<PAGE>
File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM U-1
APPLICATION OR DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
THE POTOMAC EDISON COMPANY
10435 DOWNSVILLE PIKE
HAGERSTOWN, MD 21740-1766
(Name of company or companies filing this statement and addresses
of principal executive offices)
Allegheny Energy, Inc.
(Name of top registered holding company parent of each applicant
or declarant)
Thomas K. Henderson, Esq.
Vice President
Allegheny Energy, Inc.
10435 Downsville Pike
Hagerstown, MD 21740-1766
(Name and address of agent for service)
<PAGE>
1. Description of Proposed Transaction.
The Potomac Edison Company ("Potomac Edison"), a public
utility subsidiary of Allegheny Energy, Inc. ("Allegheny"), a
registered holding company under the Public Utility Holding
Company Act of 1935 (the "Act"), requests authority through
December 31, 2005 to enter into a joint venture ("JV") with an
experienced real estate developer, and to engage in preliminary
development activities in connection with entering into the joint
venture. The activities of the JV would be limited to the
development, lease and / or sale of a certain parcel of land (the
"Property") owned by Potomac Edison. The Property was originally
purchased by Potomac Edison primarily for utility purposes, but
such use is no longer planned for the Property. Potomac Edison
desires to develop the Property, with the assistance of a
developer-partner, into a business and technology park.
Formation and Structure of the Joint Venture
The JV will likely be in the form of a limited liability
company or limited liability partnership. Potomac Edison plans
to form the JV with an experienced real estate developer, which
will manage the day-to-day operations of the JV. Potomac Edison
will provide the Property, which will be transferred to the JV.
The developer will provide capital for and oversee the
development and marketing of the Property as a business and
technology park. Development activities shall include
installation of the infrastructure (water, sewer, and other
utilities), roads and other amenities, and subdivision of the
Property as necessary to create buildable and saleable lots.
Potomac Edison intends that its involvement in the JV will be
passive, except that the Company will have equal rights with its
developer-partner to approve the ultimate sale of the lots.
<PAGE>
History of the Property
The Property is an approximately 260-acre parcel of real
estate, located adjacent to Potomac Edison's and Allegheny's
corporate headquarters in Hagerstown, Maryland. The Property has
never been included in Potomac Edison's rate base. In 1967,
Potomac Edison moved its corporate headquarters from downtown
Hagerstown to its current location on the Downsville Pike. In an
effort to consolidate and centralize its general office
operations, the Company purchased 200 acres in addition to the 35-
acres used for the general office site. It was anticipated that
many ancillary services and other utility uses would naturally
spin-off from the headquarters location. This course of events,
however, did not evolve.
In the mid-1980's it became evident that most of the
original proposed uses were no longer feasible. Potomac Edison
decided to use the acreage for economic development purposes.
The business park concept was proposed and eventually refined to
a campus-style, business and technology park. At this time, the
Company purchased an additional parcel of approximately 60 acres.
Most of the acreage has been rezoned and several extensive land-
use studies were conducted to determine the property's highest
and best use. The Property (also known as Friendship Technology
Park) has not yet realized its full potential value due to
several factors, including the lack of infrastructure and lack of
interstate access.
The Technology Park
Potomac Edison wishes to promote job growth and improve the
economy of Hagerstown and Washington County, Maryland by
developing the Property into a business and technology park.
Friendship Technology Park is expected to attract a number of
established and profitable businesses, along with high-paying
jobs, into the Hagerstown and Washington County, Maryland area.
<PAGE>
State, county and local agencies have expressed their interest in
having the Property developed into a business and technology
park. See Exhibits B-1 through B-3. In developing the
Property, Potomac Edison will be acting as a good corporate
citizen and furthering economic development in the region by
creating the opportunity for new jobs and growth. The timing for
development of the Property is also better than ever, since a new
interchange on Interstate 70 is currently being built adjacent to
the Property.
Cost Recovery
In addition to furthering the above corporate citizenship
and economic development goals, Potomac Edison hopes that
entering into the JV will allow it to recover the costs
associated with its acquisition of the Property, which, as is
noted above, was originally acquired for intended utility
purposes which no longer are feasible or desirable. In recent
orders, the Securities and Exchange Commission has held that the
retention of similar nonutility business interests is consistent
with section 11(b)(1) of the Act. See Conectiv, Inc., HCAR
No.26832 (February 25, 1998); and UNITIL Corporation, et al.,
HCAR No. 25524 (April 24, 1992).
