10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) of the SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) of the SECURITIES EXCHANGE ACT OF 1934

Commission File Number of issuing entity: 333-139937

PE Environmental Funding LLC

(Exact name of issuing entity, as specified in its charter)

Delaware (State of Incorporation)	20-5961603 (IRS Employer Identification Number)
2215-B Renaissance Drive, Suite #5
Las Vegas, Nevada
(Address of Principal Executive	89119
Offices)	(Zip Code)

(702) 740-4244
(Telephone Number)

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o     No þ

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o     No þ

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes þ     No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o
	(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o     No þ

Securities registered pursuant to Section 12(b) of the Act:	None.
Securities registered pursuant to Section 12(g) of the Act:	None.

     The registrant does not have any voting or non-voting common equity held by non-affiliates.

Documents Incorporated by Reference

     Portions of the Allegheny Energy, Inc. definitive Proxy Statement for its 2008 Annual Meeting of Stockholders are incorporated by reference to Item 11 Part III of this Annual Report on Form 10-K.

TABLE OF CONTENTS

Part I
	Item 1. Business.
	Item 1A. Risk Factors.
	Item 1B. Unresolved Staff Comments.
	Item 2. Properties.
	Item 3. Legal Proceedings.
	Item 4. Submission of Matters to a Vote of Security Holders.
Part II
	Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
	Item 6. Selected Financial Data.
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
	Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
	Item 8. Financial Statements and Supplementary Data.
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
	Item 9A. Controls and Procedures.
	Item 9B. Other Information.
Part III
	Item 10. Directors and Executive Officers of the Registrant.
	Item 11. Executive Compensation.
	Item 12. Security Ownership of Certain Beneficial Owners and Management.
	Item 13. Certain Relationships and Related Transactions.
	Item 14. Principal Accountant Fees and Services.
PART IV
	Item 15. Exhibits, Financial Statement Schedules.
	Item 1112 (b). Significant Obligors of Pool Assets.
	Item 1114(b)(2). Credit Enhancement and other Support, Except for Certain Derivative Instruments.
	Item 1115(b). Certain Derivative Instruments.
	Item 1117. Legal Proceedings.
	Item 1119. Affiliations and Certain Relationships and Related Transactions.
SIGNATURES
Exhibit Index
Ex-31.1
Ex-33.1
Ex-33.2
Ex-34.1
Ex-34.2
Ex-35.1

Part I

Item 1. Business.

Omitted pursuant to General Instruction J of Form 10-K.

Item 1A. Risk Factors.

Omitted pursuant to General Instruction J of Form 10-K.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Omitted pursuant to General Instruction J of Form 10-K.

Item 3. Legal Proceedings.

Omitted pursuant to General Instruction J of Form 10-K.

Item 4. Submission of Matters to a Vote of Security Holders.

Omitted pursuant to General Instruction J of Form 10-K.

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Omitted pursuant to General Instruction J of Form 10-K.

Item 6. Selected Financial Data.

Omitted pursuant to General Instruction J of Form 10-K.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Omitted pursuant to General Instruction J of Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Omitted pursuant to General Instruction J of Form 10-K.

Item 8. Financial Statements and Supplementary Data.

Omitted pursuant to General Instruction J of Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

Omitted pursuant to General Instruction J of Form 10-K.

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Item 9A. Controls and Procedures.

Omitted pursuant to General Instruction J of Form 10-K.

Item 9B. Other Information.

None.

Part III

Item 10. Directors and Executive Officers of the Registrant.

          PE Environmental Funding LLC (the “Company”) has a management committee currently consisting of five managers. The Company’s limited liability company agreement requires that it have at least two independent managers. Each independent manager must be a natural person who, for the five-year period prior to his or her appointment as an independent manager was not, and during the continuation of his or her service as independent manager is not:

• an employee, director, stockholder, manager, partner or officer of the Company or an employee, director, manager, stockholder, partner or officer of any affiliate of the Company, other than his or her service as independent manager;

• a customer or supplier of the Company, or a customer or supplier of any of the Company’s affiliates, except that an independent manager may be an employee of a supplier of corporate related services to the Company or any of its affiliates; or

• any member of the immediate family of a person described in either of the above bullets.

