EXHIBIT 12
Allegheny Energy Supply Company, LLC Original Sheet No. 7
Rate Schedule FERC No. 7
FACILITIES LEASE AGREEMENT
BETWEEN
ALLEGHENY ENERGY SUPPLY COMPANY, LLC
and
THE POTOMAC EDISON COMPANY
Issued by David C. Benson, Vice President,
Allegheny Energy Supply Company, LLC Effective: August 1, 2000
Issued on August 28, 2000
<PAGE>
Allegheny Energy Supply Company, LLC Original Sheet No. 8
Rate Schedule FERC No. 7
TABLE OF CONTENTS
Sheet
No.
ARTICLE I
Definitions . . . . . . . . . . . . . . . . . . . 11
ARTICLE II
Effective Date . . . . . . . . . . . . . . . . . . 12
ARTICLE III
Lease of Generating Facilities . . . . . . . . . . 12
ARTICLE IV
Operation and Maintenance of Leased Facilities . . . 14
ARTICLE V
Existing Contracts . . . . . . . . . . . . . . . . . 16
ARTICLE VI
Generating Resource Responsibilities of Potomac . . 16
ARTICLE VII
Operating Committee . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII
Term of Lease . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IX
Compensation for Lease and Assignment of Generation . . 20
ARTICLE X
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XI
Stranded Cost Recovery . . . . . . . . . . . . . . . . 23
ARTICLE XII
Insurance . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XIII
Amendment of Prior Agreements . . . . . . . . . . . . 23
<PAGE>
Allegheny Energy Supply Company, LLC Original Sheet No. 9
Rate Schedule FERC No. 7
TABLE OF CONTENTS (cont'd.)
Sheet No.
ARTICLE XIV
Exchange of Information/Right of Inspection . . . . . 24
ARTICLE XV
Settlements . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XVI
Indemnity . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XVII
Force Majeure . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XVIII
Conditions Precedent . . . . . . . . . . . . . . . . 28
ARTICLE XIX
Liens . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XX
Successors and Assigns . . . . . . . . . . . . . . . 29
ARTICLE XXI
Miscellaneous . . . . . . . . . . . . . . . . . . . 30
ARTICLE XXII
Indenture Provisions . . . . . . . . . . . . . . . . 32
ARTICLE XXIII
Dispute Resolution Procedures . . . . . . . . . . . . 32
APPENDIX A
Leased Properties
<PAGE>
Allegheny Energy Supply Company, LLC Original Sheet No. 10
Rate Schedule FERC No. 7
FACILITIES LEASE AGREEMENT
THIS LEASE made and entered into as of this 1st day of
August, 2000, between Allegheny Energy Supply Company, LLC (a
Delaware corporation) ("AESC" or "Lessor"), and The Potomac Edison
Company (a Maryland corporation) ("Potomac" or "Lessee"), and being
hereinafter individually referred to as Party and collectively
referred to as Parties.
W I T N E S S E T H:
WHEREAS, the common stock of each Party is wholly owned
by Allegheny Energy, Inc., a Maryland corporation; and
WHEREAS, the Parties desire to accommodate safe and
reliable electric generation operations for the public in the
transition from a regulated to a deregulated environment during
which time Potomac will maintain an obligation to serve a portion
of its customer base located in West Virginia with generation
service; and
WHEREAS, subject to the terms of this Lease, AESC desires
to lease designated generating assets to Potomac, subject to
certain conditions as more fully described herein;
NOW THEREFORE, in consideration of the covenants and
premises herein set forth, and intending to be legally bound, the
Parties mutually agree as follows:
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Allegheny Energy Supply Company, LLC Original Sheet No. 11
Rate Schedule FERC No. 7
ARTICLE I
Definitions
For the purpose of this Lease, the following terms shall have
the following meanings:
1.1 Federal Energy Regulatory Commission ("FERC" or "Commission"):
The current Federal Energy Regulatory Commission or successor
agency.
