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File No. 70-9373
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AME
AMENDMENT NO. 1 TO
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)
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The Potomac Edison Company hereby amends and restates its U -
1 in this case as follows:
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 to spend up
to $250,000 to engage in preliminary development activities in
connection with entering into a joint venture ("JV") with an
experienced real estate developer. These preliminary activities
would include, but not be limited to, negotiations with real
estate developers, preliminary engineering and licensing
activities, contract drafting and negotiation, consultations with
tax, legal and other professionals, and other necessary
activities. The activities of the proposed JV would be limited
to the development, lease and/or sale of a certain parcel of land
located adjacent to Potomac Edison's and Allegheny's headquarters
in Hagerstown, Maryland (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 explore development of the
Property, with the assistance of a developer-partner, into a
business and technology park.
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Formation and Structure of the Joint Venture
Potomac Edison would like to explore forming a JV with an
experienced real estate developer, which would manage the day-to-
day operations of the JV. Potomac Edison would provide the
Property, which would be transferred to the JV. The developer
would provide capital for and oversee the development and
marketing of the Property as a business and technology park.
Development activities are intended to 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 would not
enter into the JV without further appropriate authority from this
Commission.
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.
<PAGE>
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.
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.
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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 non-utility 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).
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) up to
$200,000 in connection with exploration of the formation of the
JV.
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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
transaction, 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.
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 January 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.
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6. Exhibits and Financial Statements
(a) Exhibits
B-1 Letter from Maryland Governor Parris
Glendening (filed previously)
B-2 Letter from Maryland Department of
Business and Economic Development (filed
previously)
B-3 Letter from Hagerstown-Washington County
Economic Development Commission (filed previously)
F Opinion of Counsel (to be filed by amendment)
H Form of Notice
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: /ss/
Kathy L. Mitchell
Counsel
DATE: December _____, 1998
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EXHIBIT H
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- : )
The Potomac Edison Company Notice
Requesting Approval to Enter into
Preliminary Development Activities
in Connection with 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 to spend up
to $250,000 to engage in preliminary development activities in
connection with entering into a joint venture ("JV") with an
experienced real estate developer. These preliminary activities
would include, but not be limited to, negotiations with real
estate developers, preliminary engineering and licensing
activities, contract drafting and negotiation, consultations with
tax, legal and other professionals, and other necessary
activities. The activities of the proposed JV would be limited
to the development, lease and/or sale of a certain parcel of land
located adjacent to Potomac Edison's and Allegheny's headquarters
in Hagerstown, Maryland (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 explore development of the
Property, with the assistance of a developer-partner, into a
business and technology park.
Formation and Structure of the Joint Venture
Potomac Edison would like to explore forming a JV with an
experienced real estate developer, which would manage the day-to-
day operations of the JV. Potomac Edison would provide the
Property, which would be transferred to the JV. The developer
would provide capital for and oversee the development and
marketing of the Property as a business and technology park.
Development activities are intended to 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 would not
enter into the JV without further appropriate authority from this
Commission.
<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.
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.
<PAGE>
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 non-utility 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).
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 ___________,1999,
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 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.