Moreover, consistent with Section 9(c)(3) of the Act,
Potomac Edison intends to be a passive partner in the JV. In
choosing an experienced developer-partner, Potomac Edison need
not and will not become involved in the technical and
administrative details of developing the Property. CSW
Corporation, HCAR. No. 23578 (January 22, 1985). As noted above,
Potomac Edison's involvement in the JV is mainly intended to
allow Potomac Edison some influence in determining the kinds of
businesses that will locate in the business and technology park.
Potomac Edison has a valid interest in determining the kinds of
businesses that will be the closest neighbors to its corporate
headquarters.
<PAGE>
The JV will maintain separate financial records and detailed
supporting records, including profit/loss statements. These
records will be available to any proper federal regulatory agency
or state regulatory agency for review. The accounting staff of
APSC, pursuant to a service agreement with the JV, will be
responsible for record keeping and maintaining audit procedures
which are in compliance with generally accepted accounting
principles.
Except as described herein, no associate company or
affiliate of the Applicant or any affiliate of any such associate
company has any material interest, directly or indirectly, in the
proposed transactions.
2. Fees, Commissions and Expenses
None, other than (i) ordinary expenses in connection
with the preparation of this Application or Declaration, (ii)
$10,000 in connection with the formation of the JV.
None of such fees, commissions or expenses are to be
paid to any associate company or affiliate of the Applicant or
any affiliate of any such associate company except for legal,
financial and other services to be performed at cost by Allegheny
Power Service Corporation.
3. Applicable Statutory Provisions
The Applicant has been advised that the proposed
transactions, in whole or in part, may be subject to Sections
9(a), 9(c), 10, and 11(b) of the Public Utility Holding Company
Act of 1935 and Rules 87, 90 and 91 thereunder.
<PAGE>
4. Regulatory Approval
No commission other than the Securities and Exchange
Commission has jurisdiction over the proposed transactions.
5. Procedure
It is requested that the Commission's order granting this
Application or Declaration be issued by December 31, 1998. There
should be no recommended decision by a hearing or other
responsible officer of the Commission and no 30-day waiting
period between the issuance of the Commission's order and its
effective date. The Applicant consents to the Division of
Corporate Regulation's assisting in the preparation of the
Commission's decision and order in this matter, unless the
Division opposes the transactions covered by this Application or
Declaration.
6. Exhibits and Financial Statements
(a) Exhibits
A Operating Agreement of
new Joint Venture (to be
filed by amendment)
B-1 Letter from Maryland Governor
Parris Glendening
B-2 Letter from Maryland
Department of Business and
Economic Development
B-3 Letter from Hagerstown-
Washington County Economic
Development Commission
F Opinion of Counsel (to be
filed by amendment)
H Form of Notice
<PAGE>
7. Information as to Environmental Effects
(a) For the reasons set forth in Item 1
above, the authorization applied for herein does
not require major federal action significantly
affecting the quality of the human environment for
purposes of Section 102(2)(C) of the National
Environmental Policy Act (42 U.S.C. 4232(2)(C)).
(b) Not applicable.
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.
THE POTOMAC EDISON COMPANY
By: /s/ Kathy L. Mitchell
Kathy L. Mitchell
Counsel
DATE: October 9, 1998
<PAGE>
EXHIBIT B-1
STATE OF MARYLAND Parris N. Glendening
OFFICE OF THE GOVERNOR Governor
100 State Circle
Annapolis, Maryland 21401
Mr. Alan J. Noia (410) 974-3901
President & CEO 1-800-811-8336
Allegheny Power
10435 Downsville Pike
Hagerstown, MD 21740
Re: Friendship Technology Park
Dear Mr. Noia:
It has come to my attention that Allegheny Power is about to
embark on a venture that will significantly impact the economic
development of Western Maryland. I heard with great interest your
proposed development of the property adjacent to your
headquarters facility in Hagerstown, and am extremely excited
about its positive effects on the regional economy. Friendship
Technology Park will, indeed, bring economic benefits for years
to come.
As you know, the State of Maryland has long been active in
the recruitment and location of business and industry. Although
we have achieved tremendous success, it has not happened without
the active support of our public and private allies. Allegheny
Power has a distinguished record of support of Maryland's
economic development efforts. Now, with your new initiative, I
believe your commitment has been elevated to an even higher
level. I see Friendship Technology Park as a significant step in
establishing a technology foothold in Western Maryland, and the
inevitable wage, tax, and labor benefits will be vital to the
long-term prosperity of the region.
