmont, West
Virginia, and Allegheny Energy Supply Company, LLC
("Genco"),<F1> a wholly owned generating company subsidiary of
Allegheny, R.R. 12, P.O. Box 1000, Roseytown, Pa., 15601
(collectively, "Applicants"),<F2> hereby file this application-
declaration with the Securities and Exchange Commission
("Commission") under Sections 6(a), 7, 9(a), 10, 12(b) and
13(b) of the Public Utility Holding Company Act of 1935, as
amended ("Act"), and Rules 43(a), 44, 45, 46, 54, 90 and 91
under the Act, seeking authorization to transfer Monongahela
Power's electric generating assets and other rights and
obligations to Allegheny's affiliate Allegheny Energy Supply
Company, LLC; (3) issue notes; and (4) enter into leaseback,
service, and operating agreements. An order is requested
not later than December 15, 2000.Closing on transaction is
planned for not later than January 15, 2001, assuming all
necessary regulatory approvals have been obtained.
<F1> In Application No. 70-9683 (filed May 25, 2000), Genco,
among other things, is seeking authorization to, directly or
indirectly through one or more exempt subsidiaries or
intermediate companies, engage in Rule 58 activities;
acquire interests in, finance the acquisition of, and/or
hold the securities of, one or more Exempt Wholesale
Generators ("EWGs"). Genco is not an EWG nor are there any
plans for Genco to become an EWG.
<F2> Monongahela Power, along with West Penn Power Company and
Potomac Edison collectively d/b/a Allegheny Power deliver
electric and gas energy to about 1.4 million customers in
parts of Maryland, Ohio, Pennsylvania, Virginia, and West
Virginia. Allegheny Power, together with Genco which
operates and markets competitive retail and wholesale
electric generation and operates regulated electric
generation for its affiliates, and Allegheny Ventures which
actively invests in and develops energy-related and
telecommunications projects through Allegheny Communications
Connect ("ACC"), an exempt telecommunications company
("ETC"), make up the Allegheny system.
<PAGE>
As part of the ongoing restructuring in the electric
utility industry, Monongahela Power has filed restructuring
applications and / or compliance plans with the utility
regulatory commissions of the states of West Virginia and
Ohio. The filings, among other things, seek final
authorization to separate (unbundled) electric generation
from transmission and distribution and transfer it to an
affiliate. In both states the restructuring plans have been
negotiated, contested, and the subject of regulatory
hearings. Each of the states has issued, or is in the final
process of issuing, final orders. Monongahela Power now
seeks Commission approval to: (1) form and capitalize one
first tier single member limited liability corporation ("MP
Transferring Agent, LLC.") and a single second tier single
member limited liability corporation ("MP Genco, LLC") for
the purpose of transferring and / or holding electric
generating assets, rights, interests, and obligations; (2)
to transfer the electric generating assets, rights,
interests, and obligations from the limited liability
corporations to the Genco; (3) issue notes; and (4) enter
into leaseback, service, and operating agreements.
Monongahela Power provides electric service to
approximately 351,000 West Virginia customers<F3> and
approximately 28,000 Ohio customers.<F4> Additionally, through
its West Virginia gas operations and its wholly owned
subsidiary Mountaineer Gas, Monongahela Power provides
natural gas service to approximately 224,000 customers in
West Virginia.<F5> Monongahela Power is headquartered in
Fairmont, West Virginia. For the twelve months ended
December 31, 1999, Allegheny's revenues were approximately
$2.8 billion. Monongahela Power contributed $673 million or
24% of Allegheny's revenues. As a public utility,
Monongahela Power is subject to regulation in each of the
states in which it operates. Additionally, the Federal
Energy Regulatory Commission ("FERC"), under section 203 of
the Federal Power Act, has jurisdiction over the sale,
lease, or other disposition of Monongahela Power's utility
assets.<F6> Additionally, FERC has jurisdiction over
Monongahela Power's wholesale power transactions.
Each of the states regulates a different "slice" of the
Monongahela Power system. The extent of their jurisdiction,
or the regulated "slice," is based on the portion of the
output of electricity delivered to end-users and capacity
committed from Monongahela Power. This concept is commonly
referred to as the "jurisdictional allocation" or
"allocation." Monongahela Power's system is allocated as
follows: 88% to West Virginia; and 12% to Ohio. The
jurisdictional allocation relates solely to usage and is
<F3> In Holding Co. Act Release No. 27121 (December 23, 1999).,
the Commission approved Monongahela Power's purchase of the
electric assets and retention of gas assets of West Virginia
Power. In Holding Co. Act Release No. 35-27210 (August 11,
2000), the Commission approved Monongahela Power's
acquisition of 100% of the outstanding securities of the
Mountaineer Gas Company.
<F4> Monongahela Power's sister operating company, Potomac
Edison, provides electric service to approximately 100,000
West Virginia customers.