1.2 Good Utility Practice: Any of the practices, methods and acts
engaged in or approved by a significant portion of the
electric utility industry during the relevant time period,
including national and regional standards set by North
American Electric Reliability Council ("NERC") or any
successor organization, or any of the practices, methods and
acts which, in the exercise of reasonable judgment in light of
the facts known at the time the decision was made, could have
been expected to accomplish the desired result at a reasonable
cost consistent with good business practices, reliability,
safety and expedition. Good Utility Practice is not intended
to be limited to the optimum practice, method, or act to the
exclusion of all others, but rather to be acceptable
practices, methods, or acts generally accepted in the region.
Good Utility Practices shall include applicable local,
regional and national reliability standards including those
established by NERC or any successor organization.
<PAGE>
Allegheny Energy Supply Company, LLC Original Sheet No. 12
Rate Schedule FERC No. 7
1.3 Local Distribution Utilities ("LDU's"): Potomac and any other
subsidiary existing or hereafter created under or as an
affiliate of Allegheny Energy, Inc., which performs the
functions of a local electric distribution utility and leases
facilities hereunder.
1.4 Regulated Loads: Public utility service provided by Potomac
in West Virginia.
1.5 Regulatory Contingencies: The conditions precedent set forth
in Article XVIII of this Lease.
ARTICLE II
Effective Date
2.1 This Lease shall become effective as of August 1, 2000, or
such later date as may be required by competent regulatory
authority having jurisdiction or other authority over this
Lease, including approval, pre-approval or filing required as
condition precedent.
ARTICLE III
Lease Of Generating Facilities
3.1 In consideration of the mutual covenants and agreements
contained in this Lease, and other good and valuable
consideration, AESC hereby leases to Potomac, and Potomac
leases from AESC, a portion of its generating facilities as
follows:
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Allegheny Energy Supply Company, LLC Original Sheet No. 13
Rate Schedule FERC No. 7
3.1.1 AESC hereby leases to Potomac a fixed amount of 425
MW (generator nameplate rating), equivalent to 29 percent
of Potomac's former ownership interest in the facilities,
of the generating facilities listed on Appendix A hereto,
subject in all respects to the requirements of the
Indenture. The description of facilities being leased
contained on Appendix A is intended to and shall exclude
facilities booked to transmission and distribution under
FERC's Uniform System of Accounts or interpreted by FERC
to be booked to transmission and distribution. This Lease
may be amended from time to time to add or remove
generating facilities. The amount of each unit included
in this Lease shall be proportional to the contribution
of each unit to the total capacity included in Potomac's
former ownership of the units listed in Appendix A.
3.2 Title to the generating facilities which are subject to this
Lease shall at all times remain with AESC. Potomac shall have
no right, title, or interest in such generating facilities,
except to the extent expressly set forth in this Lease.
3.3 Upon termination of this Lease, the leased generating
facilities, including certain capital additions made during
the term of this Lease, subject to the terms of this Lease,
shall revert to AESC.
<PAGE>
Allegheny Energy Supply Company, LLC Original Sheet No. 14
Rate Schedule FERC No. 7
3.4 Subject to the provisions of this Lease, Potomac shall have
the exclusive right to operate and utilize the output of the
leased generating facilities to serve its Regulated Loads.
3.5 The Parties agree that it is the understanding and intention
of the Parties that this Lease is to be classified as an
operating lease agreement. To the extent that, by law or
regulation, this Lease cannot be classified as an operating
lease agreement, the Parties agree to negotiate in good faith
to effect mutually agreed upon changes necessary to classify
this Lease as an operating lease agreement.
ARTICLE IV
Operation and Maintenance of Leased Facilities
4.1 Potomac shall maintain the leased generating facilities
pursuant to the terms of this Lease. Potomac shall have the
right to utilize the services of any third parties in
connection with its obligations and rights under this Lease.
4.2 Potomac shall perform the operation and maintenance
obligations specified in this Lease in a good and workmanlike
manner in accordance with Good Utility Practice and in
compliance with all applicable laws, rules and regulations.
