Exhibit D-5
91 FERC 62,245
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
The Potomac Edison Company Docket Nos. EC00-83-000 and
Allegheny Energy Supply Company, L.L.C.
EC00-83-001
PE Transferring Agent, L.L.C.,
[To be named], L.L.C; and
Green Valley Hydro, LLC
ORDER AUTHORIZING DISPOSITION OF
JURISDICTIONAL FACILITIES
(Issued June 30, 2000)
On April 26, 2000, as supplemented on June 8, 2000, The
Potomac Edison Company (Potomac), Allegheny Energy Supply
Company, L.L.C. (AE Supply), PE Transferring Agent, L.L.C. (PE
Transferring Agent), and [To be named], L.L.C. (PE Genco), and
Green Valley Hydro, LLC (Green Valley) (collectively, Applicants)
filed a joint application under section 203 of the Federal Power
Act (FPA), requesting Commission authorization for Potomac to
transfer certain jurisdictional assets to AE Supply in a three-
step intra-corporate realignment. Specifically, Potomac proposes
to transfer the shares of jurisdictional step-up transformers
allocable to Potomac's Maryland and Virginia service areas,
excluding Potomac's Virginia hydroelectric assets; all of the
jurisdictional transmission assets allocable to Potomac's West
Virginia area; 280 shares of equity securities in Allegheny
Generating Company (AGC); certain wholesale power purchase and
supply agreements, including those jurisdictional agreements
Potomac enters into prior to consummating the proposed corporate
reorganization; and the pollution control and solid waste bonds
issued by Potomac which are associated with the transferred
generating assets. In addition, Potomac request Commission
authorization to transfer Potomac's Virginia hydroelectric assets
to Green Valley.
Potomac is a wholly-owned public utility subsidiary of
Allegheny Energy, a registered public utility holding company
under the Public Utility Holding Company Act of 1935. In
addition to Potomac, Allegheny Energy has two other wholly-owned
franchised public utility subsidiaries, West Penn Power Company
(West Penn), which serves customers in portions of western and
central Pennsylvania, and Monongahela Power Company (Mon Power),
which serves customers in portions of West Virginia and Ohio.
1
16 U.S.C. 824b (1994).
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Docket No. EC00-83-000, et al.
AE Supply is a power marketer authorized by the Commission
to sell power at market-based rates. AE Supply is a wholly-
owned public utility subsidiary of Allegheny Energy. AE Supply
has no franchised service territory. Rather, AE Supply owns and
operates electric generation facilities and markets power in
competitive wholesale and retail markets.
PE Transferring Agent is a soon-to-be-formed wholly-owned
limited liability company subsidiary of Potomac. PE Transferring
Agent will be formed in either Maryland or Delaware.
PE Genco is a yet-to-be-named-and-formed affiliate of
Potomac that will be a wholly-owned subsidiary of PE Transferring
Agent. PE Genco will be a Maryland or Delaware limited liability
company.
Green Valley is a special purpose corporation formed to own
the Virginia hydroelectric facilities and become the licensee of
the projects.
Applicants state that the proposed transactions implement
the terms of a settlement agreement between Potomac and the
Maryland Public Service Commission (MD PSC) which provides for
retail customer choice of generation suppliers in Potomac's
Maryland service area beginning July 1, 2000; and West Virginia
restructuring legislation which authorizes Potomac to implement a
settlement agreement adopted by the West Virginia Public Service
Commission (WVA PSC) providing for retail choice of Potomac's
West Virginia service in 2001, subject to the passage of
necessary tax legislation and final authorization by the
legislature.
According to the application, to facilitate the proposed
transactions, Potomac proposes to from a new, wholly-owned
subsidiary, PE Transferring Agent and transfer to PE Transferring
Agent the jurisdictional assets described above. PE Transferring
Agent will then form a new, wholly-owned subsidiary, PE Genco,
transfer all of the jurisdictional assets it receives from
Potomac to PE Genco, and the PE Transferring Agent will dissolve.
Finally, PE Genco will merge into AE Supply and cease to exist as
a separate corporate entity, with AE Supply being the surviving
company. The end result of the corporate realignment will be to
transfer Potomac's jurisdictional assets to AE Supply.
In addition, Potomac plans to form Green Valley as a special
purpose corporation to own the Virginia hydroelectric facilities
and become the licensee of the projects. Potomac proposes to
transfer the projects to Green Valley as a capital contribution
See, Allegheny Energy Supply Company, 88 FERC 61,303 (1999).
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Docket No. EC00-83-000, et al.
in exchange for the equity shares of Green Valley. Potomac will
then dividend the shares of Green Valley to Allegheny Energy,
Inc. (Allegheny Energy), its holding company parent; and Green
Valley will then become a subsidiary of AE Supply.
