2.2.0.7 false BUSINESS AND BASIS OF PRESENTATION 10101 - Disclosure - BUSINESS AND BASIS OF PRESENTATION true false false false 1 USD false false Unit1 Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 Unit13 Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 Unit12 Standard http://www.xbrl.org/2003/instance shares xbrli 0 $ 2 BUSINESS AND BASIS OF PRESENTATION 0 aye_BusinessAndBasisOfPresentation aye false na duration BUSINESS AND BASIS OF PRESENTATION false false false false false true false false false false false false 1 false false false false 0 0 false false false xbrli:stringItemType string BUSINESS AND BASIS OF PRESENTATION false 3 BUSINESS AND BASIS OF PRESENTATION 1 us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false terselabel false 1 false false false false 0 0 <div> <a name="tx103575_13"> </a> <div> <a name="tx103575_13"> </a>NOTE 1: BUSINESS AND BASIS OF PRESENTATION Business Description Allegheny Energy, Inc. ("AE" and, together with its subsidiaries, "Allegheny") is an integrated energy business. Allegheny owns and operates electric generation facilities primarily in Pennsylvania, West Virginia and Maryland. Additionally, Allegheny owns transmission assets in Pennsylvania, West Virginia, Maryland and Virginia and provides distribution services to customers in Pennsylvania, West Virginia and Maryland. Allegheny manages its operations through two business segments: Merchant Generation and Regulated Operations. These business segments are also referred to as reportable segments. The Merchant Generation segment includes Allegheny's unregulated electric generation operations including Allegheny Energy Supply Company, LLC ("AE Supply") and AE Supply's interest in Allegheny Generating Company ("AGC"). AE Supply owns, operates and controls electric generation capacity and supplies and trades energy and energy-related commodities. AGC owns and sells generation capacity to AE Supply and Monongahela Power Company ("Monongahela"), which own approximately 59% and 41% of AGC, respectively. The Merchant Generation segment is subject to various federal and state regulations but, unlike the Regulated Operations segment, is not generally subject to state regulation of rates. The Regulated Operations segment includes the operations of Monongahela, The Potomac Edison Company ("Potomac Edison") and West Penn Power Company ("West Penn" and, together with Monongahela and Potomac Edison, the "Distribution Companies"), which primarily operate electric transmission and distribution ("T&D") systems in Pennsylvania, West Virginia and Maryland, as well as transmission in Virginia. Monongahela also owns and operates electric generation facilities in West Virginia and has a 41% interest in AGC. The Distribution Companies are subject to various federal and state regulations, including state regulation of rates. The Regulated Operations segment also includes the operations of Trans-Allegheny Interstate Line Company ("TrAIL Company") and Allegheny's interests in Potomac-Appalachian Transmission Highline, LLC ("PATH, LLC"). These entities were created to construct or facilitate the construction of high voltage transmission lines and other transmission facilities, including the Trans-Allegheny Interstate Line ("TrAIL") and the Potomac-Appalachian Transmission Highline ("PATH"). TrAIL Company and PATH, LLC are subject to the regulation of rates by the Federal Energy Regulatory Commission ("FERC"). PATH, LLC is a series limited liability company that is comprised of multiple series, each of which has separate rights, powers and duties regarding specified property and the series profits and losses associated with such property. A subsidiary of AE owns 100% of the Allegheny Series and 50% of the West Virginia Series ("PATH WV"), which is a joint venture with a subsidiary of American Electric Power Company, Inc. ("AEP"). Allegheny accounts for its interest in PATH WV using the equity method of accounting, effective January 1, 2010. See Note 3, "Recently Adopted and Recently Issued Accounting Standards" for additional information. On June 1, 2010, Potomac Edison sold its electric distribution business in Virginia. See Note 4, "Sale of Virginia Distribution Business" for additional information. Allegheny Energy Service Corporation ("AESC") is a wholly-owned subsidiary of AE that employs substantially all of Allegheny's personnel. Financial Statement Presentation As permitted by the rules and regulations of the Securities and Exchange Commission (the "SEC"), Allegheny's accompanying unaudited Consolidated Financial Statements contain certain condensed financial information and exclude certain footnote disclosures normally included in annual audited consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). These unaudited Consolidated Financial Statements should be read in conjunction with Allegheny's Consolidated Financial Statements and Notes in its Annual Report on Form 10-K for the year ended December 31, 2009. The accompanying unaudited Consolidated Financial Statements contain all adjustments, including normal recurring accruals, necessary to present fairly Allegheny's financial position, results of operations, cash flows and changes in equity for the periods presented therein. The results of operations for the interim periods are not necessarily indicative of the results expected for the full year. Information for quarterly periods is affected by seasonal variations in revenues, fuel and energy purchases and other factors. The year-end 2009 balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Certain amounts in previously issued financial statements have been reclassified to conform to the current presentation, including a change in the composition of reportable segments made during the fourth quarter of 2009. Goodwill Allegheny's consolidated balance sheets at September 30, 2010 and December 31, 2009 included goodwill of $367.3 million, which was attributable to the unregulated generation operations of AE Supply, a reporting unit that substantially comprises Allegheny's Merchant Generation segment. Allegheny tests goodwill for possible impairment on an annual basis as of August 31 of each year and at any other time if events or changes in circumstances make it likely that the fair value of the reporting unit has decreased below its carrying amount. Goodwill is tested for impairment using a fair value based approach. The first step of the test consists of comparing the reporting unit's fair value to its carrying value, including the goodwill allocated to the reporting unit. If the reporting unit's fair value exceeds its carrying amount, the reporting unit's goodwill is considered not impaired. If the carrying amount of the reporting unit exceeds its fair value, a second step is performed to measure the amount of the impairment loss, if any. The second step requires a calculation of the implied fair value of the reporting unit's goodwill determined in the same manner as the amount of goodwill recorded in a business combination. This implied fair value is then compared to the carrying amount of the goodwill. If the carrying amount of the goodwill exceeds its implied fair value, an impairment loss is recognized. Allegheny performed its annual goodwill impairment test as of August 31, 2010. The estimated fair value of the reporting unit exceeded its carrying amount by a significant amount and, therefore, no goodwill impairment was indicated at that date. The fair value was estimated using a combination of a discounted cash flow analysis approach and a market based approach that estimates fair value based on market multiples of earnings before interest, taxes, depreciation and amortization for other merchant generators. Significant assumptions used in estimating the fair value of the reporting unit include, among others, discount and growth rates, future energy and capacity prices, plant performance, operating and capital expenditures, environmental regulations, and the selection of comparable companies used in the market based approach. </div> </div> NOTE 1: BUSINESS AND BASIS OF PRESENTATION Business Description Allegheny Energy, Inc. ("AE" and, together with its subsidiaries, "Allegheny") is an false false false us-types:textBlockItemType textblock Description containing the entire organization, consolidation and basis of presentation of financial statements disclosure. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. 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