4.3 Potomac shall perform, or cause to be performed, operation and
maintenance services, which shall include, but not be limited
to, the furnishing of all materials, equipment, services,
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Allegheny Energy Supply Company, LLC Original Sheet No. 15
Rate Schedule FERC No. 7
supplies and labor necessary for the operation, inspection,
surveillance, monitoring and repair of the generation
facilities leased pursuant to this Lease.
4.4 Potomac shall perform, or cause to be performed, emergency
operation and maintenance services, which shall include, but
not be limited to, those services performed in case of
explosion, fire, storm, sudden emergencies, sabotage, or any
unscheduled major interruption of the operation of the
generation facilities leased pursuant to the terms of this
Lease. Prior to the performance of such services, the
Operating Committee, set forth in Article VII below, may upon
mutual agreement, retire or place in cold storage, in whole or
in part, a generating facility affected by an emergency as
contemplated by this Section, provided that alternate
arrangements are made to satisfy Potomac's obligations to its
Regulated Load.
4.5 Except as limited by Section 4.4 above, Potomac shall have the
sole right and discretion to determine and perform the
operation and maintenance activities set forth in this Article
IV and for those capital additions for which it assumes
financial responsibility, and the timing of such activities
and additions. Potomac shall not exercise its discretion
under this Article IV in a fashion which impairs AESC's
ability to effectively run its generating facilities.
<PAGE>
Allegheny Energy Supply Company, LLC Original Sheet No. 16
Rate Schedule FERC No. 7
ARTICLE V
Existing Contracts
5.1 Fuel Procurement Contracts and Inventories: AESC hereby
grants to Potomac the right to use fuel inventories existing as of
the effective date of this Lease as needed to supply power for its
Regulated Load; provided that upon termination of this Lease,
Potomac shall return similar inventories. Fuel inventories shall be
measured in British Thermal Unit per unit capability.
ARTICLE VI
Generating Resource Responsibilities of Potomac
6.1 Operating Control: Except as hereinafter set forth, Potomac
shall have operating control of the generation resources
leased from AESC under Article III or assigned under Article
V. Potomac shall operate those resources at its own cost and
expense, and shall maintain, or cause to be maintained, each
generating resource so as to keep it in similar operating
condition as it was when it first became subject to this
Lease, ordinary wear and tear excepted. Potomac shall replace
all parts of any generating resource that become unfit for use
with appropriate replacement parts.
Potomac shall not, without the prior written consent of the
Operating Committee defined in Section 7.1, alter any
generating resource, or affix or install any accessories or
devices on any generating resource, if the same shall impair
the originally intended function or use of such generating
<PAGE>
Allegheny Energy Supply Company, LLC Original Sheet No. 17
Rate Schedule FERC No. 7
resource or shall diminish its commercial value. Any and all
unseverable additions to and improvements of any generating
resource, and any and all parts installed on and additions and
replacements made to any generating resource, shall constitute
accessions to such generating resource and ownership thereof,
free from any lien, charge, security interest or encumbrance
shall immediately be vested in Lessor.
6.2 Operating Costs: Potomac shall be responsible for the
payment, from its own funds, of such operating and non- capital
maintenance expenses, including all fuel contracts and the
acquisition of necessary additional emission allowances as
required beyond those granted in Section 5.1 above, as it
incurs in its sole judgment for the purpose of efficiently
operating the leased generation resources.
6.3 Fixed Costs: AESC will remain responsible for the fixed cost
and fixed payment obligations associated with the contracts
concerned in Article V above. It is the intent of the parties
to this Lease that the payments for lease and transfer of
rights to generation in this Lease shall be sufficient to
cover all fixed payment obligations which AESC retains as a
result of its ownership of generating units and/or its
obligations. It is further the intent of the parties to this
Lease that the obligation to pay operating costs incurred
under each of these agreements shall be transferred to and
become the responsibility of Potomac.
<PAGE>
Allegheny Energy Supply Company, LLC Original Sheet No. 18
Rate Schedule FERC No. 7
6.4 Capital Additions, Retirements or Re-Rates: All capital
additions made at the discretion of the Operating Committee
shall be paid for by AESC and shall be the property of AESC
upon the termination of this Lease. Unseverable capital
additions unilaterally initiated and financed by Potomac shall
also become the property of the AESC upon termination of this
Lease. The Operating Committee may decide to permanently re-
rate any of the leased generation resources. Following the
permanent rerate of leased generating facilities, Lease
payments shall be adjusted as necessary.