The following is a list of our managers and executive officers:

Name	Age		Title	Background
Paul J. Evanson		66	Chief Executive Officer and Manager	Mr. Evanson has been Chairman of the Board, President and Chief Executive Officer of AYE since June 2003. Prior to joining AYE., Mr. Evanson was President of Florida Power & Light Company, the principal subsidiary of FPL Group, Inc., and a director of FPL Group Inc.
David E. Flitman		43	Manager	Mr. Flitman has been President of Allegheny Power, AYE’s energy delivery business, since July 2006. Mr. Flitman joined AYE in February 2005 as Vice President, Distribution. Prior to joining AYE, Mr. Flitman spent nearly 20 years with E.I. du Pont de Nemours and Company, most recently as Global Business Director for the Nonwovens Business Group.

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Name	Age		Title	Background
Philip L. Goulding		48	Vice President and Manager	Mr. Goulding has been Senior Vice President and Chief Financial Officer of AYE since July 2006. Mr. Goulding joined AYE in October 2003 as Vice President, Strategic Planning and Chief Commercial Officer of Allegheny Energy, Inc. Prior to joining Allegheny Energy, Inc., Mr. Goulding led the North American energy practice of L.E.K. Consulting.
William F. Wahl		48	Controller	Mr. Wahl has been Vice President, Controller and Chief Accounting Officer of AYE since May 2007. He joined AYE in September 2003 and served as Assistant Controller, Corporate Accounting from February 2005 to May 2007. From 2002 to 2003, Mr. Wahl was employed by PNC Financial Services Group, Inc. Prior to that, he was employed by Dominion Resources, Inc.
Kari L. Johnson		47	Independent Manager	Ms. Johnson is currently serving as Director, Passive Investment Services of CSC Entity Services, LLC, which, among other things, provides management services to entities involved in securitizations. Prior to joining CSC Entity Services, LLC in October, 1997, Ms. Johnson served as Credit and Accounts Receivable Manager at Raychem Corporation.
Darryl E. Smith		50	Independent Manager	Mr. Smith has been Vice President, Client Services of CSC Entity Services, LLC since July 2004. Prior to joining CSC Entity Services, LLC, Mr. Smith worked for two years at Wachovia Corporation as Vice President and Relationship Manager. Before joining Wachovia Corporation, Mr. Smith worked for 16 years at Wilmington Trust SP in various capacities, including as Vice President and Business Manager.

Code of Business Conduct and Ethics

          The Company is a wholly-owned, indirect subsidiary of Allegheny Energy, Inc. (“AYE”). AYE maintains a Code of Business Conduct and Ethics for its directors, officers and employees in order to promote honest and ethical conduct and compliance with the laws and regulations to which AYE is subject. All directors, officers and employees of AYE and its subsidiaries are expected to be familiar with the Code of Business Conduct and Ethics and to adhere to its principles and procedures.

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Item 11. Executive Compensation.

          The Company’s officers and managers, other than the independent managers, are officers, directors or managers of AYE or its other affiliates and are not be separately compensated by the Company for their services on the Company’s behalf. The aggregate compensation for each independent manager is approximately $5,000 per year. Each of our officers serves at the discretion of our management committee.

          The information required by this Item with respect to AYE is incorporated herein by reference to the material under Compensation Discussion and Analysis of the definitive proxy statement of AYE for the 2008 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission on or about March 20, 2008.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

          PE Renaissance Funding, LLC (“PE Funding”), the Company’s parent and sole member, owns all of the voting securities of the Company. PE Funding is a wholly owned subsidiary of The Potomac Edison Company (“PE”), which is a wholly owned subsidiary of AYE.

Item 13. Certain Relationships and Related Transactions.

          On April 11, 2007, the Company issued $114,825,000 aggregate principal amount of its Senior Secured Sinking Fund Environmental Control Bonds, Series A (the “Bonds”). In connection with the offer and sale of the Bonds, the Company entered into the agreements described below with PE Funding and PE. The descriptions of these agreements are qualified in their entirety by reference to the agreements themselves, which are filed as exhibits hereto and are incorporated herein by reference.

