<PAGE>
File No. 70-8503
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
Amendment No. 3 to
FORM U-1
__________________________________
APPLICATION OR DECLARATION
under the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
* * *
APPALACHIAN POWER COMPANY
40 Franklin Road, Roanoke, Virginia 24022
KANAWHA VALLEY POWER COMPANY
301 Virginia Street East, Charleston, West Virginia 25327
(Name of companies filing this statement and
addresses of principal executive offices)
* * *
AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
(Name of top registered holding company
parent of each applicant or declarant)
* * *
G. P. Maloney, Executive Vice President
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
John F. DiLorenzo, Jr., Associate General Counsel
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
(Names and addresses of agents for service)
<PAGE>
Appalachian Power Company ("APCo") and Kanawha Valley Power
Company ("KVPCo") hereby amend their Application/Declaration on
Form U-1 in File No. 70-8503 by supplying the following exhibits to
Item 6. Exhibits and Financial Statements:
Exhibit D-3 Copy of Orders of the PSCWV
Exhibit D-4 Copy of Order of VSCC
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused
this Amendment No. 3 to Form U-1 to be signed on their behalf by
the undersigned thereunto duly authorized.
APPALACHIAN POWER COMPANY
KANAWHA VALLEY POWER COMPANY
By:____/s/ G. P. Maloney________
G. P. Maloney, Vice President
Date: June 7, 1995
[95FN0050.APC]<PAGE>
Exhibit D-3
PUBLIC SERVICE COMMISSION
OF WEST VIRGINIA
CHARLESTON
Entered: May 31, 1995
CASE NO. 95-0006-E-PC
APPALACHIAN POWER COMPANY,
a corporation.
Petition for all requisite authorizations in
connection with the proposed merger of
Kanawha Valley Power Company into Appalachian
Power Company and for approval of tariff rate
factors that transfer recovery of the cost of
power currently sold to Appalachian by
Kanawha Valley from Appalachian's ENEC rates
to its base rates.
RECOMMENDED DECISION
On January 5, 1995, Appalachian Power Company (Appalachian or
Company), by its counsel William C. Porth, filed a petition with
the Public Service Commission (Commission) for approval of all
requisite authorizations in connection with the proposed merger of
Kanawha Valley Power (Kanawha or Kanawha Valley) into Appalachian
and for approval of tariff rate factors that transfer recovery of
the cost of power currently sold to Appalachian by Kanawha Valley
from Appalachian's Expanded Net Energy Rate (ENEC) components to
its base rate components.
On March 24, 1995, Staff Attorney Caryn Watson Short filed the
Initial Joint Staff Memorandum, which included the following
discussion:
Appalachian is a public utility engaged in
generating, purchasing, transmitting, distributing and
selling electric energy at retail within Virginia and
West Virginia. Kanawha Valley is a wholly-owned
subsidiary of Appalachian. Appalachian owns all 500
outstanding shares of the common stock of Kanawha Valley;
no other classes of stock are outstanding. Kanawha
Valley owns and operates hydroelectric power facilities
located within West Virginia and sells all of the power
it produces to Appalachian under rates set by the Federal
Energy Regulatory Commission (FERC).
The costs that Appalachian currently incurs to
acquire the electrical output of Kanawha Valley's
facilities are currently recovered from Appalachian's
customers, through its ENEC rates, as purchased power
costs. Pursuant to the Commission's October 28, 1993
Order in Case No. 93-0437-E-GI, Appalachian's ENEC rates,
as well as its base rates, are frozen until November 1,
1996.
Under the terms and conditions outlined in
Appalachian's petition, it is proposed that Kanawha
Valley will merge with and into Appalachian. The merger
will be governed by the Agreement and Plan of Merger, as
filed by Appalachian.
Ms. Short stated that Chief Utilities Analyst Bashar N. Khoury had
been assigned to review the financial issues and that a final Staff
memorandum would be filed upon completion of the technical review.
By Order of April 3, 1995, the Commission referred this matter
to the Division of Administrative Law Judges for decision on or
before August 3, 1995.
On April 19, 1995, Ms. Short filed the Final Joint Staff
Memorandum, with attached memorandum from Mr. Khoury. Mr. Khoury
recommended that the proposed merger be approved as requested but
that Appalachian be required to continue to recover the cost of
power generated by Kanawha's hydro facilities in the ENEC as if the
merger had never occurred until a Rule 42 filing is made, at which
time the transfer of the cost component to the base rates can be
made. Regarding the further requests of Appalachian, Mr. Khoury
made the following recommendations: That proposed journal entries
to record the transaction be made by Appalachian on the books and
records of Appalachian and Kanawha and that the deferred income
taxes be continued to be calculated as if the merger had never
occurred until a Rule 42 filing has been made, at which time the
transfer of the balances and any disposition thereof can be made.
