File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM U-1
__________________________________
APPLICATION OR DECLARATION
under the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
* * *
APPALACHIAN POWER COMPANY
40 Franklin Road, Roanoke, Virginia 24022
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(Name of companies filing this statement and
addresses of principal executive offices)
* * *
AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
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(Name of top registered holding company
parent of each applicant or declarant)
* * *
Armando A. Pena, Treasurer
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
John F. Di Lorenzo, Jr., Associate General Counsel
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
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(Names and addresses of agents for service)
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.
BACKGROUND.
Appalachian Power Company ("APCo" or the "Company"), a pub-
lic utility subsidiary of American Electric Power Company, Inc.,
a registered holding company, is party to a utility mortgage
dated December 1, 1940 with Bankers Trust Company (the "Mort-
gage"). The Mortgage has a two-part maintenance provision (Sec-
tion 40). Part I provides that the maintenance obligation be
calculated on a 15% revenue test. Part II requires that the
maintenance obligation be calculated on a percentage of depreci-
able property, currently 2.25%. From the Indenture Supplemental
dated as of March 1, 1957 up to and including the Indenture
Supplemental dated as of November 15, 1992, supplemental inden-
tures under which first mortgage bonds have been issued have
extended the covenants in Part II of Section 40 to those series
of bonds. The Indenture Supplemental dated April 15, 1993 and
subsequent supplemental indentures have not extended the
covenants under Part II of Section 40 of the Mortgage.
AMENDMENT OF MORTGAGE -- BONDHOLDER APPROVAL.
On April 12, 1979, APCo filed a Form U-1 in File No. 70-6289
with this Commission in connection with sale of first mortgage
bonds and preferred stock. Included in this Form U-1 was a pro-
posal to amend the provisions of Article XX, Section 128 of the
Mortgage, concerning meetings of bondholders "to facilitate the
amendment of the Mortgage at a future date, as follows: (i) to
delete the third paragraph of Part I of Section 40 of the Mort-
gage (the requirement that the Company annually satisfy through
the deposit of cash or bonds the amount by which the sum of
expenditures for repairs, maintenance and replacements and the
amount of property additions which the Company may elect to
certify fail to equal a percentage -- ranging from 13% to 15% -- of
base operating revenues, as defined), and/or (ii) to delete the
fourth paragraph of Section 27 of the Mortgage, which provides
that no bonds shall be authenticated, nor funded cash withdrawn,
nor funded property released, nor credit taken on the basis of
property additions subject to prior liens where the property
additions so used, and related amounts, would exceed 15% of the
total amount of bonds authenticated under the Mortgage." This
amendment was proposed to comply with the standards of the Com-
mission's Policy in respect of first mortgage bonds stated in
HCAR Release No. 13105 dated February 16, 1956. The Supplemental
Indenture dated May 1, 1979 to the Mortgage amended Section 128
to permit the future specified amendments to the Mortgage without
bondholder approval.
The Mortgage could not be amended to provide for the changes
that could be made without bondholder approval so long as there
were any first mortgage bonds issued prior to 1972, as the waiver
of bondholder approval applied only to subsequently issued first
mortgage bonds. No series of first mortgage bonds issued prior
to May 1, 1979 are currently outstanding. The Mortgage has not
yet been amended to delete the third paragraph of Part I of Sec-
tion 40 or the fourth paragraph of Section 27.
CHANGE IN APPLICABLE PERCENTAGE.
In that Form U-1 in File No. 70-6289, the Company also pro-
posed that the Commission approve a change in the amount of the
Applicable Percentage specified under Part II of Section 40 of
the Mortgage from 2.25% to 2.90%, SUCH CHANGE TO BECOME EFFECTIVE
ON THE DATE WHEN THE MORTGAGE SHALL BE AMENDED TO DELETE THE PRO-
VISIONS OF THE THIRD PARAGRAPH OF PART I OF SECTION 40, AND TO
CONTINUE AT 2.90% UNTIL ANOTHER CHANGE IN SUCH PERCENTAGE SHALL
BE AUTHORIZED OR APPROVED.
1979 ORDER.
The Order of this Commission dated May 7, 1979 in File No.