Please count on my continued support of this project and of
Allegheny Power's economic development efforts. It is this spirit
of cooperation that will propel Maryland into the next century
with confidence and conviction. If I may be of further
assistance, please do not hesitate to contact me.
Sincerely,
/s/
Paris N. Glendening
Governor
<PAGE>
EXHIBIT B-2
MARYLAND DEPARTMENT OF BUSINESS & ECONOMIC DEVELOPMENT
Office of the Secretary
217 East Redwood Street
Baltimore, Maryland 21202
Telephone: (410) 767-6300
Fax: (410)333-8628
1-800-541-8549
September 28, 1998
Mr. Alan J. Noia
President & CEO
Allegheny Power
10435 Downsville Pike
Hagerstown, MD 21740
Dear Mr. Noia:
As Acting Secretary of the Maryland Department of Business and
Economic Development, I would like to take this opportunity to
thank Allegheny Power for all the contributions given to
Maryland's economic development efforts. You and your staff have
been longtime supporters of our office and your contributions
have assisted in many successful business locations in Western
Maryland.
Allegheny Power is now attempting to increase its commitment to
the people of Western Maryland by developing the property
adjacent to its headquarters facility in Hagerstown. Your
project, to be known as Friendship Technology Park, will be an
integral part of the growth of that region. As designed, this
project will help to diversify the regional economy through its
emphasis on technology and high-end uses, provide an upward push
on the average wage levels through the influx and training of
skilled workers, and significantly increase the tax base for
Hagerstown and Washington County.
Let me say that we are excited to be a part of your efforts. Rest
assured that my staff will work with Allegheny Power to market
and promote the property. Thank you again for your continual
commitment to your customers and the citizens of Maryland. I know
that we could not effectively do our jobs without the active
support of companies like yours.
Sincerely,
/s/
James D. Fielder Jr., Ph.D.
Acting Secretary
<PAGE>
EXHIBIT B-3
HAGERSTOWN-WASHINGTON COUNTY ECONOMIC DEVELOPMENT COMMISSION
County Administration Building
100 West Washington Street, Room 103
Hagerstown, Maryland 21740-4727
Telephone: (301) 791-3080
TDD/Hearing Impaired (301) 791-3383
FAX: (301) 791-3157
September 29, 1998
Mr. Alan J. Noia
President & CEO
Allegheny Power
10435 Downsville Pike
Hagerstown, MD 21740
Dear Mr. Noia:
On behalf of the Board of Directors of the Hagerstown-
Washington County Economic Development Commission and the
governmental units we serve, we would like to declare our support
for the planned development of Friendship Technology Park. The
proposed development of your acreage located just south of
Interstate 70 along Maryland Route 632 is critical to the
economic development program throughout Hagerstown and Washington
County. The planned uses will certainly increase the economic
diversity within our county and region.
We know that high-end tenants in Friendship Technology Park
- - such as sophisticated technology companies, corporate offices,
and regional centers involving advanced telecommunications - can
have significant positive impacts upon our local economy. The
highly-trained professional occupations which may result will
heighten the image and value of our workforce over-all.
We are excited to be a part of this proposed development and
will do all we can to help your project come to fruition. Please
count on our full support.
Yours very truly,
/s/
Suzanne Hayes
Chairman
/s/
John C. Howard, CED
Executive Director
cc: The Honorable Gregory I. Snook
President, Washington County Board of County Commissioners
The Honorable Robert E. Bruchey
Mayor, City of Hagerstown
<PAGE>
EXHIBIT H
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- : )
The Potomac Edison Company
Notice Requesting Approval to Enter into
A Joint Venture to Develop Real Estate
THE POTOMAC EDISON COMPANY
10435 Downsville Pike
Hagerstown, MD 21740
Description of Proposed Transaction.
The Potomac Edison Company ("Potomac Edison"), a public
utility subsidiary of Allegheny Energy, Inc. ("Allegheny"), a
registered holding company under the Public Utility Holding
Company Act of 1935 (the "Act"), requests authority through
December 31, 2005 to enter into a joint venture ("JV") with an
experienced real estate developer, and to engage in preliminary
development activities in connection with entering into the joint
venture. The activities of the JV would be limited to the
development, lease and / or sale of a certain parcel of land (the
"Property") owned by Potomac Edison. The Property was originally
purchased by Potomac Edison primarily for utility purposes, but
such use is no longer planned for the Property. Potomac Edison
desires to develop the Property, with the assistance of a
developer-partner, into a business and technology park.