On May 18, 1995, the undersigned ALJ issued a Procedural Order
establishing May 30, 1995, as the deadline for Appalachian to
respond to the Staff recommendation and scheduling this matter for
hearing at 9:30 a.m. on June 14, 1995, in the Commission's Hearing
Room, Public Service Commission Building, 201 Brooks Street,
Charleston, West Virginia.
On May 19, 1995, Mr. Porth responded. Regarding the
recommendation that the transfer of the cost component to the base
rates be deferred until a Rule 42 filing is made, which Mr. Porth
labelled Staff Recommendation 3, Mr. Porth stated,
It is the Company's understanding of the Staff's
position that, in lieu of the immediate transfer from
ENEC to base rates sought by the Company, [Appalachian]
should continue to calculate the cost of power generated
by the former Kanawha hydro facilities based on the
current FERC-approved tariff rates for Kanawha, with such
cost to be included as an ENEC expense for ratemaking
even after such FERC-approved rate is canceled following
the merger.
It is further the Company's understanding that the
Staff's recommendation is intended to provide rate
recognition of the former Kanawha hydro facilities' costs
calculated as described above, through the ENEC factor
until such time as [Appalachian's] West Virginia retail
base rates are changed pursuant to a Rule 42 filing, at
which time such cost recovery will be transferred from
the ENEC factor to base rates.
Mr. Porth argued that Appalachian cannot readily comply with
Staff's recommendation regarding calculation of the deferred income
taxes, which he labelled Staff Recommendation 4, because the merger
of all financial records of Kanawha into Appalachian will make
separate tracking of the taxes very difficult and requiring such
tracking would not allow Appalachian to realize the full efficiency
benefits from the merger. He concluded by stating that the Company
believes that the Staff's position is workable and reasonable if
the Company's understanding of Staff Recommendation 3 is confirmed
to be correct and if Staff Recommendation 4 is withdrawn.
On May 26, 1995, Ms. Short filed a Further Final Joint Staff
Memorandum, with attached memorandum from Mr. Khoury. Staff stated
that it concurred with the Company's interpretation of Staff
Recommendation 3 and agreed to withdraw Staff Recommendation 4.
Mr. Khoury also noted that Staff accepted the Company's request
that a particular $37,000 deferred income tax credit balance be
amortized over a five-year period.
FINDINGS OF FACT
1. On January 5, 1995, Appalachian Power Company filed a
petition with the Public Service Commission for approval of all
requisite authorizations in connection with the proposed merger of
Kanawha Valley Power Company (Kanawha or Kanawha Valley) into
Appalachian and for approval of tariff rate factors that transfer
recovery of the cost of power currently sold to Appalachian by
Kanawha Valley from Appalachian's Expanded Net Energy Rate (ENEC)
components to its base rate components. (See application).
2. Appalachian is a public utility engaged in generating,
purchasing, transmitting, distributing and selling electric energy
at retail within Virginia and West Virginia and Kanawha Valley, a
wholly-owned subsidiary of Appalachian, owns and operates
hydroelectric power facilities in West Virginia and sells all of
the power it produces to Appalachian. (See application and Initial
Joint Staff Memorandum filed March 24, 1995).
3. Commission Staff recommended approval of the merger and
all requests of Appalachian relating to said merger except that
Staff recommended that Appalachian be required to continue to
recover the cost of power generated by Kanawha's hydro facilities
in the ENEC as if the merger had never occurred until a Rule 42
filing is made, which has been labelled Staff Recommendation 3, and
that the deferred income taxes be continued to be calculated as if
the merger had never occurred until a Rule 42 filing is made, which
has been labelled Staff Recommendation 4. (See Final Joint Staff
Memorandum filed April 19, 1995).
4. Appalachian accepted Staff Recommendation 3, if Staff's
interpretation thereof was consistent with Appalachian's, and it
requested that Staff withdraw Staff Recommendation 4. (See
response filed by Appalachian on May 19, 1995).
5. Staff confirmed agreement with Appalachian regarding
Staff Recommendation 3 and agreed to withdraw Staff Recommendation
4, and further specified that the West Virginia retail
jurisdictional share of net accumulated deferred federal income tax
credit balances on Kanawha Valley's books that were not normalized,
totalling $37,000, could be amortized over five years. (See
Further Final Joint Staff Memorandum filed May 26, 1995).