According to the Application, the proposed transaction is
consistent with the public interest and it will not have an
adverse effect on competition, rates or regulations. With
respect to competition, Applicants state that the proposed
transaction will have no effect on competition because the
proposed intra-corporate transfer of generating assets, power
supply agreements, and securities in AGC from Potomac to its
affiliate, AE Supply, will not result in a change in generation
market concentration levels. In addition, Applicants state that
the proposed transfer will actually promote competition through
the corporate separation of Potomac's generation from its
transmission and distribution functions.
With regards to rates, Applicants state that the proposed
transaction will have no effect on rates since Potomac's
wholesale requirements customers in Maryland (the Towns of
Thurmont and Williamsport and the City of Hagerstown) are served
under power service agreements with fixed rates for service
through June 30, 2003, and are not subject to change, absent the
mutual agreement of the parties. Likewise, Applicants indicate
that Potomac's wholesale requirements customers in Virginia and
West Virginia (the Town of Front Royal and Old Dominion Electric
Cooperative (ODEC)) are also served under fixed rate contracts.
Front Royal's contract expires June 30, 2003, and ODEC's contract
expires by its terms on January 1, 2002. Once these contracts
expire, Potomac's wholesale requirements customers will be free
to purchase power in the competitive market and import their
purchases under the Allegheny Power Open Access Transmission
Tariff on file with the Commission. Similarly, Applicants note
that effective July 1, 2000, all of Potomac's retail customers in
Maryland will be free to choose alternative electric suppliers in
the competitive market. Moreover, Applicants note that the rates
for Potomac's Maryland retail customers taking standard offer
service are capped through December 31, 2008, for residential
customers, and through December 21, 2004, for non-residential
customers. Applicants state that rates for retail customers in
West Virginia are also frozen. Finally, Applicants state that
although they do not anticipate that captive retail customers in
Virginia will have the right to choose their power supplier in
the competitive market until 2002, and Virginia does not
presently have a rate freeze in place, Potomac's retail
ratepayers in Virginia cannot be impacted by the proposed
According the application, these agreements are on file
with the Commission. Potomac states that it is not proposing
to transfer these wholesale agreements to AE Supply.
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Docket No. EC00-83-000, et al.
transfer. Applicants note that the Allegheny Energy operating
companies are parties to a cost-based system power supply
agreement (PSA) which permits them to rely on system resources to
serve bundled retail and wholesale loads. Therefore, Applicants
indicate that until Potomac's Virginia customers obtain customer
choice, they will be served under the PSA at rates that cannot
vary without the prior authorization of the Commission. Further,
Applicants note that even if the Commission did not review the
PSA rates, Potomac cannot manipulate PSA rates flowed through to
the retail ratepayers.
With respect to regulation, Applicants state that the
Commission will continue to exercise regulatory control over
Potomac and AE Supply. In addition, Applicants state that both
Potomac's and AE Supply's retail services will be subject to the
jurisdiction of the MD PSC, the WVA PSC, and the Virginia State
Corporation Commission.
Notices of the application were published in the Federal
Register with comments due on or before June 23, 2000. No
comments were received.
After consideration, it is concluded that the proposed
transactions are consistent with the public interest and are
authorized subject to the following conditions:
(1) The proposed transaction is authorized upon the terms
and conditions and for the purposes set forth in the
application;
(2) The foregoing authorization is without prejudice to the
authority of the Commission or any other regulatory
body with respect to rates, service, accounts,
valuation, estimates or determinations of cost, or any
other matter whatsoever now pending or which may come
before the Commission;
(3) Nothing in this order shall be construed to imply
acquiescence in any estimate or determination of cost
or any valuation of property claimed or asserted;
(4) The Commission retains authority under section 203(b)
and 309 of the FPA, to issue supplemental orders as
appropriate; and
According to the application, to prepare for retail
competition, the operating companies filed an amendment to the
PSA, which was accepted by the Commission in Docket No. ER99-
397-000, and which removes unregulated load (i.e., customers
who are free to choose power suppliers) from the PSA effective
on the dates when those customers obtain competitive choice.
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Docket No. EC00-83-000, et al.
(5) Applicants shall promptly notify the Commission of the
date on which the disposition of the jurisdictional
facilities is consummated.
Authority to act on this matter is delegated to the
Director, Division of Corporate Applications, pursuant to 18
C.F.R. 375.307. This order constitutes final agency action.
Requests for rehearing by the Commission may be filed within
thirty (30) days of the date of issuance of this order, pursuant
to 18 C.F.R. 385.713.
Michael C. McLaughlin, Director
Division of Corporate Applications
