Exhibit D-2B(1)
PUBLIC SERVICE COMMISSION
OF WEST VIRGINIA
CHARLESTON
At a session of the PUBLIC SERVICE COMMISSION OF WEST VIRGINIA in
the City of Charleston on the 23rd day of June, 2000.
CASE NO. 00-0801-E-PC
MONONGAHELA POWER COMPANY and
THE POTOMAC EDISON COMPANY, both
dba ALLEGHENY POWER
Petition for consent and approval for Monongahela
Power Company and The Potomac Edison Company
to transfer their West Virginia generation assets to an
affiliate, Allegheny Energy Supply Company, LLC,
at book value.
COMMISSION ORDER
On May 26, 2000, Monongahela Power Company (Mon Power) and The
Potomac Edison Company (PE), both dba Allegheny Power (APS),
filed a petition seeking Commission approval for a transfer of
their West Virginia generation assets to an affiliate, Allegheny
Energy Supply Company, LLC (Allegheny Energy). On the June16,
2000, the Commission issued an Order in this proceeding. In that
Order, the Commission found that the filing was unnecessary for
the PE generation assets because the Commission had approved the
transfer of PE generation assets on or after July 1, 2000 in its
Order of January 28, 2000, in Case No. 98-0452-E-GI. The
Commission made no such finding with regard to the Monongahela
Power generation assets and dismissed this proceeding for both
companies. On June 19, 2000 the Consumer Advocate Division of the Public
Service Commission (CAD) filed a petition to intervene, to reopen
proceedings and for the Commission to reconsider its June 16
decision. In addition to reopening and intervention, the CAD is
asking that the Commission assert jurisdiction over the petition
by Monongahela Power Company and Potomac Edison Company and that
the Commission grant the petition subject to conditions set forth in
paragraphs 7 See FootNote (1) and 8 See FootNote (2) of the petition and
subject to the submission of a list of all property transferred,
by FERC account number, within 30 days of the transfer.
On June 23, 2000 APS, CAD and Commission Staff filed a
Stipulation and Recommendation (Stipulation) agreeing to a
resolution of this proceeding. The Stipulation recommended that
the Commission do the following:
1. Grant CAD's request for intervention and reopening.
2. Confirm that the Commission has jurisdiction over West
Virginia generation assets until a Commission authorized sale or
transfer occurs.
3. Affirm the approval for PE's transfer of generation assets
subject to certain conditions. The first condition, which is
agreed to by PE and APS, is a requirement to file details of the
assets transferred and the book value of such assets within 14
days of the actual transfer. The second condition, which is
agreed to by PE and APS, is that PE shall be bound by the rate
protections, consumer protections, capacity protections and tax
neutrality protections to state and local governments as outlined
in the restructuring plan that had been adopted by the Commission
in Case Number 98-0452-E- GI (the Plan).
In addition to the above recommendations for Commission action,
the parties agreed on a general outline of the procedures to be
used by Monongahela Power Company at such time as it sought to
transfer its generation assets.
Upon consideration of the CAD's petition, the Commission shall
reopen this case for the purpose of issuing this further Order.
As a first matter to address, it appears that the Commission's
June 16, 2000 decision may require clarification with regard to
Monongahela Power Company. The CAD is concerned that the June 16
Order was based on a misinterpretation of the terms of
the restructuring plan that had been adopted by the Commission in
Case Number 98- 0452-E-GI (the Plan). As the CAD states in its
petition, the Plan provides that generation assets will be
deregulated effective with the starting date (or implementation
date), which will not occur before mid-2001. The Plan further
provides that:
" . . . APS (Potomac Edison) shall have the right to transfer its
West Virginia generation assets to an affiliate, at book value,
on or after July 1, 2000, incident to the deregulation of
generation in Maryland."
<PAGE>
Contrary to the CAD's concerns, the Commission does not interpret
the Plan as giving Monongahela Power Company authority to
transfer its generation assets prior to the starting date, and we
did not grant authority for any transfer of the Monongahela Power
Company generation assets. Instead, we dismissed the petition of
Monongahela Power Company, and we shall clarify and affirm that
decision in this Order.
We note that the Stipulation filed by the parties sets forth a
proposed procedure for Monongahela Power Company to follow before
any transfer of its generation assets may occur, including any
transfer after the starting date of the Plan. This portion of the
Stipulation outlines a procedure and is not dispositive of the
issue of approval of transfer of generation assets in advance of
the starting date. Accordingly the Commission has no objection if
Mon Power and the signatory parties proceed pursuant to the
Stipulation, recognizing that the Commission may require
additional information and/or evidence in any future proceedings
involving transfer of generation assets.
With regard to Potomac Edison, the CAD argues that even with the
approval language contained within the Plan, the Commission
retains jurisdiction to conduct a review of the actual assets
which are proposed to be transferred and should condition the
approval on certain commitments made by the petitioners in
paragraph 7 and paragraph 8 of their petition. We agree with the
CAD with regard to the review of transferred assets. With regard
to other jurisdiction, protection of customers and rate
commitments, we certainly agree that the transfer cannot be
approved absent a guarantee of sufficient capacity at reasonable
rates for PE customers. Finally, we agree that the commitments
with regard to state and local government tax revenue neutrality
must be a condition of the transfer of generation assets.
