[Federal Register Volume 63, Number 59 (Friday, March 27, 1998)]
[Notices]
[Pages 14984-14986]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8002]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-26846]


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

March 20, 1998.
    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 thereunder. 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 thereto is/are available for public 
inspection through the Commission's Office of Public References.
    Interested persons wishing to comment or request a hearing on the 
application(s) and/or declaration(s) should submit their views in 
writing by April 13, 1998, to the Secretary, Securities and Exchange 
Commission, Washington, D.C. 20549, 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 case of an attorney at law, by 
certificate) should be filed with the request. Any request for 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 received a copy of any notice or order issued in the 
matter. After said date, 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. (70-9147)

    Allegheny Energy, Inc. (formerly, Allegheny Power System, Inc.) 
(``Allegheny''), 10435 Downsville Pike, Hagerstown, Maryland 21740, a 
registered holding company, has filed an application-declaration under 
sections 6(a), 7, 9(a), 10, 12(b) and 13(b) of the Act and rules 45, 
54, and 80-92 under the Act, in connection with a proposed combination 
with DQE, Inc. (``DQE''), a holding company exempt under sections 
3(a)(1) by rule 2 from all provisions of the Act except section 
9(a)(2).
    As described in more detail below, Allegheny proposes: (1) to 
acquire, by means of the mergers described below all of the issued and 
outstanding common stock of DQE (``DQE Common Stock); and, through this 
acquisition, (i) all of the issued and outstanding common stock of 
DQE's direct electric utility subsidiary company, Duquesne Light 
Company (``Duquesne Light''), and all of the issued and outstanding 
common stock of Duquesne Light's three electric utility subsidiary 
companies, Allegheny Development Corporation (``ADC''), DH Energy, Inc. 
and MT Energy, Inc. and (ii) all of the issued and outstanding common 
stock of DQE's two direct holding company subsidiaries, Duquesne 
Enterprises (``DE'') and DQE Energy Services (``DES''), each of which 
is currently exempt under section 3(a)(1) by rule 2 from all provisions 
of the Act except section 9(a)(2); (2) to form and capitalize a special 
purpose subsidiary and issue Allegheny common stock (``Allegheny Common 
Stock'') to effect the proposed transactions; (3) to add DQE and 
certain of its subsidiaries to the Allegheny money pool (``Money 
Pool''); (4) to provide loans and guarantees to DQE's nonutility 
subsidiaries; and (5) to authorize Allegheny Power Service Corporation 
(``AP Services'') to render services to DQE's utility and nonutility 
subsidiaries.
    Allegheny, through subsidiaries, is engaged principally in the 
generation, transmission, distribution and sale of electricity 
throughout a 29,000 square mile service area covering parts of 
Maryland, Ohio, Pennsylvania, Virginia and West Virginia. Allegheny has 
three wholly electric operating companies, Monongahela Power Company 
(``Monongahela''), The Potomac Edison Company (``Potomac Edison'') and 
West Penn Power Company (``West Penn''). The three utility subsidiaries 
jointly own Allegheny Generating Company (``AGE''), a Virginia 
corporation. AGC's only asset is a 40% undivided interest in a pumped-
storage hydroelectric generating facility located in Bath County, 
Virginia and its connecting transmission facilities. AGC's 840-megawatt 
share of the capacity of the station is sold to its three parents.
    Monongahela, an Ohio corporation, is engaged in the generation, 
transmission and distribution of electricity to 350,062 retail 
customers and eight wholesale customers in an area of approximately 
11,900 square miles with a population of approximately 710,000 in 
northern West Virginia and an adjacent portion of

[[Page 14985]]