ARTICLE VII
Operating Committee
7.1 An Operating Committee shall be established to carry out and
coordinate the provisions of this Lease. Said Operating
Committee shall consist of one representative from each Party
as designated in writing. Any Party may change its designated
representative by notifying the other Parties in writing.
ARTICLE VIII
Term of Lease
8.1 Effective Date: This Lease shall become effective as of
August 1, 2000.
8.2 Initial Term: This Lease shall continue in full force and
effect from the effective date set forth in Section 8.1 until
August 1, 2000. The length of the Initial Term, or of any
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Allegheny Energy Supply Company, LLC Original Sheet No. 19
Rate Schedule FERC No. 7
subsequent term, may be modified, decreased or increased upon
mutual agreement of all Parties to this Lease.
8.3 Termination: This Lease is also subject to termination or
modification to the extent that performance hereunder may
conflict with any applicable provision of law or with any
rule, regulation or order of any regulatory agency having
jurisdiction, whether adopted before or after the making of
this Lease. This Lease may be subject to termination or
modification in the event any state or federal regulatory or
legislative body should adopt a plan requiring retail customer
choice for electricity that results in a termination or
material modification of the Lease.
8.4 Default Events: In the event either Party shall (a) make an
assignment or any general arrangement for the benefit of
creditors; (b) default in the payment or performance of its
obligations to another Party under this Lease (which shall not
include a delay in performance or payment that is cured within
two (2) business days (as used herein, business day shall mean
any day on which Federal Reserve member banks in New York are
open for business) of a demand for corrective action); (c)
file a petition or otherwise commence, authorize or acquiesce
in the commencement of a proceeding or cause under any
bankruptcy or similar law for the protection of creditors or
have such petition filed or proceeding commenced against it;
(d) otherwise become bankrupt or insolvent (however
evidenced); (e) be unable to pay its debts as they fall due;
or (f) fail to give adequate security for or assurance of its
ability to perform its further obligations under this Lease
<PAGE>
Allegheny Energy Supply Company, LLC Original Sheet No. 20
Rate Schedule FERC No. 7
within two business days of a reasonable request by another
Party, then the performing Party shall have the right to
terminate this Lease without prior notice, in addition to any
and all other remedies available hereunder or pursuant to law.
Notice of termination shall be given within one business day,
unless otherwise provided for herein.
ARTICLE IX
Compensation For Lease And Assignment Of Generation
9.1 As compensation for the foregoing rights to the leased
generation resources, Potomac agrees to pay AESC an amount
determined as follows. Potomac will pay a fixed amount of
$100 per month per megawatt (MW) of capacity leased. This
capacity leased shall be 425 MW as described in Appendix A,
unless the capacity is changed by amendment as provided for in
Article 3.1.1 of this lease. The fixed monthly amount so
determined is $42,500 per month, subject to change in
accordance with any capacity change by amendment. In addition
to this fixed amount, Potomac agrees to make an additional
payment determined by its actual use of the leased generation
capacity as measured by megawatt-hour (MWH) sales to Potomac's
West Virginia retail customers. This additional payment shall
be calculated for each month by multiplying Potomac's MWH
sales to its West Virginia retail customers that month by
$31.57 per MWH, subtracting the fixed monthly payment of
$42,500 from the result, and subtracting the operating
expenses PE incurs during the month to operate the leased
generation resources. Such operating expenses shall be those
<PAGE>
Allegheny Energy Supply Company, LLC Original Sheet No. 21
Rate Schedule FERC No. 7
expenses included in the FERC's Uniform System of Accounts
account numbers 500 through 554 charged to Potomac's books of
account for the month. The Parties recognize and agree that
the foregoing payments to AESC are intended to cover
depreciation, property tax, property insurance, income tax,
cost of money, and any other expenses not included in FERC
account numbers 500 through 554 for the leased generation
facilities.