CONCLUSION OF LAW
It is appropriate to grant, without hearing,1 the petition of
Appalachian Power Company filed January 5, 1995, as modified by
agreement of the parties, and to approve the merger of Kanawha
Valley Power Company Into Appalachian Power Company and all
requisite authorizations in connection with said merger, as
modified by agreement of the parties that transfer of the recovery
of the cost of power currently sold to Appalachian Power Company by
Kanawha Valley Power Company from the Expanded Net Energy Rate
components of Appalachian Power Company to its base rate components
shall be deferred until Appalachian Power Company makes a Rule 42
filing.
ORDER
IT IS, THEREFORE, ORDERED that the petition filed January 5,
1995, by Appalachian Power Company be, and it hereby is, approved,
as modified by agreement of the parties, as follows: the merger of
Kanawha Valley Power Company into Appalachian Power Company be, and
it hereby is, approved, and all requisite authorizations in
connection with said merger be, and they hereby are, granted, with
the exception of the request of Appalachian Power Company for the
immediate transfer of the recovery of the cost of power currently
sold to Appalachian Power Company by Kanawha Valley Power Company
from the Expanded Net Energy Rate components of Appalachian Power
Company to its base rate components.
IT IS FURTHER ORDERED that this matter be removed from the
Commission's docket of open cases.
1The hearing scheduled for June 14, 1995 will be canceled by
separate order.
IT IS FURTHER ORDERED that the Executive Secretary serve a
copy of this order upon the Commission by hand delivery, and upon
all parties of record by United States Certified Mail, return
receipt requested.
Leave is hereby granted to the parties to file written
exceptions supported by a brief with the Executive Secretary of the
Commission within fifteen (15) days of the date this order is
mailed. If exceptions are filed, the parties filing exceptions
shall certify to the Executive Secretary that all parties of record
have been served said exceptions.
If no exceptions are so filed this order shall become the
order of the Commission, without further action or order, five (5)
days following the expiration of the aforesaid fifteen (15) day
time period, unless it is ordered stayed or postponed by the
Commission.
Any party may request waiver of the right to file exceptions
to an Administrative Law Judge's Order by filing an appropriate
petition in writing with the Secretary. No such waiver will be
effective until approved by order of the Commission, nor shall any
such waiver operate to make any Administrative Law Judge's Order or
Decision the order of the Commission sooner than five (5) days
after approval of such waiver by the Commission.
Sunya Anderson
Administrative Law Judge
[95FN0050.APC]<PAGE>
PUBLIC SERVICE COMMISSION
OF WEST VIRGINIA
CHARLESTON
Issued: May 31, 1995
CASE NO. 95-0006-E-PC
APPALACHIAN POWER COMPANY,
a corporation.
Petition for all requisite authorizations
in connection with the proposed merger of
Kanawha Valley Power Company into
Appalachian Power Company and for
approval of tariff rate factors that
transfer recovery of the cost of power
currently sold to Appalachian by Kanawha
Valley from Appalachian's ENEC rates to
its base rates.
PROCEDURAL ORDER
On May 18, 1995, the undersigned Administrative Law Judge
(ALJ) issued a Procedural Order scheduling this matter for hearing
at 9:30 a.m., on June 14, 1995, in the Commission's Hearing Room,
Public Service Commission Building, 201 Brooks Street, Charleston,
West Virginia.
By recommended decision of this date, the undersigned ALJ
resolved all of the issues in this matter.
Upon consideration of the above, the ALJ finds it appropriate
to cancel the June 14, 1995 hearing.
ORDER
IT IS THEREFORE ORDERED that the hearing scheduled for June
14, 1995, be, and it hereby is, cancelled.
IT IS FURTHER ORDERED that the Executive Secretary of the
Commission serve a copy of this order upon all parties of record by
United States Certified Mail, return receipt requested, and upon
Commission Staff by hand delivery.
Sunya Anderson
Administrative Law Judge
[95FN0050.APC]<PAGE>
Exhibit D-4
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
AT RICHMOND, MARCH 20, 1995
APPLICATION OF
CASE NO. PUA940049
APPALACHIAN POWER COMPANY
For authority to merge a subsidiary
into its parent
ORDER GRANTING AUTHORITY
Appalachian Power Company ("Appalachian," "Company,"
"Applicant") has filed an application with the Commission under
the Public Utility Affiliates Act requesting authority to merge
its wholly-owned subsidiary, Kanawha Valley Power Company
("Kanawha," or "Affiliate"), into Appalachian pursuant to an
Agreement and Plan of Merger (the "Merger Agreement").
Appalachian was granted authority to acquire the stock of Kanawha
by Commission Order dated February 21, 1957, in Case No. 13367.
