[Federal Register Volume 67, Number 218 (Tuesday, November 12, 2002)]
[Notices]
[Pages 68703-68704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-28710]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27596]


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

November 5, 2002.
    Notice is hereby given that the following filing has 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/
declaration for a complete statement of the proposed transaction 
summarized below. The application/declaration is available for public 
inspection through the Commission's Branch of Public Reference.
    Interested persons wishing to comment or request a hearing on the 
application/declaration should submit their views in writing by 
November 27, 2002, to the Secretary, Securities and Exchange 
Commission, Washington, DC 20549-0609, and serve a copy on the relevant 
applicant/declarant at the address 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 
November 27, 2002, the application/declaration, as filed or as amended, 
may be granted and/or permitted to become effective.

Allegheny Energy, Inc., et al. (70-10100)

    Allegheny Energy, Inc. (``Allegheny''), a registered public utility 
holding company, and its registered public utility holding company 
subsidiary, Allegheny Energy Supply Company, L.L.C. (``AE Supply,'' and 
with Allegheny, ``Applicants''), both located at 10435 Downsville Pike, 
Hagerstown, Maryland, have filed an application-declaration under 
sections 6(a), 7, 12, 32 and 33 of the Act, and rules 46, 53 and 54 
under the Act.

I. Background

    Allegheny is a diversified energy company headquartered in 
Hagerstown, Maryland. The Allegheny system consists of three regulated 
electric public utility companies, West Penn Power Company (``West 
Penn''), Monongahela Power Company (``Monongahela Power'') (Monongahela 
Power also has a regulated natural gas utility division as a result of 
its purchase of West Virginia Power), and The Potomac Edison Company 
(``Potomac Edison''), and a regulated public utility natural gas 
company, Mountaineer Gas Company (``Mountaineer Gas''), which is a 
wholly owned subsidiary of Monongahela Power (collectively West Penn, 
Monongahela Power, Potomac Edison and Mountaineer Gas are referred to 
as the ``Operating Companies'').

II. Requested Authority

A. Summary of Requests

    By order dated December 31, 2001 (HCAR No. 27486), as supplemented 
by HCAR No. 27521 (April 17, 2002) and HCAR No. 27579 (Oct. 17, 2002) 
(collectively, the ``Financing Order''), the Commission authorized, 
through July 31, 2005 certain financing transactions. Applicants now 
request authorization (1) to modify the financing conditions set forth 
in the Financing Order, (2) for AE Supply to pay dividends out of 
capital surplus in an amount not to exceed $500 million; and (3) for 
Allegheny, AE Supply and their respective subsidiaries (other than the 
Operating Companies) to sell, or otherwise dispose of, utility assets 
and/or the securities of public utility companies (other than the 
Operating Companies).

B. Modification of Financing Conditions

    Applicants request that the conditions to the financing 
authorizations in the Financing Order be modified for the period 
through December 31, 2003 (``Modified Authorization Period''), by 
replacing the conditions with the following:
    1. the common stock equity ratio of Allegheny, on a consolidated 
basis, will not fall below 28% of its total capitalization; and the 
common stock equity ratio \1\ of AE Supply, on a consolidated basis, 
will not fall below 20% of its total capitalization;
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    \1\ Since AE Supply is a limited liability company, ``common 
stock equity'' means, for this purpose, the membership interests of 
AE Supply.
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    2. the effective cost of capital on any security will not exceed 
competitive market rates available at the time of issuance for 
securities having the same or reasonably similar terms and conditions 
issued by similar companies of reasonably comparable credit quality,