9.2 Billing and Payments: Monthly payments equivalent to the
above annual amount shall be made by on or before the 15th day
of the following month. The initial payments under this Lease
shall be made on or before the 15th day of the month
immediately following the month in which the effective date
occurs and shall be prorated to cover the portion of the month
in which the effective date occurs for which this Lease is in
effect.
9.3 Automatic Adjustment for Environmental Capital Additions:
Parties to this Lease shall not be prevented from filing
changes with the FERC if any federal, state or local
legislative body, judicial authority, or administrative
agency, including the FERC, orders any new, or changes any
existing, statutes, regulations, regulatory policies,
interpretations, or changes preexisting programs or procedures
directly resulting in costs, savings, expenses or requiring of
AESC a change in compensation not otherwise provided for in
this Lease for environmental capital additions.
<PAGE>
Allegheny Energy Supply Company, LLC Original Sheet No. 22
Rate Schedule FERC No. 7
9.4 Automatic Adjustment for Tax Changes: An adjustment for tax
changes shall apply to the compensation for this Lease. Rates
to be adjusted, as required, by including an automatic pass-
through of changes in federal, state, or local taxes or tax
rates by providing an automatic adjustment of all taxes
included in the Lease, upward or downward, based on actual tax
expense incurred by AESC.
9.5 Regulatory Approved Changes: Nothing contained herein shall
be construed as affecting in any way the right of AESC
individually or jointly, to unilaterally make application to
the FERC for a change in rates under Sections 205 or 206 of
the Federal Power Act and pursuant to FERC's Rules and
Regulations promulgated thereunder.
9.6 Liability of Ownership by Transferring Agent: Potomac shall
be liable for any portion of lease payment for the period that
title to the generating facilities is held by an affiliated
transferring agent company.
ARTICLE X
Taxes
10.1 AESC shall remain responsible for paying all property related
taxes, including but not limited to state and local ad valorem
taxes, levied on the facilities leased pursuant to this Lease.
The Parties shall be responsible for gross receipts taxes
associated with the sales, if any, which each of them makes to
ultimate consumers of electricity. The Parties agree that any
<PAGE>
Allegheny Energy Supply Company, LLC Original Sheet No. 23
Rate Schedule FERC No. 7
payment made by Potomac for West Virginia state B&O Tax on
generation capacity in West Virginia included in this
Facilities Lease Agreement shall be credited to Potomac's
payments under this Lease. The Parties hereby commit that
they will not impair or encumber the leased property, by
incurring any lien on such leased property arising by failure
to pay taxes or other lawful debts.
ARTICLE XI
Stranded Cost Recovery
11.1 This Lease does not in any way affect the right of any Party
or affiliate thereof to seek and recover stranded cost
recovery.
ARTICLE XII
Insurance
12.1 AESC will maintain existing levels of property, boiler,
machinery and liability insurance coverage on the leased
properties described in Appendix A.
ARTICLE XIII
Amendment Of Prior Agreements
13.1 Existing Ownership and Operating Agreements: This Lease shall
constitute an amendment of the Joint Ownership and Operating
Agreements. Each such Agreement is hereby amended to
eliminate the sections of such agreements and substitute for
such eliminated sections the provisions contained in this
<PAGE>
Allegheny Energy Supply Company, LLC Original Sheet No. 24
Rate Schedule FERC No. 7
Lease. AESC is responsible for obtaining approvals necessary
to amend all relevant agreements affected by this Lease and to
which AESC is a party or a successor or assignor thereof. The
rights and obligations to the capacity and energy accruing to
AESC are proportionally granted and assigned to Potomac under
Article V above.
ARTICLE XIV
Exchange of Information/Right of Inspection
14.1 Records and Accounts: All records and accounts pertaining to
services hereunder shall be available to any Party for audit
and review at all reasonable times.
14.2 Right of Inspection: AESC shall have the right at any
reasonable time to enter the premises where the leased
generating facilities are located and shall be given free
access to inspect the facilities.