The transfer took place on March 12, 1957. Appalachian
represents that Kanawha owns and operates hydroelectric power
facilities within West Virginia and sells all of the power it
produces to Appalachian under rates set by the Federal Energy
Regulatory Commission (the "FERC").
According to the Merger Agreement, Kanawha will merge with
and into Appalachian, the separate corporate existence of Kanawha
will cease, and Appalachian will be the continuing and surviving
corporation (the "Surviving Corporation"). Each outstanding
share of capital stock of Appalachian will continue to be one (1)
outstanding share of stock of the Surviving Corporation and will
continue to have the same rights, privileges, and preferences as
before the merger, while each outstanding share of capital stock
of Kanawha will be canceled and extinguished. Company states
that by operation of law, as the Surviving Corporation,
Appalachian will own all real estate and other property of
Kanawha and will be subject to all liabilities of Kanawha.
Company represents that prior to effecting the merger, the Merger
Agreement must be adopted by the Boards of Directors of Kanawha
and Appalachian, but does not have to be approved by the
stockholders of Appalachian or Kanawha.
Appalachian states in its application that the consummation
of the proposed merger is dependent upon, among other things,
receiving necessary regulatory approvals from the Commission, the
Securities and Exchange Commission (the "SEC"), and the Public
Service Commission of West Virginia ("PSCWV"), as well as certain
approvals from the FERC related to the proposed merger. Company
represents that all required approvals have been or will be
sought.
In its application, Company represents that the proposed
merger is in the public interest and will lead to greater effi-
ciencies for the Surviving Corporation, including the following:
elimination of separate accounting for Affiliate; elimination of
financial and other reports prepared for Kanawha and filed with
various regulatory, tax, and governmental agencies; elimination
of periodic FERC compliance audits and an annual audit by
Affiliate's independent public accountants; and fewer rate
proceedings because of the elimination of separate FERC rate
proceedings for Kanawha. All assets transferred will be recorded
at their book value at the time of merger.
Company represents that as a wholesale customer of
Affiliate, Appalachian will continue to make purchases from
Kanawha prior to the merger pursuant to FERC jurisdictional
rates, which reflect federal income tax normalization for certain
book-tax timing differences that are not subject to similar
federal income tax normalization accounting in Appalachian's
Virginia retail jurisdiction. Company further represents that as
of June 30, 1994, the Virginia retail allocated share of the net
accumulated deferred federal income tax credit balances that were
associated with these timing differences was approximately
$15,000. Beginning with the merger, and given the small size of
the balance, Company requests authority to amortize the allocated
amount over a five (5)-year period. For those book-tax timing
differences and deferred investment tax credits that are
currently subject to similar tax normalization in Virginia and at
the FERC, Appalachian further requests authority to merge the
Virginia retail allocated share of these balances on Kanawha's
books, a net credit of approximately $420,000, as of June 30,
1994, into Appalachian's existing deferred federal income tax and
deferred investment tax credit accounts as of the time of merger.
In its application, Company also requests approval of the
proposed accounting entries to reflect the merger.
THE COMMISSION, upon consideration of the application and
representations of Applicant and having been advised by its
Staff, is of the opinion and finds that the above-described
merger of Kanawha Valley Power Company into Appalachian Power
Company would be in the public interest and should be approved.
Accordingly,
IT IS ORDERED:
1) That, pursuant to Sections 56-77 of the Code of Virginia,
Appalachian is hereby authorized to merge Kanawha into
Appalachian under the terms and conditions as set forth in the
application and the Agreement and Plan of Merger;
2) That the pro forma journal entries to reflect the
merger are hereby approved;
3) That the treatment of accumulated deferred Federal
income tax balances and deferred investment tax credits requested
in the application is hereby authorized for book purposes only;
4) That the authority granted herein for the merger and
accounting treatment as well as accounting treatment of
accumulated deferred federal income tax balances and deferred
investment tax credits shall have no ratemaking implications;
5) That authority granted herein shall not preclude the
Commission from exercising the provisions of Sections 56-78 and 56-80
of the Code of Virginia hereafter;
6) That, on or before May 31, 1995, Applicant shall file a
report of the action taken pursuant to the authority granted
herein, such report to include the date of merger and the actual
accounting entries reflecting the merger; and
7) That this matter shall be continued generally subject
to the continuing review, audit, and appropriate directive of the
Commission.
AN ATTESTED COPY hereof shall be sent to Applicant, care of
Ann B. Graf, Esq., American Electric Power Company, 1 Riverside
Plaza, Columbus, OH 43215-2373; and delivered to the Director of
Public Utility Accounting and the Director of Economics and
Finance of the Commission.
/s/ William J. Bridge
Clerk of the State
Corporation Commission
[95FN0050.APC]