Ohio.\1\ In the fiscal year ended December 31, 1996, Monongahela 
provided approximately 24% of Allegheny's consolidated revenues. 
Monongahela is subject to regulation by the Public Utilities Commission 
of Ohio and the Public Service Commission for West Virginia.
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    \1\ Monongahela also owns generating capacity in Pennsylvania.
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    Potomac Edison, a Virginia corporation, is engaged in the 
generation, transmission and distribution of electricity to 375,432 
retail customers and ten wholesale customers in an area of 
approximately 7,300 square miles with a population of approximately 
782,000 in portions of Maryland, Virginia and West Virginia. \2\ In the 
fiscal year ended December 31, 1996, Potomac Edison provided 
approximately 31% of Allegheny's consolidated revenues. Potomac Edison 
is subject to regulation by the State Corporation Commission of 
Virginia, the West Virginia Commission and the Maryland Public Service 
Commission.
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    \2\ Potomac Edison also owns generating capacity in 
Pennsylvania.
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    West Penn, a Pennsylvania corporation, is engaged in the 
generation, transmission and distribution of electricity to 662,881 
retail customers and 15 wholesale customers in an area to approximately 
9,900 square miles with a population of approximately 1.399 million in 
southwestern and north and south central Pennsylvania.\3\ In the fiscal 
year ended December 31, 1996, West Penn provided approximately 45% of 
Allegheny's consolidated revenues. West Penn is subject to regulation 
by the Pennsylvania Public Utility Commission (``Pennsylvania 
Commission'').
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    \3\ West Penn also owns generating capacity in West Virginia.
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    Wholesale rates for electric energy sold in interstate commerce, 
wheeling rates for energy transmission in interstate commerce, and 
certain other activities of Allegheny system companies, including the 
operation of hydroelectric plants, are subject to the jurisdiction of 
the Federal Energy Regulatory Commission (``FERC'').
    Allegheny also owns directly all the issued and outstanding stock 
of two nonutility companies, AYP Capital, Inc. (``AYP Capital'') and AP 
Services. Allegheny conducts its nonutility business through AYP 
Capital, which has three wholly owned subsidiaries, AYP Energy, Inc., 
an exempt wholesaler generator and a power marketer; Allegheny 
Communications Connect, Inc., an exempt telecommunications company; and 
Allegheny Energy Solutions, Inc., formed as an unregulated subsidiary 
to provide electric energy and related services to retail customers as 
retail energy and service are opened to competition. \4\
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    \4\ Through its utility subsidiaries, Allegheny also owns three 
other small nonutility companies. Allegheny Pittsburgh Coal Company, 
which is jointly owned by Monongahela, Potomac Edison and West Penn, 
owns coal rights in a tract of land in Pennsylvania. West Virginia 
Power and Transmission Company (``West Virginia Power''), a wholly 
owned subsidiary of West Penn, and West Penn West Virginia Water 
Power Company, a wholly owned subsidiary of West Virginia Power, 
each own tracts of land in West Virginia and Pennsylvania, 
respectively.
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    For the twelve months ended September 30, 1997, Allegheny's total 
revenue on a consolidated basis was $2.3 billion. Consolidated assets 
of Allegheny and its subsidiaries as of September 30, 1997, were 
approximately $6.5 billion, consisting of $5.2 billion in net electric 
utility property, plant and equipment and $1.3 billion in other 
corporate assets.
    DQE's sole utility subsidiary, Duquesne Light, is engaged in the 
production, transmission, distribution and sale of electric energy. 
Duquesne Light serves an area of approximately 800 square miles, 
including Pittsburgh and municipalities, in Allegheny, Beaver and (to a 
limited extent) Westmoreland Counties, Pennsylvania, having a 
population of approximately 1.51 million of which 370,000 reside in 
Pittsburgh. Duquesne Light also sells electricity to other utilities. 
Duquesne Light owns undivided interests as tenant-in-common in two 
nuclear facilities and leases an undivided interest in a third 
(``Nuclear Facilities''). \5\ Duquesne Light is subject to regulation 
by the Pennsylvania Commission. The FERC has jurisdiction over 
wholesale rates for electric energy sold in interstate commerce, 
wheeling rates for energy transmission in interstate commerce, and 
certain other activities of Duquesne Light. DQE's electric utility 
operations are also subject to regulation by the Nuclear Regulatory 
Commission with respect to the operation of the Nuclear Facilities.
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    \5\ Specifically, Duquesne Light owns a 13.74% interest in Perry 
Power Station Unit 1 and a 47.5% interest in Beaver Valley Power 
Station Unit 1, and leases a 13.74% interest in Beaver Valley Power 
Station Unit 2.
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    DQE has five direct nonutility subsidiaries. DE makes strategic 
investments related to DQE's core energy business. DES is a diversified 
energy services company that offers a wide range of energy solutions 
for industrial, utility and consumer markets worldwide. DQEnergy 
Partners, Inc. was formed in December 1996 to align DQE with strategic 
partners to capitalize on opportunities in the energy services 
industry. Montauk, Inc. is a financial services company that makes 
long-term investments. It was established to provide financing for 
DQE's unregulated businesses and their customers. Brighter Light 
Corporation has no active operations.
    For the twelve months ended September 30, 1997, DQE's total revenue 
on a consolidated basis was approximately $1.22 billion. Consolidated 
assets of DQE and its subsidiaries as of September 30, 1997, were 
approximately $4.7 billion, consisting of $3.7 billion in net electric 
utility assets and $1 billion in nonutility assets.
    An Agreement and Plan of Merger, dated as of April 5, 1997 
(``Merger Agreement''), among DQE, Allegheny and AYP Sub, Inc., a 
wholly owned subsidiary that Allegheny will incorporate under 
Pennsylvania law (``Merger Sub''), provides for a combination of 
Allegheny and DQE in which Merger Sub will be merged with and into DQE 
(``Merger''), with DQE as the surviving corporation.
    To effectuate the Merger, Allegheny requests authority to form and 
capitalize Merger Sub. Merger Sub will be incorporated solely for the 
purpose of effectuating the Merger and, prior to the consummation of 
the Merger, Merger Sub will have no operations other than those 
contemplated by the Merger Agreement. The authorized capital stock of 
Merger Sub will consist of 1,000 shares of common stock, $.01 par 
value, all of which will be issued to Allegheny at the price of $1.00 
per share.
    Allegheny requests authority to issue up to 90,557,682 shares of 
Allegheny Common Stock to consummate the Merger. Each share of DQE 
Common Stock \6\ issued and outstanding immediately prior to the 
effective date of the Merger will be converted into the right to 
receive, and become exchangeable for, 1.12 shares of Allegheny Common 
Stock. Upon consummation of the Merger, holders of DQE Common Stock 
immediately prior to the Merger will own approximately 42% of the 
outstanding shares of Allegheny Common Stock after the Merger, based on 
the number of shares of Allegheny Common Stock and DQE