Sale Agreement

          The Transferred Environmental Control Property Sale Agreement (the “Sale Agreement”) between the Company and PE Funding, as Seller, governs the sale of all of PE Funding’s (and thereby PE’s) right, title and interest in, to and under certain environmental control property (the “Environmental Control Property”), which includes the right to impose, charge, collect and receive special, irrevocable nonbypassable charges, known as environmental control charges (“Environmental Control Charges”), paid by all electric service customers (individuals, corporations, other business entities, the State of West Virginia and other federal, state and local governmental entities) located within PE’s West Virginia service territory and the right to implement a true-up mechanism in respect of the Environmental Control Charges. PE Funding, as Seller, has agreed to indemnify the Company and the indenture trustee under the indenture governing the Bonds (“Indenture Trustee”) , for itself and on behalf of the holders of the Bonds, for certain tax matters, and for breaches of PE Funding’s representations, warranties and covenants in connection with the Sale Agreement.

Servicing Agreement

          Pursuant to the Transferred Environmental Control Property Servicing Agreement (the “Servicing Agreement”) between the Company and PE, PE, as Servicer, manages, services, administers and makes collections in respect of the Environmental Control Charges. PE’s duties as Servicer include obtaining meter reads, calculating, billing and collecting the Environmental Control Charges, remitting the Environmental Control Charges to the Indenture Trustee and filing and obtaining from the West Virginia Public Service Commission periodic adjustments to the Environmental Control Charges. The Company pays PE a semi-annual servicing fee equal to 0.05% per annum of the initial principal balance of the Environmental Control Bonds, payable semi-annually, in arrears. PE, as Servicer, has agreed to indemnify the Company and the Indenture Trustee, for itself and on behalf of the holders of the Bonds, for the Servicer’s willful misconduct, bad faith or gross negligence in the performance of its duties or observance

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of its covenants under the Servicing Agreement or for the Servicer’s reckless disregard of its obligations and duties under the Servicing Agreement.

Item 14. Principal Accountant Fees and Services.

Omitted pursuant to General Instruction J of Form 10-K.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) The following documents are filed as part of this report:

(1) Financial Statements:

Omitted pursuant to General Instruction J of Form 10-K.

(2) Financial Statement Schedules:

Omitted pursuant to General Instruction J of Form 10-K.

(3) Exhibits:

Reference is made to the index on page 9 for exhibits required pursuant to Item 601 of Regulation S-K.

Item 1112 (b). Significant Obligors of Pool Assets.

None.

Item 1114(b)(2). Credit Enhancement and other Support, Except for Certain Derivative Instruments.

None.

Item 1115(b). Certain Derivative Instruments.

None.

Item 1117. Legal Proceedings.

None.

Item 1119. Affiliations and Certain Relationships and Related Transactions.

The Company is an indirect, wholly-owned subsidiary of PE, which in turn is a wholly-owned direct subsidiary of AYE.

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SIGNATURES

     Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 28^th day of March, 2008.

PE Environmental Funding LLC
By:	/s/ Barry E. Pakenham
	Barry E. Pakenham, Treasurer

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Exhibit Index

Exhibit No.	Description of Exhibit
3.1	Amended Certificate of Formation of PE Environmental Funding LLC (filed with the Company’s Registration Statement on Form S-3, dated January 11, 2007).
3.2	Amended and Restated Limited Liability Company Agreement of PE Environmental Funding LLC, dated as of April 11, 2007 (filed with the Company’s Current Report on Form 8-K, dated April 17, 2007).
4.1	Indenture, dated as of April 11, 2007, including the form of the bonds (filed with the Company’s Current Report on Form 8-K, dated April 17, 2007).
4.2	Series Supplement, dated as of April 11, 2007 (filed with the Company’s Current Report on Form 8-K, dated April 17, 2007).
10.1	Transferred Environmental Control Property Servicing Agreement, dated as of April 11, 2007 (filed with the Company’s Current Report on Form 8-K, dated April 17, 2007).
10.2	Administration Agreement, dated as of April 11, 2007 (filed with the Company’s Current Report on Form 8-K, dated April 17, 2007).
10.3	Environmental Control Property Transfer Agreement, dated as of April 11, 2007 (filed with the Company’s Current Report on Form 8-K, dated April 17, 2007).
10.4	Transferred Environmental Control Property Sale Agreement, dated as of April 11, 2007 (filed with the Company’s Current Report on Form 8-K, dated April 17, 2007).
31.1	Rule 13a-14(d)/15d-14(d) certification (filed herewith).
33.1	Report on assessment of compliance with servicing criteria for asset-backed securities.
33.2	Report on assessment of compliance with servicing criteria for asset-backed securities.
34.1	Attestation report on assessment of compliance with servicing criteria for asset-backed securities (filed herewith).
34.2	Attestation report on assessment of compliance with servicing criteria for asset-backed securities (filed herewith).
35.1	Servicer compliance statement (filed herewith).

