<PAGE> 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
(Name of company 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
J. F. Di Lorenzo, Jr., Associate General Counsel
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
(Names and addresses of agents for service)
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.
Appalachian Power Company ("APCo"), a wholly owned operating
company subsidiary of American Electric Power Company, Inc.
("AEP"), a registered holding company under the Public Utility
Holding Company Act of 1935, as amended (the "Act"), herein
requests authorization to have its Central Machine Shop perform
modification and rebuild services for non-affiliated entities of
the AEP System.
A. Background
The Central Machine Shop (the "Shop"), a cost center of
APCo, is located in the Charleston Ordnance Center, South
Charleston, West Virginia. The purpose of the Shop is to renovate,
rebuild and modify major pieces of power plant equipment such as
turbine shells and rotors, pump rotors, motors and other equipment
for the power generation operations of companies in the AEP System.
Shop operations began in April 1974 with non-union employees. Shop
employees consist of mechanics, welders, winders and other
craftsmen. During the years of Shop operation, total personnel
levels have fluctuated, peaking in June 1990 at 139 employees. As
of May 1996, the Shop's manpower consists of a staff of 109
employees.
The Shop facility is in a leased building measuring 1,200
feet long and varying widths with a usable floor space of
approximately 230,000 square feet. The Shop also includes a two-
level office area and a storeroom with three fenced-in storage
areas. The original cost of owned assets of the Shop was
approximately $8,836,000, with a net book value as of March 31,
1996 of approximately $4,188,000. The annualized rental expense of
the leased building was $898,077 as of March 31, 1996.
B. Operation of Shop
Throughout the years of the Shop's operation, the
workload has varied due to (1) new equipment acquisitions to
replace older equipment; (2) changes in power plant activity and
plans; and (3) efficiency improvements.
Listed below are the Shop's historical dollar revenues
unadjusted for inflation:
Year Revenues
1989 $11,121,000
1990 $12,030,205
1991 $12,514,224
1992 $11,529,601
1993 $12,029,461
1994 $13,013,745
1995 $12,545,738
APCo expects the need to service power plant equipment
will continue in the future at the same annual level; however, due
to generation load increases, power plant maintenance will become
more cyclical. This, in turn, will cause Shop work to become
cyclical.
Charges for work performed by the Shop to user AEP System
companies adhere to the principal that revenues equal costs. Costs
for each job to affiliated companies are accumulated by job order
and billed to each user AEP System company. Billed charges include
direct labor and direct material costs plus overhead allocations
thereon. Such charges do not include any return on investment.
C. Proposed Work for Non-Affiliates
APCo and any successor company thereof requests
authorization for its Shop to perform work for non-affiliated
entities of the same type that the Shop presently performs for AEP
System companies. Such work for non-affiliates would be done
during slack periods. Layoffs of experienced personnel could thus
be avoided and such personnel would be retained on staff for the
anticipated higher levels of affiliated service work throughout the
year. APCo anticipates that the experienced laid-off personnel
would find other employment and would not be subject to recall for
employment by APCo. The ability to perform work for non-affiliates
during reduced workload periods would provide the economic
justification to avoid layoffs and keep the Shop's core staff
intact. Performing work for non-affiliates during slack periods in
the Shop's workload would also more efficiently optimize
utilization of the Shop's fixed assets and manpower, spreading the
cost of those assets and manpower across a greater volume of work,
thereby also lowering the average cost of work to user AEP System
companies.
APCo and any successor company thereof seeks
authorization for the Shop to perform for non-affiliates the herein
described services for an initial period up to December 31, 2001.
APCo and any successor company thereof agrees to obtain additional
authorization to take on additional work for non-affiliates beyond
the initial requested period of approximately five years.
Charges to non-affiliates would include an amount for
profit and would be as high as practicable giving consideration to
the competitive market, but in no case less than anticipated direct
labor and direct materials (incremental cost).
The revenue derived from providing services to non-
affiliates would be used to reduce Shop operation costs (overheads)
and thus reduce the rate charged by the Shop to user AEP System
companies. APCo at this time has no prospective non-affiliated
work and is unable to reasonably estimate the annual dollar volume
or work that might be performed for non-affiliates.
APCo proposes, subject to the terms and conditions
prescribed by Rule 24 promulgated under the 1935 Act, to file
certificates within 90 days after the end of each calendar year,
beginning with a report for the 1996 calendar year (including any
prior period for which authorization is received), setting forth
the following information: (1) total revenues, including
separately identifying revenues attributed to affiliates and non-
affiliates,; and (2) total costs, including separately identifying
costs charged to work performed for affiliates and non-affiliates.
Appendix A is a form of the proposed report.
D. Compliance with Rule 54
Rule 54 provides that in determining whether to approve
certain transactions other than those involving exempt wholesale
generators ("EWG") or foreign utility companies ("FUCO"), as
defined in the 1935 Act, the Commission will not consider the
effect of the capitalization or earnings of any subsidiary which is
an EWG or FUCO if Rule 53(a), (b) and (c) are satisfied. The
requirements of Rule 53(a), (b) and (c) are satisfied.
Rule 53(a)(1). AEP Resources International, Limited
("AEPRI"), an indirect subsidiary of AEP, is an EWG. As of March
31, 1996, AEP, through its subsidiary, AEP Resources, Inc., had
invested $365,000 in AEPRI. This investment represents less than
1% of $1,406,191,000, the average of the consolidated retained
earnings of AEP reported on Form 10-K or Form 10-Q, as applicable,
for the four consecutive quarters ended March 31, 1996.