Formation and Structure of the Joint Venture
The JV will likely be in the form of a limited liability
company or limited liability partnership. Potomac Edison plans
to form the JV with an experienced real estate developer, which
will manage the day-to-day operations of the JV. Potomac Edison
will provide the Property, which will be transferred to the JV.
The developer will provide capital for and oversee the
development and marketing of the Property as a business and
technology park. Development activities shall include
installation of the infrastructure (water, sewer, and other
utilities), roads and other amenities, and subdivision of the
Property as necessary to create buildable and saleable lots.
Potomac Edison intends that its involvement in the JV will be
passive, except that the Company will have equal rights with its
developer-partner to approve the ultimate sale of the lots.
History of the Property
The Property is an approximately 260-acre parcel of real
estate, located adjacent to Potomac Edison's and Allegheny's
corporate headquarters in Hagerstown, Maryland. The Property has
never been included in Potomac Edison's rate base. In 1967,
Potomac Edison moved its corporate headquarters from downtown
Hagerstown to its current location on the Downsville Pike. In an
effort to consolidate and centralize its general office
operations, the Company purchased 200 acres in addition to the 35-
acres used for the general office site. It was anticipated that
many ancillary services and other utility uses would naturally
spin-off from the headquarters location. This course of events,
however, did not evolve.
In the mid-1980's it became evident that most of the
original proposed uses were no longer feasible. Potomac Edison
decided to use the acreage for economic development purposes.
The business park concept was proposed and eventually refined to
a campus-style, business and technology park. At this
<PAGE>
time, the
Company purchased an additional parcel of approximately 60 acres.
Most of the acreage has been rezoned and several extensive land-
use studies were conducted to determine the property's highest
and best use. The Property (also known as Friendship Technology
Park) has not yet realized its full potential value due to
several factors, including the lack of infrastructure and lack of
interstate access.
The Technology Park
Potomac Edison wishes to promote job growth and improve the
economy of Hagerstown and Washington County, Maryland by
developing the Property into a business and technology park.
Friendship Technology Park is expected to attract a number of
established and profitable businesses, along with high-paying
jobs, into the Hagerstown and Washington County, Maryland area.
State, county and local agencies have expressed their interest in
having the Property developed into a business and technology
park. See Exhibits B-1 through B-3. In developing the
Property, Potomac Edison will be acting as a good corporate
citizen and furthering economic development in the region by
creating the opportunity for new jobs and growth. The timing for
development of the Property is also better than ever, since a new
interchange on Interstate 70 is currently being built adjacent to
the Property.
Cost Recovery
In addition to furthering the above corporate citizenship
and economic development goals, Potomac Edison hopes that
entering into the JV will allow it to recover the costs
associated with its acquisition of the Property, which, as is
noted above, was originally acquired for intended utility
purposes which no longer are feasible or desirable. In recent
orders, the Securities and Exchange Commission has held that the
retention of similar nonutility business interests is consistent
with section 11(b)(1) of the Act. See Conectiv, Inc., HCAR
No.26832 (February 25, 1998); and UNITIL Corporation, et al.,
HCAR No. 25524 (April 24, 1992).
Moreover, consistent with Section 9(c)(3) of the Act,
Potomac Edison intends to be a passive partner in the JV. In
choosing an experienced developer-partner, Potomac Edison need
not and will not become involved in the technical and
administrative details of developing the Property. CSW
Corporation, HCAR. No. 23578 (January 22, 1985). As noted above,
Potomac Edison's involvement in the JV is mainly intended to
allow Potomac Edison some influence in determining the kinds of
businesses that will locate in the business and technology park.
Potomac Edison has a valid interest in determining the kinds of
businesses that will be the closest neighbors to its corporate
headquarters.
The JV will maintain separate financial records and detailed
supporting records, including profit/loss statements. These
records will be available to any proper federal regulatory agency
or state regulatory agency for review. The accounting staff of
APSC, pursuant to a service agreement with the JV, will be
responsible for record keeping and maintaining audit procedures
which are in compliance with generally accepted accounting
principles.
Except as described herein, no associate company or
affiliate of the Applicant or any affiliate of any such associate
company has any material interest, directly or indirectly, in the
proposed transactions.
The application 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 , 1998, to the Secretary,
Securities and Exchange Commission, Washington, DC 20549, and serve a
copy on the Applicant at the address specified above. Proof of service
(by affidavit or, in case of an 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
<PAGE>
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 granted.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