<F5> See Holding Co. Act Release No.35-27210 (August 11, 2000)
<F6> 16 U.S.C. 824b(a) (1994).
<PAGE>
unrelated to Monongahela Power's undivided ownership
interests in electric generating assets.
Monongahela Power proposes to leave the generating
business in its entirety. To accomplish this Monongahela
Power proposes to transfer its electric generating assets,
related assets, related liabilities, and other rights and
interests to Genco ("Transaction").<F7> Transferring less
than 100% of the generating function would result in reduced
efficiencies due to the complexities of the various
standards and rules of conduct. Moreover, as the generation
assets are common assets it would be impossible and highly
inefficient to attempt to sub-divide the physical
operations.
Monongahela Power holds undivided ownership interests
in: electric generating stations ("Generating Assets");
certain generation related assets ("Related Assets"); and
certain generation related liabilities ("Related
Liabilities"). Monongahela Power's undivided ownership
interests in Generating Assets consist of a: 25% interest in
the Fort Martin Power station located in Maidsville, West
Virginia; 66% interest in the Albright Power Station
located in Albright, West Virginia; 25% interest in the
Harrison Power Station located in Shinnston, West Virginia;
27.5% interest in the Hatfield's Ferry Power Station located
in Masontown, Pennsylvania; 25% interest in the Pleasants
Power Station, located in Saint Mary's, West Virginia; 100%
interest in the Willow Island Station located in Willow
Island, West Virginia; and 100% interest in the Rivesville
Station located in Rivesville, West Virginia.<F8>
Monongahela Power's Related Assets consist of current
assets, deferred charges, cash and temporary cash
investments, and the value of the investment in an undivided
27% ownership interest in the stock of Allegheny Generating
Company ("AGC"), a Virginia corporation which it jointly
owns with Genco. Genco owns a 40% undivided interest in a
pumped storage hydroelectric generating facility and related
transmission facilities ("Bath County Rights and
Obligations") located in Bath County, Virginia. Related
Liabilities include accounts payables, accrued taxes, tax
deferrals, pollution controls bonds,<F9> and other deferred
credits. Related Liabilities does not include first
mortgage bonds. Monongahela Power is of the view that the
transfer of the Generating Assets but not Related
Liabilities would negatively impact the debt to equity
ratios of Monongahela Power. Monongahela Power also has a
3.5% ownership interest in the Ohio Valley Electric
<F7> In Holding Co. Act Release Nos. 27101 and 27205,
respectively, the Commission, among other things, authorized
the formation of LLCs formed to facilitate, hold, and then
transfer all the electric generating assets, rights,
interests and associated liabilities of Allegheny's wholly
owned utility subsidiaries West Penn Power Company and
Potomac Edison.
<F8> The jurisdictional allocation is calculated as follows,
for example using West Virginia - the value of Monongahela
Power's undivided interest in the Fort Martin Power Station
would be calculated by multiplying the 88% West Virginia
allocation by the dollar value of Monongahela Power's 25%
undivided interest in Fort Martin.
<F9> Notwithstanding the transfer of the payment obligation to
Genco, Monongahela Power will remain liable for the
pollution control bonds by operation of the terms and
conditions thereof.
<PAGE>
Corporation ("OVEC"),<F10> an investor owned utility ("Other
Rights and Interests").<F11>
Finally, Monongahela Power and Genco propose to enter
into an energy supply agreement or series of agreements with
each one pertinent to an individual jurisdictional supply
obligation ("Agreements") sufficient to allow Monongahela
Power to meet its continuing service obligations as may be
imposed in West Virginia or Ohio. Additionally, Monongahela
Power and Genco propose to enter into leaseback, service,
and operating agreements to, respectively, assure
sufficient actual generation will be available to meet
Monongahela Power's service obligations, permit Allegheny
service subsidiary to provide services, and to provide for
the continue operation of the facilities will certain
licenses and permits are transferred. All agreements will
be performed in adherence with the "at cost" provisions of
Rules 90 and 91 under the Act.
<F10> Allegheny assigned 28% of its 12.5% ownership interest
(and corresponding power purchase interest) to Monongahela
Power. Allegheny's assignment of 28% of its 12.5% ownership
interest translates into a 3.5% ownership interest in OVEC
(out of the original 12.5%).
<F11> Applicants also intend to transfer contractual rights and
obligations corresponding to four jointly owned generation
facilities ("Joint-Owner Operation Agreements") and OVEC.
The jointly owned facilities are Fort Martin, Harrison,
Hatfield Ferry and Pleasants - each of which is operated
pursuant to an operating agreement ("Joint Operating
Agreement"). Each of the Joint-Owner Operation Agreements
has a clause which provides that "[t]his Agreement shall
continue in full force and effect for a period of 45 years
from the date hereof and for such longer period as the
Companies shall by mutual agreement continue to operate any
of the units at the Station."