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EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(d)/15d-14(d)

I, Barry E. Pakenham, Treasurer of The Potomac Edison Company, as servicer (the “Servicer”), certify that:

1. I have reviewed this report on Form 10-K and all reports on Form 10-D required to be filed in respect of the period covered by this report on Form 10-K of PE Environmental Funding LLC (the “Exchange Act periodic reports”);

2. Based on my knowledge, the Exchange Act periodic reports, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, all of the distribution, servicing and other information required to be provided under Form 10-D for the period covered by this report is included in the Exchange Act periodic reports;

4. I am responsible for reviewing the activities performed by the Servicer, and based on my knowledge and the compliance review conducted in preparing the servicer compliance statement required in this report under Item 1123 of Regulation AB, and except as disclosed in the Exchange Act periodic reports, the servicer has fulfilled its obligations under the Transferred Environmental Control Property Servicing Agreement, dated as of April 11, 2007 between PE Environmental Funding LLC and the Servicer in all material respects; and

5. All of the reports on assessment of compliance with servicing criteria for asset-backed securities and the related attestation reports on assessment of compliance with servicing criteria for asset-backed securities required to be included in this report in accordance with Item 1122 of Regulation AB and Exchange Act Rule 13a-18 and 15d-18 have been included as an exhibit to this report, except as otherwise disclosed in this report. Any material instances of noncompliance described in such reports have been disclosed in this report on Form 10-K.

Date: March 28, 2008

/s/ Barry E. Pakenham 

Name: Barry E. Pakenham
Title:   Treasurer
 

EX-33.1

EXHIBIT 33.1

REPORT ON ASSESSMENT OF COMPLIANCE WITH SERVICING CRITERIA
FOR ASSET-BACKED SECURITIES

The Potomac Edison Company (the “Asserting Party”), as a party participating in the servicing function under Item 1122 of Regulation AB, hereby reports on its assessment of compliance with the servicing criteria specified in paragraph (d) of Item 1122 of Regulation AB, as follows:

(1) The Asserting Party is responsible for assessing compliance with the servicing criteria applicable to it under paragraph (d) of Item 1122 of Regulation AB, as set forth on Appendix A hereto, as of December 31, 2007 and for the period from April 11, 2007 (commencement of servicing activities) through December 31, 2007 (the “Reporting Period”). The transactions covered by this report include environmental control property-backed securities, the Senior Secured Sinking Fund Environmental Control Bonds, Series A, for which the Asserting Party acted as servicer (the “Platform”);

(2) Except as set forth in this paragraph, the Asserting Party used the criteria in paragraph (d) of Item 1122 of Regulation AB to assess compliance with the applicable servicing criteria. The following criteria of paragraph (d) of Item 1122 of Regulation AB are not applicable to the Asserting Party based on the activities it performs with respect to the Platform: 1122(d)(1)(ii), 1122(d)(1)(iii). 1122(d)(1)(iv), 1122(d)(2)(vi), 1122(d)(3)(iii), 1122(d)(3)(iv), 1122(d)(4)(v), 1122(d)(4)(ix), 1122(d)(4)(xi), 1122(d)(4)(xii), 1122(d)(4)(xiii), and 1122(d)(4)(xv); as listed in the column “Inapplicable Servicing Criteria” on Appendix A hereto;

(3) The Asserting Party has determined that it is in compliance in all material respects with the applicable servicing criteria as of December 31, 2007 and for the period from April 11, 2007 through December 31, 2007, with respect to the Platform, taken as a whole except for criterion 1122(d)(4)(ii) for which the company maintained environmental control property documentation at a site different than the site specified in the transaction agreement; and

(4) PricewaterhouseCoopers LLP, an independent registered public accounting firm, has issued an attestation report on the Servicer’s compliance with the applicable servicing criteria as of December 31, 2007 and for the period April 11, 2007 through December 31, 2007.