Since our June 16 Order allowed the transfer of PE's generation
assets pursuant to the Plan, we intended all of the reliability
and rate protections given to customers under the Plan, as well
as the tax neutrality requirement, to apply to PE's transfer of
generation assets. We did not view the paragraph 7 commitments to
be anything other than commitments to abide by the terms and
conditions of the Plan, which would assure PE's customers of
sufficient capacity at rates which are frozen at current levels
for the first
four years following the starting date of the Plan. However, in
consideration of the CAD's petition and the Stipulation filed by
the parties, we shall clarify that requirement and condition in
this Order. Similarly, state and local tax neutrality is a
condition of the Plan, and it must be a condition of the PE
generation assets transfer. This condition will likewise be
clarified in this Order. Furthermore, the Commission will clarify
, as contemplated in the Plan, that the future agreement between
the affiliate, Allegheny Energy, and the utility, Potomac Edison,
will be subject to Commission consent and approval pursuant to
24-2-12 of the Code.
In consideration of the above discussion, the discussion in our
June 16, 2000 Order and the terms and conditions of the Plan, the
Commission finds that it has continuing jurisdiction over the
generation assets of Monongahela Power Company and Potomac Edison
Company until such time as a Commission authorized sale or
transfer of said assets occurs. Therefore:
IT IS ORDERED that the CAD's petition it intervene in this
proceeding is granted.
IT IS FURTHER ORDERED that all Ordering Paragraphs of our June
16, 2000 Order are hereby retracted and superceded by this Order.
IT IS FURTHER ORDERED that Monongahela Power Company may not
sell, transfer or otherwise dispose of its generation assets
prior to the starting date of the Plan without the consent of
this Commission pursuant to 24-2-12 of the Code.
IT IS FURTHER ORDERED that at least sixty days prior to any
proposed sale, transfer or other disposition of its generation
assets in advance of the starting date of the Plan, Monongahela
Power Company must submit a petition seeking Commission approval
for such disposition. Such filing must, in accordance with the
Stipulation, contain a full and complete description of the
assets to be transferred and a detail of the book value of the
transferred assets. In addition, such filing must set forth its
agreement to adhere to the rate protections, consumer
protections, capacity protections and tax neutrality protections
to state and local governments in the Plan.
IT IS FURTHER ORDERED that prior to any sale, transfer or other
disposition of its generation assets after the starting date of
the Plan, Monongahela Power Company must submit a petition
seeking a finding by the Commission that its proposed disposition
of generation assets complies with the terms and conditions of
the Plan. Such filing must, in accordance with the Stipulation,
contain a full and complete description of the assets to be
transferred and a detail of the book value of the transferred
assets.
IT IS FURTHER ORDERED that Potomac Edison has been authorized by
the terms and conditions of the Plan to transfer its generation assets to an
affiliate at book value on or after July 1, 2000.
IT IS FURTHER ORDERED that this authority is conditioned upon
Potomac Edison's agreement and guarantee, as made in its petition
and the Stipulation, that it will acquire sufficient capacity to
meet its West Virginia load at no cost to its West Virginia
<PAGE>
customers in excess of the existing power supply component of its
rates or rates which are approved by the Commission in Case No.
99-0262-E-GI.
IT IS FURTHER ORDERED that this authority is conditioned upon
Potomac Edison's Stipulation agreement and guarantee, as made in
its petition and the Stipulation, that neither state nor the
local tax revenues of any political sub-division of the state
will be adversely impacted by the transfer of its generation
assets.
IT IS FURTHER ORDERED that within 14 days of the transfer of
Potomac Edison's generation assets, PE shall submit for
Commission review a complete listing of generation assets
transferred, detailed by account and sub-account number, and the
book value of the assets at the time of transfer. This filing
shall include a detailed description and book value determination
of any other assets and/or liabilities that were transferred
related to generation, such as agreements, deferred taxes and
easements. In addition, PE shall file a complete detail of all
accounting entries which are necessary to reflect the transfer of
its generation assets and associated balance sheet accounts at
book value.
IT IS FURTHER ORDERED that this Case is closed and shall be
removed from the open case docket of the Commission, pending a
limited reopening for the purpose of receiving and reviewing the
asset listing and accounting entries herein ordered.
IT IS FURTHER ORDERED that the Commission's Executive Secretary
shall serve a copy of this order on all parties of record by
First Class United States Mail, and upon Commission Staff by hand
delivery.
JML/seg
000801ca.wpd
Footnote: 1 (1) Paragraph 7 of the petition states: " After the
transfer, the West Virginia customer load will be met by an
arrangement between Allegheny Energy Supply Company, LLC and Mon
Power/PE to make available to West Virginia customers power
supply sufficient to meet all load requirements at the existing
rates (or any rates established hereafter as approved by the
Commission in Case No. 99-0262-E-GI). The transfer of assets will
be totally transparent to customers. . . . . ."
Footnote: 2 (2) Paragraph 8 of the petition states: "The
transfers will not adversely impact tax revenues of state or
local governments. . . ."