[[Page 14986]]

Common Stock outstanding as of September 30, 1997.
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    \6\ Other than shares owned by Allegheny, Merger Sub and any 
other subsidiary of Allegheny and shares of DQE Common Stock that 
are owned by DQE or any subsidiary of DQE, in each case not held on 
behalf of third parties and which are not shares of DQE Common Stock 
held by Duquesne Light to provide for redemption of the subsidiary's 
preference shares under the terms of the subsidiary's 401(k) plan or 
to provide benefits under another employee benefit plan of Duquesne 
Light (collectively, ``Excluded Shares'').
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    After the Merger, DQE will be a wholly owned subsidiary of 
Allegheny. Allegheny's utility and nonutility subsidiaries will remain 
subsidiaries of Allegheny. DQE's utility and nonutility subsidiaries 
will become indirect subsidiaries of DQE. Upon consummation of the 
Merger, DQE will be a wholly owned subsidiary of Allegheny.
    The applicants request authority for certain of DQE's direct and 
indirect subsidiaries to participate in the Money Pool under the same 
terms and conditions as Monongahela, Potomac Edison and West Penn 
(i.e., be permitted to both invest in and borrow from the Money Pool), 
as stated in the Commission order dated April 18, 1996 (HCAR No. 
26506).
    The applicants also request authorization for DQE's nonutility 
subsidiaries to borrow or obtain guarantees from Allegheny under the 
same terms and conditions as the nonutility subsidiaries of Allegheny, 
as stated in the Commission order dated October 9, 1996 (HCAR No. 
26590).
    AP Services is a service company subsidiary. It provides various 
technical, engineering, accounting, administrative, financial, 
purchasing, computing, managerial, operational and legal services to 
Allegheny's subsidiaries, including AYP Capital and its subsidiaries, 
at cost.
    AP Services proposes to enter into service agreements (``Service 
Agreements'') with certain utility and nonutility subsidiaries of DQE 
(including Duquesne Light), which will become effective upon the 
consummation of the Merger. The Service Agreements are similar in all 
material respects to those service agreements which AP Services has 
signed with its client companies. Under the terms of the Service 
Agreements, AP Services will render to DQE's subsidiaries, at cost, 
various technical, engineering, accounting, administrative, financial, 
purchasing, computing, managerial, operational and legal services. AP 
Services will account for, allocate and charge its costs of the 
services provided on a full cost reimbursement basis under a work order 
system consistent with the Uniform System of Accounts for Mutual and 
Subsidiary Service Companies. The time AP Services employees spend 
working for the subsidiaries of DQE will be billed to and paid by the 
applicable subsidiary on a monthly basis, based upon time records. Each 
DQE subsidiary that is party to a Service Agreement will maintain 
separate financial records and detailed supporting records.