14.3 Standards of Conduct: Services and related exchanges of
information remain subject to any relevant standards of
conduct imposed by state and/or federal regulatory
authorities.
<PAGE>
Allegheny Energy Supply Company, LLC Original Sheet No. 25
Rate Schedule FERC No. 7
ARTICLE XV
Settlements
15.1 Accounting Period: The accounting period for transactions
hereunder shall be one month, which, unless otherwise
specified by the Operating Committee, shall be a calendar
month.
15.2 Disputed Bills: In case a portion of any bill is in dispute,
the undisputed amount shall be paid when due, and the
remainder, if any, shall be paid promptly after determination
of the correct amount. Interest on unpaid amounts shall
accrue daily at the then current prime interest rate (or
comparable rate) from the due date of such unpaid amount until
the date paid.
ARTICLE XVI
Indemnity
16.1 Each Party will indemnify and save harmless each other Party
from all claims, liability, and expense arising out of any
bodily injury, death, or damage to property caused by
negligence of a Party thereto (other than those caused by the
gross negligence of such other Party or its employees, agents,
or servants) occurring in or about facilities owned by it and
used for the purposes of this Lease, except that each Party
shall be responsible for all claims of its own employees,
agents, and servants under any workmen's compensation or
similar law. This Indemnity obligation shall survive
termination of this Lease.
<PAGE>
Allegheny Energy Supply Company, LLC Original Sheet No. 26
Rate Schedule FERC No. 7
16.2 AESC hereby agrees to indemnify and save harmless Potomac from
all claims, liability and expense arising out of any
preexisting but not yet identified environmental related claim
or liability arising in whole or in part from the operation of
the generating facilities which are the subject of this Lease.
This indemnification shall include but not be limited to any
future discovered environmental costs associated with removal
of any previously deposited hazardous materials resulting from
the operation of the referenced generating units.
16.3 It is understood that during the term of this Lease, Potomac
is solely responsible for compliance with all environmental
laws and regulations, and Potomac hereby agrees to indemnify
and save harmless AESC for any environmental claim or
liability which results from Potomac's failure to comply with
such environmental laws or regulations regarding facilities
subject to this Lease.
16.4 The indemnity contemplated by this Lease shall survive
termination of this Lease.
ARTICLE XVII
Force Majeure
17.1 If by reason of force majeure any Party hereto is
rendered unable, in whole or in part, to carry out its
obligations under this Lease, and if such Party gives notice
and reasonably full particulars of such force majeure in
writing, by telegram, facsimile, or E-mail to the other Party
or Parties, as appropriate, within a reasonable period of time
after the occurrence of the force majeure event, the Party
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Allegheny Energy Supply Company, LLC Original Sheet No. 27
Rate Schedule FERC No. 7
giving such notice, so far as and to the extent that it is
affected by such force majeure event, shall be relieved of its
performance obligations under this Lease and shall not be
liable in damages during the continuance of inability to
perform so caused; provided, however, that such cause shall be
remedied with all reasonable dispatch.
17.2 As used herein, the term "force majeure" shall mean: acts of
God, strikes, lockouts or other industrial disturbances; acts
of public enemies, wars, blockades, insurrections, riots,
epidemics, landslides, lightning, earthquakes, fires, storms,
floods or washouts; arrests and restraints imposed by the
government, either federal or local, civil or military; the
binding order of any court, legislative body, or governmental
authority which has been resisted in good faith by all
reasonable legal means; vandalism, sabotage or civil
disturbances; relocation of facilities; breakage or accident
to machinery, including but not limited to generation
facilities or transmission lines; the necessity for testing
(as required by governmental authority or as deemed necessary
by the testing party for safe operations) or for making
repairs or alterations to machinery, including but not limited
to generation facilities or transmission lines; accidents,
breakdowns or the inability of a Party to obtain necessary
material, supplies, permits, rights-of-way or labor to perform
or comply with any obligation or condition of this Lease; and
any other causes, whether of the kind herein enumerated or
otherwise, which are not reasonably in control of the Party
claiming suspension. It is understood that the settlement of
strikes or lockouts shall be entirely within the discretion of
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Allegheny Energy Supply Company, LLC Original Sheet No. 28
Rate Schedule FERC No. 7
the Party having the difficulty and that the above requirement
that force majeure events be remedied with reasonable dispatch
shall not require the settlement of strikes, lockouts or
disagreements by acceding to the demands of any opposing party
when such course is inadvisable in the discretion of the Party
having the difficulty.