70-6289 ("1979 Order") stated that "the new Supplemental Inden-
ture will not include a restriction in the existing indenture on
the use of property subject to prior liens if the aggregate
amount of prior liens exceed 15% of the total amount of bonds
authenticated and IT WILL SUBSTITUTE a requirement that annual
expenditures for repairs, maintenance and replacements will be
2.90% of net depreciable property UNLESS A DIFFERENT PERCENTAGE
IS AUTHORIZED OR APPROVED BY THIS COMMISSION for the present
indenture requirement based on 15% of base operating revenues or
2.25% of plant, whichever is greater. These changes will not be
operative as long as bonds issued under the prior provisions are
outstanding, unless the indenture is amended with respect to
them. APCo may seek such amendments in the future and would re-
quire separate authorization. The effect of including the
revised terms in the new supplemental indenture is to make it
unnecessary to secure the consent of holders of the bonds to such
an amendment."
PROPOSED TRANSACTION.
The Commission's Statement of Policy on First Mortgage
Bonds, which has since been proposed to be rescinded, relied on a
formula based on depreciable property. APCo intends to amend its
Mortgage to delete (i) the third paragraph of Part I of Section
40 and (ii) the fourth paragraph of Section 27 pursuant to the
1979 Order. In this application, APCo proposes that the appli-
cable percentage referred to in Part II of Section 40 remain at
2.25% instead of being increased to 2.90% as authorized in the
1979 Order.
Increasing the applicable percentage correspondingly
increases the maintenance obligation, which obligation in the
past has most recently been fulfilled by redeeming first mortgage
bonds at par. While this provision is for the benefit of the
bondholders, it is not popular with bondholders because a larger
maintenance deficit means that more first mortgage bonds could be
called at par to fulfill this deficit. Of the twenty series of
bonds currently outstanding under the Mortgage, ten series have
been sold without an extension of the maintenance provision.
This is evidence of the lack of importance placed on the main-
tenance provision by bondholders. The trustee under the Mortgage
concurs with this analysis and with the Company's plan to amend
the Mortgage without increasing the applicable percentage, sub-
ject to Commission approval.
The Company proposes to amend the Mortgage to delete (i) the
third paragraph of Part I of Section 40 and (ii) the fourth para-
graph of Section 27 in accordance with the 1979 Order. The Com-
pany hereby requests authority to retain the 2.25% applicable
percentage instead of increasing the applicable percentage to
2.90% as set forth in the 1979 Order, which contemplated addi-
tional changes in the percentage with the approval of the Commis-
sion.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
Estimates of fees, commissions and expenses paid or in-
curred, or to be paid or incurred, directly or indirectly, in
connection with the proposed transaction by the applicant or
declarant or any associates thereof are as follows:
Recordation Fees and Expenses $2,000
Legal Fees of Counsel to APCo
and the Trustee 1,000
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Total $3,000
======
No other fees, commissions or expenses, other than expenses
billed at cost by American Electric Power Service Corporation
(not to exceed $2,000), have been or are to be paid or incurred
by APCo or any associate company in connection with the proposed
transaction.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
APCo considers that Section 6(a) of the Public Utility
Holding Company Act of 1935, as amended, and the rules thereunder
are applicable to the proposed transaction.
ITEM 4. REGULATORY APPROVAL.
No commission other than those named above and this Commis-
sion has jurisdiction over the proposed transaction.
ITEM 5. PROCEDURE.
It is requested, pursuant to Rule 23(c) of the Rules and
Regulations of the Commission, that the Commission's order
granting and permitting to become effective this Joint Applica-
tion or Declaration, be issued on or before _____________ 30,
199_. APCo waives any recommended decision by a hearing officer
or by any other responsible officer of the Commission and waive
the 30-day waiting period between the issuance of the Commis-
sion's order and the date it is to become effective, since it is
desired that the Commission's order, when issued, become effec-
tive forthwith. APCo consents to the Division of Investment
Management assisting in the preparation of the Commission's
decision and/or order in this matter, unless the Division opposes
the matter covered by this joint Application - Declaration.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
The following exhibits and financial statements are filed as
part of this statement:
(a) Exhibits:
Exhibit A None
Exhibit B None
Exhibit C None
Exhibit D None
Exhibit F Opinion of Counsel
Exhibit G Form of Notice
(b) Financial Statements:
No financial statements for AEP or APCo are submitted
herewith since such financial statements would not appear to
be necessary or relevant in connection with the disposition
and consideration of the proposed transaction.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
It is believed that the granting and permitting to become
effective of this joint Application or Declaration will not con-
stitute a major Federal action significantly affecting the
quality of the human environment. No other Federal agency has
prepared or is preparing an environmental impact statement with
respect to the proposed transaction.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned company has duly caused this
statement to be signed on its behalf by the undersigned thereunto
duly authorized.