Gulf Power Co., et al. (70-9171)

    Gulf Power Company (``Gulf''), 500 Bayfront Parkway, Pensacola, 
Florida, 32501, and Mississippi Power Company (``Mississippi''), 2992 
West Beach, Gulfport, Mississippi, 39501, wholly owned subsidiaries of 
The Southern Company, a registered holding company, have filed a 
declaration under sections 6(a) and 7 of the Act and rule 54 under the 
Act.
    Gulf and Mississippi propose to issue and sell in one or more 
series through March 31, 2003 senior debentures, senior promissory 
notes or other senior debt instruments (``Senior Notes'') governed by 
an indenture or other document. The amount of Senior Notes would not 
exceed $350 million outstanding for Gulf or $400 million outstanding 
for Mississippi.
    The provisions of each series of Senior Notes and related 
instruments would be determined when the sale of each series of Senior 
Notes occurs. However, Gulf and Mississippi request authority to issue 
and sell Senior Notes whose terms fall within certain parameters 
described below.
    First, the effective cost of money on Senior Notes will not exceed 
the greater of 300 basis points over U.S. Treasury securities having 
comparable maturities or a gross spread over those Treasury securities 
that is consistent with comparable securities. Second, the maturity of 
the Senior Notes will not exceed approximately 50 years.
    Third, the interest rate on the Senior Notes will be either fixed 
or adjusted on a periodic basis, either by auction or remarketing 
procedures that use one or more formulas based on certain reference 
rates, or by other predetermined methods. Fourth, the Senior Notes will 
be direct, unsecured and unsubordinated obligations of Gulf or 
Mississippi ranked equally with all other unsecured and unsubordinated 
obligations of Gulf or Mississippi.
    The proceeds from the issuance and sale of Senior Notes will be 
used principally (i) to finance capital expenditures, (ii) to acquire, 
retire or redeem securities, (iii) to repay outstanding short-term 
borrowings, (iv) to provide working capital and/or (v) for other 
general corporate purposes.

American Electric Power Company, Inc., et al. (70-9181)

    American Electric Power Company, Inc. (``AEP''), a registered 
holding company, and its wholly owned nonutility subsidiary, American 
Electric Power Service Corporation (``AEPSC''), both of 1 Riverside 
Plaza, Columbus, Ohio 43215, have filed a declaration under sections 
6(a), 7, and 12(b) of the Act and rules 45 and 54 under the Act 
requesting authorization for AEP to guarantee certain payment 
obligations of AEPSC.
    AEPSC will issue unsecured long-term promissory notes (``Notes'') 
to one or more commercial banks, financial institutions or other 
institutional investors under the terms and conditions of one or more 
term-loan agreements (``Proposed Loan Agreement''). The Proposed Loan 
Agreement and the Notes will have a term of not less than nine months 
and no more than ten years from the date of borrowing.
    The Notes will bear interest at a fixed, fluctuating or combination 
fixed and fluctuating rate. If the interest rate is fixed, interest on 
the Notes at the time of issuance will not be greater than 250 basis 
points above the yield to maturity of United States Treasury 
obligations which have maturities similar to the maturity date of the 
Notes. If the interest rate is fluctuating, interest on the Notes will 
be not be greater than 200 basis points above the rate of interest 
announced publicly by a major bank from time to time as its base or 
prime rate. The actual rate of interest on the Notes will be as further 
determined by AEPSC and the lender.
    AEPSC intends to use proceeds from the Notes to pay long-term debt 
at, or prior to, maturity, to repay short-term debt, for working 
capital or other corporate purposes.\2\
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    \7\ AEPSC currently has a term loan in the principal amount of 
$10 million, which will mature on October 14, 1998.
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    AEP proposes to issue guarantees (``Guarantees'') in support of the 
Notes in an aggregate amount not to exceed $20 million outstanding at 
any one time, through December 31, 2003. Under the Guarantees, AEP will 
be unconditionally obligated to pay amounts due and unpaid by AEPSC in 
connection with the Notes.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-8002 Filed 3-26-98; 8:45 am]
BILLING CODE 8010-01-M