Date: March 28, 2008

THE POTOMAC EDISON COMPANY, as Servicer
/s/ Barry E. Pakenham
Name:	Barry E. Pakenham
Title:	Treasurer

Appendix A

		APPLICABLE	INAPPLICABLE
	SERVICING CRITERIA	SERVICING CRITERIA	SERVICING CRITERIA
	General Servicing Considerations
1122(d)(1)(i)	Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements.	X1
1122(d)(1)(ii)	If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party’s performance and compliance with such servicing activities.		X
1122(d)(1)(iii)	Any requirements in the transaction agreements to maintain a back-up servicer for the environmental control property are maintained.		X
1122(d)(1)(iv)	A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements.		X
	Cash Collection and Administration
1122(d)(2)(i)	Payments on pool assets are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two business days following receipt, or such other number of days specified in the transaction agreements.	X
1122(d)(2)(ii)	Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel.	X
1122(d)(2)(iii)	Advances of funds or guarantees regarding collections, cash flows or distributions, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements.	X2
1122(d)(2)(iv)	The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of overcollateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements.	X3
1122(d)(2)(v)	Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, “federally insured depository institution” with respect to a foreign financial institution means a foreign financial institution that meets the requirements of 240.13k-1(b)(1) of this chapter,	X4
1122(d)(2)(vi)	Unissued checks are safeguarded so as to prevent unauthorized access.		X

1	The Asserting Party monitors events of default as obligated pursuant to the transaction agreements.
2	No advances by the Asserting Party or the Trustee are permitted under the applicable transaction documents.
3	Excess funds and other transaction accounts are maintained and applied by the Trustee in accordance with the requirements of the Indenture.
4	All custodial accounts are maintained by the Trustee and invested in accordance with the requirements of the Indenture.

		APPLICABLE	INAPPLICABLE
	SERVICING CRITERIA	SERVICING CRITERIA	SERVICING CRITERIA
1122(d)(2)(vii)	Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts. These reconciliations are (A) mathematically accurate; (B) prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction agreements.	X
	Investor Remittances and Reporting
1122(d)(3)(i)	Reports to investors, including those to be filed with the Commission, are maintained in accordance with the transaction agreements and applicable Commission requirements. Specifically, such reports (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the Commission as required by its rules and regulations; and (D) agree with investors’ or the trustee’s records as to the total unpaid principal balance and number of pledged assets serviced by the Servicer.	X
1122(d)(3)(ii)	Amounts due to investors are allocated and remitted in accordance with timeframes, distribution priority and other terms set forth in the transaction agreements.	X5
1122(d)(3)(iii)	Disbursements made to an investor are posted within two business days to the Servicer’s investor records, or such other number of days specified in the transaction agreements.		X
1122(d)(3)(iv)	Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements.		X
	Pool Asset Administration
1122(d)(4)(i)	Collateral or security on pool assets is maintained as required by the transaction agreements or related documents.	X
1122(d)(4)(ii)	Pool assets and related documents are safeguarded as required by the transaction agreements.	X
1122(d)(4)(iii)	Any additions, removals or substitutions to the pool asset are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements.	X6
1122(d)(4)(iv)	Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the applicable Servicer’s obligor records maintained no more than two business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related pool asset documents.	X
1122(d)(4)(v)	The Servicer’s records regarding the pool assets agree with the Servicer’s records with respect to an obligor’s unpaid principal balance.		X

5	The Asserting Party is responsible for allocations of amounts due and provides such information to the Trustee via payment due statements. No payment date statements were issued by the Asserting Party during the period from April 11, 2007 to December 31, 2007. The Trustee is responsible for remittance.
6	No removals or substitutions of pledged assets are allowed under the transaction documents.