17.3 Such force majeure affecting the performance hereunder by any
Party, however, shall not relieve such Party of liability in
the event of its concurring negligence or willful misconduct
in creating such force majeure event or in the event of
failure to use due diligence to remedy the situation and to
remove the cause or contingencies affecting such performance
in an adequate manner and with all reasonable dispatch.
ARTICLE XVIII
Conditions Precedent
18.1 The Parties hereto expressly agree that each Party's rights
and obligations under this Lease are contingent upon
satisfaction of each of the following conditions precedent:
Any authorizations of the United States Securities and
Exchange Commission, the Federal Energy Regulatory Commission,
the West Virginia Public Service Commission, and/or other
administrative or regulatory body, to the extent required by
law, for the transactions contemplated by this Lease.
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Allegheny Energy Supply Company, LLC Original Sheet No. 29
Rate Schedule FERC No. 7
ARTICLE XIX
Liens
19.1 Subject to the terms of the indentures identified in Article I
above, Potomac may incur liens or other encumbrances on the
property which is the subject of this Lease including liens or
other encumbrances made by Potomac.
ARTICLE XX
Successors and Assigns
20.1 This Lease shall inure to and bind the successors and assigns
of the Parties. This Lease, and the leases set forth in
Article III, shall not be assigned by any Party without the
written consent of the others, which consent shall not be
unreasonably withheld; provided that this Lease may be
assigned without prior written consent to a corporation into
which such Party shall be merged or with which it shall be
consolidated or to a corporation resulting from any merger or
consolidation to which such Party shall be a party or to a
person or corporation to which substantially all the business
and assets of such Party shall be transferred.
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Allegheny Energy Supply Company, LLC Original Sheet No. 30
Rate Schedule FERC No. 7
ARTICLE XXI
Miscellaneous
21.1 Waivers: Any waiver at any time of any rights as to any
default hereunder or any other matter arising hereunder shall
not be deemed a waiver as to any subsequent default or matter.
21.2 Governing Law: This Lease shall be governed by and
interpreted in accordance with the laws of the State of West
Virginia without recourse to the law regarding conflict of
laws.
21.3 Authority: Each Party hereto represents to the others that
this Lease, the transactions contemplated herein, and the
execution and delivery of this Lease have been duly authorized
by all necessary corporation actions, including without
limitation, required action on the part of the officers and
agents of the representing Party, and this Lease, when
executed and delivered, shall be valid and binding on it.
21.4 Headings: The headings contained in this Lease are for
reference purposes only and shall not affect the meaning or
interpretation of this Lease.
21.5 Notices: Unless otherwise specifically provided in this
Lease, any written notice or other communication shall be
deemed to be given and received on the date when such notice
or communication is given by facsimile or E-mail, and
confirmed as received by the other Party, or the date received
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Allegheny Energy Supply Company, LLC Original Sheet No. 31
Rate Schedule FERC No. 7
if given by registered or certified mail, postage prepaid,
addressed to:
Allegheny Energy Supply Company, LLC
Attn: David C. Benson
Roseytown Road
Greensburg, PA 15601
The Potomac Edison Company
Attn: Secretary
10435 Downsville Pike
Hagerstown, MD 21740-1766
21.6 Entirety: This Lease and the appendices hereto constitute the
entire agreement between the parties hereto. There are no
prior or contemporaneous agreements or representations
affecting the same subject matter other than those expressed
herein.
21.7 Transfer of Assets: The Parties reserve the right
individually or collectively to transfer ownership of assets
which are the subject of this Lease to Potomac or another
entity of its choosing. No signatory will oppose such
transfer of assets.
