[Federal Register Volume 65, Number 113 (Monday, June 12, 2000)]
[Notices]
[Pages 36848-36850]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-14717]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27180]


Filings Under the Public Utility Holding Company Act of 1935, as 
Amended (``Act'')

June 5, 2000.
AGENCY: Notice is hereby given that the following filing(s) has/have 
been made with the Commission pursuant to provisions of the Act and 
rules promulgated under the Act. All interested persons are referred to 
the application(s) and/or declaration(s) for complete statements of the 
proposed transaction(s) summarized below. The application(s) and/or 
declaration(s) and any amendments(s) is/are available for public 
inspection through the Commission's Branch of Public Reference.
    Interested persons wishing to comment or request a hearing on the 
application(s) and/or declaration(s) should submit their views in 
writing by June 27, 2000, to the Secretary, Securities and Exchange 
Commission, Washington, DC 20549-0609, and serve a copy on the relevant 
applicant(s) and/or declarant(s) at the address(es) specified below. 
Proof of service (by affidavit or, in the case of an attorney at law, 
by certificate) should be filed with the request. Any request for 
hearing should identify specifically the issues of facts 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 
the matter. After June 27, 2000, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Allegheny Energy, Inc., et al. (70-9627)

    Allegheny Energy, Inc., (``Allegheny''), a registered holding 
company, Allegheny Energy Service Company (``AESC''), a service 
subsidiary of Allegheny, The Potomac Edison Company (``Potomac 
Edison''), a wholly owned electric public utility subsidiary of 
Allegheny, all located at 10435 Downsville Pike, Hagerstown, Maryland 
21740-1766, and Allegheny Energy Supply Company, LLC, a wholly owned 
nonutility subsidiary of Allegheny located at 10435 Downsville Pike, 
Hagerstown, Maryland 21740-1766, and Allegheny Energy Supply Company, 
LLC, a wholly owned nonutility subsidiary of Allegheny located at R.R. 
12, P.O. Box 1000, Roseytown, Pennsylvania 15601 (``Genco'' and 
collectively, ``Applicants''), have filed an application-declaration 
under sections

[[Page 36849]]