		APPLICABLE	INAPPLICABLE
	SERVICING CRITERIA	SERVICING CRITERIA	SERVICING CRITERIA
1122(d)(4)(vi)	Changes with respect to the terms or status of an obligor’s pool asset (e.g. loan modifications or re-agings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related asset documents.	X
1122(d)(4)(vii)	Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements.	X
1122(d)(4)(viii)	Records documenting collection efforts are maintained during the period a pool asset is delinquent in accordance with the transaction agreements. Such records are maintained on at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity’s activities in monitoring delinquent assets including, for example, phone calls, letters and payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment).	X
1122(d)(4)(ix)	Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents.		X
1122(d)(4)(x)	Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor’s pool asset documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable pool asset documents and state laws; and (C) such funds are returned to the obligor within 30 calendar days of full repayment of the related pool asset, or such other number of days specified in the transaction agreements.	X7
1122(d)(4)(xi)	Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the Servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements.		X
1122(d)(4)(xii)	Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the Servicer’s funds and not charged to the obligor, unless the late payment was due to the obligor’s error or omission.		X
1122(d)(4)(xiii)	Disbursements made on behalf of an obligor are posted within two business days to the obligor’s records maintained by the Servicer, or such other number of days specified in the transaction agreements.		X
1122(d)(4)(xiv)	Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements.	X
1122(d)(4)(xv)	Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements.		X

⁷ The Asserting Party maintains customer deposits in accordance with the rules and regulations of the West Virginia Public Service Commission, as required by the transaction documents.

EX-33.2

Exhibit 33.2

Management’s Assertion

Report on Compliance with Applicable Servicing Criteria Pursuant to Item 1122
of Regulation AB under the Securities Exchange Act of 1934

U.S. Bank National Association (“U.S. Bank”) as a party participating in the servicing function for the following transactions:

U.S. Bank Corporate Trust Asset Backed Securities Platform¹

hereby provides the following report on its assessment of compliance with the servicing criteria set forth in Item 1122 of Regulation AB applicable to it and as described on Exhibit A hereto:

1.	U.S. Bank is responsible for assessing its compliance with the servicing criteria applicable to it as noted on the accompanying Exhibit A;
2.	U.S. Bank used the criteria set forth in paragraph (d) of Item 1122 of Regulation AB to assess its compliance with the applicable servicing criteria;
3.	U.S. Bank’s assessment of its compliance with the applicable servicing criteria is as of and for the period beginning on January 1, 2007 and ending December 31, 2007, the end of the fiscal year covered by the Form 10-K report. U.S. Bank’s participation in the servicing function complied in all material respects with the applicable servicing criteria.
4.	Ernst & Young, a registered public accounting firm, has issued an attestation report on U.S. Bank’s assessment of compliance with the applicable servicing criteria as of and for the period beginning on January 1, 2007 and ending December 31, 2007, the end of the fiscal year covered by the Form 10-K report.

U.S. BANK NATIONAL ASSOCIATION
/s/ Bryan R. Calder
Name:	Bryan R. Calder
Title:	President

Date: February 12, 2008

¹ The U.S. Bank Corporate Trust ABS Platform (the “Platform”) consists of the activities involved in the performance of servicing functions for (i) publicly issued asset-backed and mortgage backed transactions the securities of which were offered on or after January 1, 2006 and (ii) certain asset backed transactions offered prior to January 1, 2006 for which the Issuer has voluntarily elected to make Regulation AB compliant filings under the Securities Exchange Act of 1934, as amended. The Platform does not include transaction comprised of the repackaging of corporate debt and/or other agency securities.

EXHIBIT A to Management’s Assertion

		Applicable	Inapplicable
		Servicing	Servicing
Reference	Servicing Criteria	Criteria	Criteria
General Servicing Considerations
1122(d)(1)(i)	Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements.	X
1122(d)(1)(ii)	If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party’s performance and compliance with such servicing activities.	X
1122(d)(1)(iii)	Any requirements in the transaction agreements to maintain a back-up servicer for the Pool Assets are maintained.		X
1122(d)(1)(iv)	A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements.	X
Cash Collection and Administration
1122(d)(2)(i)	Payments on pool assets are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two business days following receipt, or such other number of days specified in the transaction agreements.	X
1122(d)(2)(ii)	Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel.	X
1122(d)(2)(iii)	Advances of funds or guarantees regarding collections, cash flows or distributions, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements.	X
1122(d)(2)(iv)	The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of over collateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements.	X
1122(d)(2)(v)	Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, “federally insured depository institution” with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) of the Securities Exchange Act.	X
1122(d)(2)(vi)	Unissued checks are safeguarded so as to prevent unauthorized access.	X
1122(d)(2)(vii)	Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts. These reconciliations are (A) mathematically accurate; (B) prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction agreements.	X