[[Page 68704]]

provided that in no event will the interest rate on any debt securities 
exceed an interest rate per annum equal to the sum of 12% plus the 
prime rate as announced by a nationally recognized money center bank;
    3. the underwriting fees, commissions and other similar 
remuneration paid in connection with the non-competitive issuance of 
any security will not exceed the greater of (a) 5% of the principal or 
total amount of the securities being issued or (b) issuances expenses 
that are paid at the time in respect of the issuance of securities 
having the same or reasonably similar terms and conditions issued by 
similar companies of reasonably comparable credit quality;
    4. the maturity of long-term debt will be not less than one year 
and will not exceed thirty years; and
    5. short-term debt will have a maturity of not less than one day 
and not more than 364 days.
    Applicants request that the financing authorizations granted in the 
Financing Order not be subject to the requirement that Allegheny and/or 
AE Supply maintain a common stock equity ratio above 30%, or above the 
levels stated in B.1. above. Rather, Applicants request that the 
financing authorizations granted in the Financing Order remain 
effective without regard to the common stock equity levels of Allegheny 
and/or AE Supply. Applicants request that the Commission reserve 
jurisdiction over the common stock equity ratio level to be maintained 
as a condition to the financing authorization for Allegheny and AE 
Supply below 28% in the case of Allegheny and 20% in the case of AE 
Supply.
    Applicants request authorization to issue debt securities at an 
interest rate in excess of an interest rate per annum equal to the sum 
of 12% plus the prime rate as announced by a nationally recognized 
money center bank. Applicants request that the Commission reserve 
jurisdiction over any higher interest rate to be applicable to any debt 
securities to be issued under the Financing Order.
    Applicants request that the financing authorizations granted in the 
Financing Order not be subject to the requirement that Allegheny 
maintain its senior unsecured long-term debt ratings, and the rating of 
any commercial paper that may be issued, at investment grade level, as 
established by a nationally recognized statistical rating organization. 
Applicants further request that Allegheny and AE Supply be authorized 
to issue short-term debt and/or long-term debt under those 
circumstances when the debt, upon issuance, is unrated or is rated 
below investment grade.
    Applicants commit to file in a timely manner an application with 
the Commission if, or to the extent that, Applicants will seek relief 
from the requirement that they maintain a common stock equity ratio of 
at least 30% after December 31, 2003.

C. Payment of Dividends Out of Capital Surplus

    Applicants also request authorization for AE Supply to pay 
dividends out of capital surplus of up to $500 million during the 
period ending December 31, 2003. Specifically, AE Supply proposes to 
declare and pay dividends to Allegheny only to the extent required by 
Allegheny to repay outstanding indebtedness in an aggregate principal 
amount of up to $365 million and to pay AE Supply's approximate 
proportionate share of interest on the outstanding notes of Allegheny 
in the amount of $11.625 million. To the extent that Allegheny does not 
require proceeds of dividends from AE Supply to repay these 
obligations, Applicants request that the Commission reserve 
jurisdiction over the declaration and payment of dividends by AE Supply 
out of capital surplus up to an aggregate amount of $500 million.
    Applicants anticipate that, to meet the liquidity needs of 
Allegheny, AE Supply will be required to pay dividends in excess of its 
current and retained earnings. Allegheny and AE Supply represent that 
AE Supply will not declare or pay any dividend out of capital surplus 
in contravention of any law restricting the payment of dividends. In 
addition, AE Supply will comply with the terms of any credit agreements 
and indentures that restrict the amount and timing of distributions by 
AE Supply to its members.

D. Sale of Utility Assets

    Applicants request authorization to sell securities of the public 
utility subsidiaries, other than the Operating Companies, held directly 
or indirectly by Applicants and to sell utility assets of Applicants 
and/or their subsidiaries, other than the Operating Companies. At this 
time Applicants cannot identify the specific assets to be sold. The 
identity of the assets to be sold will depend upon, among other things, 
market conditions.\2\ As a result of the extraordinary circumstances 
existing in the merchant power market at this time, Allegheny and AE 
Supply need flexibility as they proceed with the asset sale program. 
Thus, Applicants request that the Commission reserve jurisdiction over 
the authorization to sell the securities of public utility companies, 
other than the Operating Companies, held directly or indirectly by 
Applicants, and to sell utility assets of Applicants and their 
subsidiaries, other than the Operating Companies. Applicants commit to 
submit an amendment to the Application in this matter seeking 
authorization of the Commission for any asset disposition subject to 
Commission jurisdiction.
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    \2\ Applicants have included as an exhibit to SEC File No. 70-
10100 a list of all of AE Supply's utility assets and securities of 
public utility companies.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-28710 Filed 11-8-02; 8:45 am]
BILLING CODE 8010-01-P