21.8 Severability: Except as otherwise stated herein, any
provision, Article or Section declared or rendered unlawful by
a court of law or regulatory agency with jurisdiction over
this agreement, or deemed unlawful because of statutory
change, will not otherwise affect the lawful obligations that
arise under this Lease.
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Allegheny Energy Supply Company, LLC Original Sheet No. 32
Rate Schedule FERC No. 7
ARTICLE XXII
Indenture Provisions
22.1 This Lease is expressly made subject to the lien and security
of the Indenture, and is not intended to impair in any way
such lien or security or the rights under the Indenture.
ARTICLE XXIII
Dispute Resolution Procedures
23.1 Internal Dispute Resolution Procedures: Any dispute between
Potomac and AESC involving service under this Lease shall be
referred within six (6) months of the written notification of
a dispute by a Party to a designated senior representative of
AESC and a senior representative of the Potomac for resolution
on an informal basis as promptly as practicable. In the event
the designated representatives are unable to resolve the
dispute within thirty (30) days (or such other period as the
Parties may agree upon by mutual agreement), such dispute may
be submitted to arbitration and resolved in accordance with
the arbitration procedures set forth below.
23.2 External Arbitration Procedures: Any arbitration initiated
under this Lease shall be conducted before a single neutral
arbitrator appointed by the Parties. If the Parties fail to
agree upon a single arbitrator within ten (10) days of the
referral of the dispute to arbitration, each Party shall
choose one arbitrator who shall sit on a three- member
arbitration panel. The two arbitrators so chosen shall within
twenty (20) days select a third arbitrator to chair the
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Allegheny Energy Supply Company, LLC Original Sheet No. 33
Rate Schedule FERC No. 7
arbitration panel. In either case, the arbitrators shall be
knowledgeable in electric utility matters, including electric
transmission and bulk power issues, and shall not have any
current substantial business or financial relationships with
any party to the arbitration (except prior arbitration). The
arbitrator(s) shall provide each of the Parties an opportunity
to be heard and, except as otherwise provided herein, shall
generally conduct the arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association and any applicable Commission regulations or
regional Transmission Provider rules.
23.3 Arbitration Decisions: Unless otherwise agreed, the
arbitrator(s) shall render a decision within ninety (90) days
of appointment and shall notify the Parties in writing of such
decision and the reasons therefor. The arbitrator(s) shall be
authorized only to interpret and apply the provisions of this
Lease and shall have no power to modify or change the Lease in
any manner. The decision of the arbitrator(s) shall be final
and binding upon the Parties, and judgment on the award may be
entered in any court having jurisdiction. The decision of the
arbitrator(s) may be appealed solely on the grounds that the
conduct of the arbitrator(s), or the decision itself, violated
the standards set forth in the Federal Arbitration Act and/or
the Administrative Dispute Resolution Act. The final decision
of the arbitrator must also be filed with the Commission if it
affects jurisdictional rates, terms and conditions of service
or facilities.
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Allegheny Energy Supply Company, LLC Original Sheet No. 34
Rate Schedule FERC No. 7
23.4 Costs: Each Party shall be responsible for its own costs
incurred during the arbitration process and for the following
costs, if applicable:
(a) the cost of the arbitrator chosen by the Party to
sit on the three member panel and one half of the cost of
the third arbitrator chosen; or
(b) one half the cost of the single arbitrator
jointly chosen by the Parties.
23.5 Rights Under The Federal Power Act: Nothing in this section
shall restrict the rights of any party to file a complaint
with the Commission under relevant provisions of the Federal
Power Act.
IN WITNESS WHEREOF, the parties have caused this Lease to
be executed by their respective duly authorized officers or
representatives, as of the day and year first above written.
ALLEGHENY ENERGY SUPPLY COMPANY, LLC
By: ________________________________
THE POTOMAC EDISON COMPANY
By:__________________________________
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Allegheny Energy Supply Company, LLC Original Sheet No. 35
Rate Schedule FERC No. 7
APPENDIX A
* Albright
* Fort Martin 1 and 2
* Harrison 1, 2 and 3
* Pleasants 1 and 2
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