6(a), 7, 9(a), 10, 12(b), 12(c), 12(d), and 13(b) of the Act, and rules 
43, 44, 45, 46, 54, 90 and 91 under the Act.
    Potomac Edison, subject to obtaining the requisite regulatory 
approvals, intends to leave the generating business entirely. To 
accomplish this, Applicants request authority for Potomac Edison to 
transfer most of its electric generating business to Genco, which was 
organized to compete in deregulated, competitive electricity generation 
markets. Specifically, Applicants request authority for Potomac Edison 
to transfer to Genco, at net book value, Potomac Edison's undivided 
ownership interests in certain jointly held and certain wholly owned 
generating facilities and related fixed assets (``Generating Assets''), 
in certain current assets related to the Generating Assets (``Related 
Assets''), and other related interests (``Other Interests'') each of 
which is more particularly described below. In addition, Applicants 
request authority for Potomac Edison to transfer and for Genco to 
assume certain net liabilities and debt associated with the Generation 
Assets and Related Assets (``Related Liabilities''). As discussed 
below, Applicants also request authority for Potomac Edison to transfer 
its undivided ownership interests in certain hydroelectric generating 
stations located in Virginia (``Virginia Hydros'') to a subsidiary it 
proposes to organize, PE VA Hydro, LLC (``PE VA Hydro'').
    The Generating Assets consist of the undivided ownership interests 
in the following generating facilities: a 25% interest in the Fort 
Martin Power station located in Maidsville, West Virginia; a 33% 
interest in the Albright Power Station located in Albright, West 
Virginia; a 32.76% interest in the Harrison Power Station located in 
Shinnston, West Virginia; a 20% interest in the Hatfield's Ferry Power 
Station located in Masontown, Pennsylvania; a 30% interest in the 
Pleasants Power Station, located in Saint Mary's, West Virginia; a 100% 
interest in the R. Paul Smith Station and R. Paul Smith Ash Basin, both 
located in Williamsport, Maryland; and a 100% interest in the 
Millville, Dam #4 and Dam #5 hydro stations located in West Virginia. 
The Generating Assets also consist of step-up transformers and 
ancillary transmission and distribution equipment, production 
equipment, buffers and rights of way, and other equipment that connect 
the Generating Assets to the transmission grid. Applicants project that 
the total net book value of the Generating Assets will be approximately 
$448.4 million as of June 30, 2000. Potomac Edison also intends to 
transfer fuel, supplies, and other inventory (``Inventory'') to Genco 
through intermediate subsidiaries more particularly described below.\1\
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    \1\ Applicants state that Potomac Edison will transfer the 
Inventory at net book value. Applicants project that the net book 
value of the Inventory will be approximately $32.8 million as of 
June 30, 2000.
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    The Related Assets consist of current assets, deferred charges, 
cash, temporary cash investments, and an undivided 28% ownership 
interest in Allegheny Generating Company (``ACC'').\2\ Applicants 
project that the net book value of the Related Assets will be 
approximately $57.9 million as of June 30, 2000. The Other Interests 
consist of an undivided 2% ownership interest in Ohio Valley Electric 
Corporation (``OVEC''), a public utility, and Potomac Edison's rights 
and obligations under four agreements regarding the operation of four 
of the generating facilities included as Generating Assets.
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    \2\ AGC, a Virginia corporation that is currently jointly owned 
by Potomac Edison, Genco, and Monongahela Power Company, owns a 40% 
undivided interest in a pumped storage hydroelectric generating 
facility and related facilities located in Bath County, Virginia.
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    The Related Liabilities consist of accounts payables, accrued 
taxes, tax deferrals, pollution control bonds, and other deferred 
credits related to the Generating Assets. Applicants project that the 
book value of the Related Liabilities will be approximately $215.3 
million as of July 1, 2000. Applicants state that the Related 
Liabilities do not include Potomac Edison's first mortgage bonds. 
Applicants state that Potomac Edison expects to obtain a release from 
the lien of the first mortgage by pledging additional bondable property 
in an amount not to exceed the net book value of the Generating Assets, 
which could include remaining utility assets of Potomac Edison, and 
request authority to pledge those assets to obtain the described 
release.
    The Virginia Hydros consist of Potomac Edison's undivided 100% 
ownership interests in the Luray, Newport, Shenandoah and Warren 
hydroelectric generating stations. According to Applicants, the net 
book value of the Virginia Hydros will be approximately $3.6 million as 
of June 30, 2000.
    To accomplish the proposed transfers, Applicants request authority 
to form two limited liability corporations, PE Transferring Agent, LLC 
(``PE Transferring Agency'') and PE Genco, LLC (``PE Genco''). Potomac 
Edison would acquire the ownership interests in PE Transferring Agent 
in exchange for an initial cash contribution of $200,000, and PE 
Transferring Agent would acquire the membership interests in PE Genco 
for an initial cash contribution of $100,000, with the contributions to 
be in the form of collateralized government obligations.
    Potomac Edison would then transfer its undivided ownership 
interests in the Generating Assets, Related Assets, Inventory and Other 
Interests to PE Transferring Agent. PE Transferring Agent would issue a 
promissory note to Potomac Edison in an amount equal to the sum of the 
net book values of the Generating Assets and Inventory (``Purchase 
Note'') in exchange for the transfer of these assets. In order to 
assure that PE Transferring agent has sufficient assets to cover the 
principal amount of the Purchase Note and its accrued interest, Potomac 
Edison would issue a non-interest bearing note to PE Transferring agent 
in an amount $20 million greater than the Purchase Note as a capital 
contribution. In addition, Potomac Edison would issue a non-interest 
bearing promissory note to PE Transferring Agency in an amount 
constituting the difference between the net book values of the Related 
Assets and the Related Liabilities.
    PE Transferring Agent would in turn contribute the undivided 
ownership interests in the Generating Assets, Related Assets, Inventory 
and Other Interests to PE Genco, which would also assume the Related 
Liabilities. PE Transferring Agent would then dividend its membership 
interests in PE Genco to Potomac Edison, which would in turn dividend 
these membership interests to Allegheny, after which PE Genco would 
merge with Genco.
    Applicants state that it is undesirable, at this time, for Genco to 
directly acquire the Virginia Hydros because the acquisition could 
subject Genco to regulation as a ``public utility'' under Virginia law. 
In order to facilitate Potomac Edison's exit from the generation 
business and Genco's entry into Virginia''s deregulated generation 
market, Applicants request authority for Potomac Edison to organize and 
acquire PE VA Hydro and for Potomac Edison to transfer the Virginia 
Hydros to PE VA Hydro. Applicants also request authority for Potomac 
Edison to dividend the membership interests in PE VA Hydro to 
Allegheny, and for Allegheny to contribute these interests in PE VA 
Hydro to Genco, making PE VA Hydro a wholly owned subsidiary of Genco.
    In addition, Applicants request authority for Potomac Edison to 
render operating services with respect to the Generating Assets on 
behalf of Genco, and to render operating services with respect to the 
Virginia Hydros on behalf of PE VA Hydro, until Genco and PE VA

[[Page 36850]]

Hydro obtain the necessary permits and licenses to operate the 
Generating Assets and the Virginia Hydros, respectively. These services 
will be rendered at cost, in accordance with rules 90 and 91 under the 
Act. Further, Applicants request authority for AE Units 1 and 2, LLC 
(``AEU''), a public utility subsidiary of Allegheny, to merge with 
Genco in exchange for Genco assuming the former company's outstanding 
debt.\3\
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    \3\ AEU's principal assets are to 44MW generation units in 
Springdale, Pennsylvania.

    For the Commission by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-14717 Filed 6-9-00; 8:45 am]
BILLING CODE 8010-01-M