1

		Applicable	Inapplicable
		Servicing	Servicing
Reference	Servicing Criteria	Criteria	Criteria
Investor Remittances and Reporting
1122(d)(3)(i)	Reports to investors, including those to be filed with the Commission, are maintained in accordance with the transaction agreements and applicable Commission requirements. Specifically, such reports (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the Commission as required by its rules and regulations; and (D) agree with investors’ or the trustee’s records as to the total unpaid principal balance and number of Pool Assets serviced by the Servicer.	X
1122(d)(3)(ii)	Amounts due to investors are allocated and remitted in accordance with timeframes, distribution priority and other terms set forth in the transaction agreements.	X
1122(d)(3)(iii)	Disbursements made to an investor are posted within two business days to the Servicer’s investor records, or such other number of days specified in the transaction agreements.	X
1122(d)(3)(iv)	Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements.	X
Pool Asset Administration
1122(d)(4)(i)	Collateral or security on pool assets is maintained as required by the transaction agreements or related pool asset documents.		X
1122(d)(4)(ii)	Pool assets and related documents are safeguarded as required by the transaction agreements.		X
1122(d)(4)(iii)	Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements.	X
1122(d)(4)(iv)	Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the Servicer’s obligor records maintained no more than two business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related pool asset documents.		X
1122(d)(4)(v)	The Servicer’s records regarding the pool assets agree with the Servicer’s records with respect to an obligor’s unpaid principal balance.		X
1122(d)(4)(vi)	Changes with respect to the terms or status of an obligor’s pool assets (e.g., loan modifications or re-agings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related pool asset documents.		X
1122(d)(4)(vii)	Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements.		X

2

		Applicable	Inapplicable
		Servicing	Servicing
Reference	Servicing Criteria	Criteria	Criteria
1122(d)(4)(viii)	Records documenting collection efforts are maintained during the period a pool asset is delinquent in accordance with the transaction agreements. Such records are maintained on at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity’s activities in monitoring delinquent pool assets including, for example, phone calls, letters and payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment).		X
1122(d)(4)(ix)	Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents.		X
1122(d)(4)(x)	Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor’s pool asset documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable pool asset documents and state laws; and (C) such funds are returned to the obligor within 30 calendar days of full repayment of the related pool assets, or such other number of days specified in the transaction agreements.		X
1122(d)(4)(xi)	Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements.		X
1122(d)(4)(xii)	Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the Servicer’s funds and not charged to the obligor, unless the late payment was due to the obligor’s error or omission.		X
1122(d)(4)(xiii)	Disbursements made on behalf of an obligor are posted within two business days to the obligor’s records maintained by the servicer, or such other number of days specified in the transaction agreements.		X
1122(d)(4)(xiv)	Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements.		X
1122(d)(4)(xv)	Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements.	X

3

EX-34.1

Exhibit 34.1

PricewaterhouseCoopers LLP
600 Grant Avenue
Pittsburgh PA 15219
Telephone (412) 355 6000
Facsimile (412) 355 8089
www.pwc.com

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholder of the Potomac Edison Company:

We have examined The Potomac Edison Company’s (the “Company”) compliance with the servicing criteria set forth in Item 1122(d) of the Securities and Exchange Commission’s Regulation AB for the environmental control property-backed securities transactions, the Senior Secured Sinking Fund Environmental Control Bonds, Series A, for which the Asserting Party acted as servicer (the “Platform”) described in the accompanying Report on Assessment of Compliance with Servicing Criteria for Asset-Backed Securities, as of December 31, 2007 and for the period from April 11, 2007 through December 31, 2007 (the “Reporting Period”), excluding criteria 1122(d)(1)(ii), 1122(d)(1)(iii), 1122(d)(1)(iv), 1122(d)(2)(vi), 1122(d)(3)(iii), 1122(d)(3)(iv), 1122(d)(4)(v), 1122(d)(4)(ix), 1122(d)(4)(xi), 1122(d)(4)(xii), 1122(d)(4)(xiii) and 1122 (d)(4)(xv) which the Company has determined are not applicable to the servicing activities performed by it with respect to the Platform. Management is responsible for the Company’s compliance with the servicing criteria. Our responsibility is to express an opinion on management’s compliance with the servicing criteria based on our examination.