Rule 53(a)(2). AEPRI will maintain books and records and make
available the books and records required by Rule 53(a)(2).
Rule 53(a)(3). No more than 2% of the employees of the
operating company subsidiaries of AEP will, at any one time,
directly or indirectly, render services to AEPRI.
Rule 53(a)(4). AEP has submitted and will submit a copy of
Item 9 and Exhibits G and H of AEP's Form U5S to each of the public
service commissions having jurisdiction over the retail rates of
AEP's operating company subsidiaries.
Rule 53(b). (i) Neither AEP nor any subsidiary of AEP is the
subject of any pending bankruptcy or similar proceeding; (ii) AEP's
average consolidated retained earnings for the four most recent
quarterly periods ($1,406,191,000) represented an increase of
approximately $74,946,000 (or 5.6%) in the average consolidated
retained earnings from the previous four quarterly periods
($1,331,245,000); and (iii) for the year ended December 31, 1995,
there were no losses attributable to AEP's investments in AEPRI
other than $93,000 in preliminary development and start-up costs.
Rule 53(c). Rule 53(c) is inapplicable because the
requirements of Rule 53(a) and (b) have been satisfied.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
No fees, commissions or expenses, other than the Commission's
filing fee of $2,000 and expenses estimated not to exceed $10,000
to be billed at cost by American Electric Power Service
Corporation, are to be paid by APCo or any associate company in
connection with the proposed transaction.
ITEM 3. APPLICABLE STATUTORY PROVISIONS
APCo considers Sections 9 and 10 of the 1935 Act may be
applicable to the proposed transactions described herein.
ITEM 4. REGULATORY APPROVAL
No commission other than the Securities and Exchange
Commission 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 Application or Declaration
be issued on or before June 30, 1996. APCo waives any recommended
decision by a hearing officer or by any other responsible officer
of the Commission and waive the 10-day waiting period between the
issuance of the Commission's order and the date it is to become
effective, since it is desired that the Commission's order, when
issued, become effective forthwith. APCo consents to the Office of
Public Utility Regulation assisting in the preparation of the
Commission's decision and/or order in this matter, unless the
Office opposes the matter covered by this Application or
Declaration.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
The following exhibits and financial statements are filed as
part of this statement:
Exhibits:
Exhibit F Opinion of Counsel (to be filed by amendment).
Exhibit G Proposed form of Notice
It is believed that financial statements are not necessary or
relevant to the disposition of this proceeding.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
It is believed that the granting and permitting to become
effective of this Application or Declaration will not constitute 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 its duly authorized
officer.
APPALACHIAN POWER COMPANY
By: /s/ A. A. Pena
Treasurer
June 18, 1996
Exhibit G
UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Release No. /June , 1996
_____________________________________________
:
In the Matter of :
:
APPALACHIAN POWER COMPANY :
40 Franklin Road :
Roanoke, VA 24022 :
:
(70- ) :
_____________________________________________:
NOTICE OF PROPOSAL TO PERFORM SERVICES FOR NON-AFFILIATED ENTITIES
Appalachian Power Company ("APCo"), an electric utility
subsidiary of American Electric Power Company, Inc. ("AEP"), a
registered holding company, has filed an Application or Declaration
with this Commission pursuant to Sections 9 and 10 of the Public
Utility Holding Company Act of 1935 (the "Act").
APCo's Central Machine Shop is located in the Charleston
Ordnance Center, South Charleston, West Virginia. Since 1974 the
Shop has renovated, rebuilt and modified major pieces of power
plant equipment such as turbine shells and rotors, pump rotors,
motors and other equipment for the power generation operations of
AEP System companies.
APCo is requesting authorization for an initial period up to
December 31, 2001 for the Shop to perform work during slack periods
for non-affiliated entities of the same type that the Shop
presently performs for AEP System companies. Layoffs of
experienced personnel could thus be avoided and such personnel
would be retained on staff for the anticipated higher levels of
affiliated service work throughout the year. Performing work for
non-affiliates during slack periods in the Shop's workload would
also more efficiently optimize utilization of the Shop's fixed
assets and manpower, spreading the cost of those assets and
manpower across a greater volume of work, thereby also lowering the
average cost of work to user AEP System companies.
Charges to non-affiliates would include an amount for profit
and would be as high as practicable giving consideration to the
competitive market, but in no case less than anticipated direct
labor and direct materials (incremental cost). The revenue derived
from providing services to non-affiliates would be used to reduce
Shop operation costs (overheads) and thus reduce the rate charged
by the Shop to user AEP System companies. APCo at this time has no
prospective non-affiliated work and is unable to reasonably
estimate the annual dollar volume or work that might be performed
for non-affiliates.
The Application or Declaration 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 July , 1996 to
the Secretary, Securities and Exchange Commission, Washington, D.C.
20549, and serve a copy on the applicants at the addresses
specified above. Proof of service (by affidavit or, in case of any
attorney at law, by certificate) should be filed with the request.
Any request for a hearing shall identify specifically the issues of
fact or law that are disputed. A person who so requests 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
Application, as filed or as it may be amended, may be permitted to
become effective.
For the Commission, by the Office of Public Utility
Regulation, pursuant to delegated authority.
Jonathan G. Katz
Secretary