APPALACHIAN POWER COMPANY
By:_____/s/_A._A._Pena________
A. A. Pena, Treasurer
Date: November 8, 1996
EXHIBIT F
American Electric Power
1 Riverside Plaza
Columbus, OH 43215-2373
(614) 223-1000
(614) 223-1687 (Telecopier)
Writer's Direct Dial No.
(614) 223-1649
November 8, 1996
Securities and Exchange Commission
Office of Public Utility Regulation
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: APPALACHIAN COMPANY
FILE NO. 70-
Gentlemen:
In connection with the authority requested in the Application or
Declaration on Form U-1 filed with the Securities and Exchange
Commission by Appalachian Power Company to which this opinion is
an exhibit, I have examined, among other things, the Application
or Declaration on Form U-1 and the documents referred to in it.
In my opinion, if the Application or Declaration is granted and
permitted to become effective and if the proposed transaction is
consummated in accordance with the aforesaid Application or
Declaration:
(a) all state laws applicable to the proposed
transaction will have been complied with;
(b) the consummation of the proposed transaction will
not violate the legal rights of the holders of any securi-
ties issued by the Applicant or Declarant, or any associate
company.
I consent to the use of this opinion as part of the above-
mentioned Application or Declaration.
Very truly yours,
/s/ Ann B. Graf
Ann B. Graf
Counsel for Appalachian Power Company
EXHIBIT G
UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Release No. ______ / , 1996
________________________________________
:
In the Matter of :
:
APPALACHIAN POWER COMPANY :
40 Franklin Road, S.W. :
Roanoke, VA 24011 :
:
( ) :
________________________________________:
NOTICE OF PROPOSED RETENTION OF APPLICABLE
PERCENTAGE UNDER UTILITY MORTGAGE
Appalachian Power Company ("Appalachian"), a public utility sub-
sidiary of American Electric Power Company, Inc. ("American"), a
registered holding company, has filed a proposal with this Com-
mission pursuant to Section 6(a) of the Public Utility Holding
Company Act of 1935 ("Act").
Under the maintenance provisions of Part II of Section 40 of its
utility Mortgage dated December 1, 1940 with Bankers Trust Com-
pany, Appalachian is required to use an applicable percentage of
2.25% of depreciable property to calculate the maintenance obli-
gation under the Mortgage. In its order dated May 7, 1979, this
Commission authorized the increase of the applicable percentage
to 2.90% when no bonds issued under prior provisions were out-
standing, unless separate authorization of the Commission was
granted. Since there are now no bonds outstanding that were
issued prior to the May 1979 order, Appalachian seeks authority
to retain the applicable percentage of 2.25% of depreciable
property currently in effect under its Mortgage instead of in-
creasing said applicable percentage to 2.90% as authorized by the
May 7, 1979 order of the Commission.
The proposal and any amendments thereto are available for public
inspection through the Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing should
submit their views in writing by November ____, 1996, to the
Secretary, Securities and Exchange Commission, Washington, D.C.
20549, and serve a copy on the applicant at the address specified
above. Proof of service (by affidavit or, in the case of an
attorney at law, by certificate) should be filed with the re-
quest. Any request for a hearing shall identify specifically the
issues of fact or law that are disputed. A person who so re-
quests will be notified of any hearing, if ordered, and will
receive a copy of any notice or order issued in this matter.
After said date, the proposal, as filed or as amended, may be
authorized.
For the Commission, by the Office of Public Utility Regulation,
pursuant to delegated authority.
Jonathan G. Katz
Secretary