Our examination was conducted in accordance with standards of the Public Company Accounting Oversight Board (United States) and, accordingly, included examining, on a test basis, evidence about the Company’s compliance with the applicable servicing criteria and performing such other procedures as we considered necessary in the circumstances. Our examination included testing of selected asset-backed transactions and securities that comprise the Platform, testing of selected servicing activities related to the Platform, and determining whether the Company processed those selected transactions and performed those selected activities in compliance with the applicable servicing criteria. Our procedures were limited to the selected transactions and servicing activities performed by the Company during the period covered by this report. Our procedures were not designed to detect noncompliance arising from errors that may have occurred prior to or subsequent to our tests that may have affected the balances or amounts calculated or reported by the Company during the period covered by this report. We believe that our examination provides a reasonable basis for our opinion. Our examination does not provide a legal determination on the Company’s compliance with the servicing criteria.

Our examination disclosed the following material noncompliance with the servicing criterion set forth in Item 1122(d)(4)(ii) of Regulation AB applicable to the Company for the Reporting Period. The Company maintained the environmental control property documentation at a site different than the site specified in the transaction agreement for the Reporting Period.

In our opinion, except for the material noncompliance described in the preceding paragraph, The Potomac Edison Company complied with the aforementioned applicable servicing criteria as of December 31, 2007 and for the period from April 11, 2007 through December 31, 2007 for the Platform, in all material respects.

PricewaterhouseCoopers LLP

March 27, 2008

EX-34.2

Exhibit 34.2

Report of Independent Registered Public Accounting Firm

The Board of Directors
U.S. Bank National Association

We have examined management’s assertion, included in the accompanying Report on Assessment of Compliance with Securities and Exchange Commission (SEC) Regulation AB Servicing Criteria, that U.S. Bank National Association (the Company) complied with the servicing criteria set forth in Item 1122(d) of the SEC’s Regulation AB for the Corporate Trust Asset Backed Securities platform (the Platform) as of and for the year ended December 31, 2007, except for servicing criteria 1122(d)(1)(iii), 1122(d)(4)(i), 1122(d)(4)(ii), and 1122(d)(4)(iv)—(xiv), which the Company has determined are not applicable to the activities performed by them with respect to the servicing platform covered by this report. Management is responsible for the Company’s compliance with those servicing criteria. Our responsibility is to express an opinion on management’s assertion about the Company’s compliance with the servicing criteria based on our examination.

Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants, as adopted by the Public Company Accounting Oversight Board (United States) and, accordingly, included examining, on a test basis, evidence about the Company’s compliance with the applicable servicing criteria and performing such other procedures as we considered necessary in the circumstances. Our examination included testing of less than all of the individual asset backed transactions and securities that comprise the Platform, testing of less than all of the servicing activities related to the Platform, and determining whether the Company processed those selected transactions and performed those selected activities in compliance with the servicing criteria. Furthermore, our procedures were limited to the selected transactions and servicing activities performed by the Company during the period covered by this report. Our procedures were not designed to determine whether errors may have occurred either prior to or subsequent to our tests that may have affected the balances or amounts calculated or reported by the Company during the period covered by this report for the selected transactions or any other transactions. We believe that our examination provides a reasonable basis for our opinion. Our examination does not provide a legal determination on the Company’s compliance with the servicing criteria.

In our opinion, management’s assertion that the Company complied with the aforementioned servicing criteria as of and for the year ended December 31, 2007, for the Corporate Trust Asset Backed Securities platform is fairly stated, in all material respects.

/s/ Ernst & Young LLP

Minneapolis, Minnesota
February 12, 2008

EX-35.1

EXHIBIT 35.1

SERVICER COMPLIANCE STATEMENT

I, Barry E. Pakenham, Treasurer of The Potomac Edison Company (the “Servicer”), certify that:

(a) A review of the Servicer’s activities during the reporting period covered by this Report on Form 10-K and of its performance under that certain Transferred Environmental Control Property Servicing Agreement dated as of April 11, 2007 between PE Environmental Funding LLC and the Servicer (the “Servicing Agreement”) has been made under my supervision.

(b) To the best of my knowledge, based on such review, the Servicer has fulfilled all of its obligations under the Servicing Agreement in all material respects throughout the reporting period, except that the Servicer maintained environmental control property documentation at a site different than the site specified in the transaction agreement

Date: March 28, 2008

/s/ Barry E. Pakenham 

Name: Barry E. Pakenham
Title:   Treasurer