SECURITIES AND EXCHANGE COMMISSION
(Release No. 35-27922; 70-7888)
Allegheny Energy, Inc., et al.
Supplemental Order Extending Authorization to Operate System Money Pool
December 14, 2004
Allegheny Energy, Inc. ("Allegheny"), a registered holding company under the Public Utility Holding Company Act of 1935, as amended ("Act"); Allegheny Energy Supply Company, LLC ("AE Supply"), a registered holding company and public utility company subsidiary of Allegheny;1 Allegheny's wholly-owned public-utility company subsidiaries, Monongahela Power Company ("Monongahela Power"), Mountaineer Gas Company ("Mountaineer"), The Potomac Edison Company ("Potomac Edison"), West Penn Power Company ("West Penn"), and Allegheny Generating Company ("AGC"); and the Allegheny system service company, Allegheny Energy Service Corporation ("AESC," and collectively, "Applicants"), all of Greensburg, Pennsylvania, have filed a post-effective amendment ("Amendment") to a previously filed application-declaration with the Securities and Exchange Commission ("Commission") under sections 6, 7, 9(a), 12(b), and 13 of the Act and rules 43, 45, 54, 86, 87, 90, and 91 under the Act. The Commission issued a notice of the Amendment on November 18, 2004 (Holding Co. Act Release No. 27911).
The Applicants request authority to continue the current Allegheny system money pool ("Money Pool") through April 30, 2005. The Commission has previously authorized the operation of the Money Pool through December 31, 2004.
The Allegheny system has three regulated electric utility companies, West Penn, Monongahela Power, and Potomac Edison Company (collectively, "Operating Companies"), and a regulated gas utility company, Mountaineer, which is a wholly-owned subsidiary of Monongahela Power (all collectively d/b/a "Allegheny Power").2 Allegheny Power delivers electric energy to approximately 1.6 million customers in parts of Maryland, Ohio, Pennsylvania, Virginia, and West Virginia and natural gas to approximately 230,000 customers in West Virginia. AGC is jointly owned by Monongahela Power and AE Supply. Its sole asset is a 40 percent undivided interest in a pumped-storage hydroelectric station located in Bath County, Virginia. All of AGC's revenues are derived from sales from its share of this facility's generating capacity to AE Supply and Monongahela Power. AE Supply is the principal electric generating company for the Allegheny system. AE Supply provides power to West Penn, Potomac Edison, and Monongahela Power to serve their customers in Pennsylvania, Maryland, Virginia, and Ohio and to serve the retail load of Potomac Edison in West Virginia. AESC is the Allegheny system service company. Among other things, it administers the Money Pool.
In a series of orders3 (collectively, "Prior Money Pool Orders"), the Applicants were authorized, among other things, to establish and participate in the Money Pool through December 31, 2004.4 The Applicants request authority to continue the Money Pool through April 30, 2005, subject to substantially the same terms and conditions set forth in the Prior Money Pool Orders. The Applicants request that the Commission authorize (i) Monongahela Power, Mountaineer, Potomac Edison, and West Penn to continue participation in the Money Pool as both lenders and borrowers to the extent not exempt under rule 52; (ii) AGC to continue participation in the Money Pool as a borrower only, to the extent not exempt under rule 52; and (iii) Allegheny and AE Supply to continue participation in the Money Pool as lenders only.
The Money Pool will continue to be administered on behalf of the Money Pool Applicants by AESC and under the direction of an officer of AESC. AESC will not be a participant in the Money Pool. The Money Pool will consist principally of surplus funds received from the Money Pool Applicants.
The Applicants do not propose any material changes to the operation of the Money Pool as currently authorized. Participants will be parties to the Allegheny Energy System Money Pool Agreement. Transactions under the Money Pool will be designed to match, on a daily basis, the surplus funds of the pool participants with the short-term borrowing requirements of the pool participants (other than the pool participants who are lenders only). The Applicants believe that the cost of the proposed borrowings through the Money Pool generally will be more favorable to the borrowing participants than the comparable cost of external short-term borrowings, and the yield to the participants contributing available funds to the Money Pool generally will be higher than the typical yield on short-term investments.
The funds available through the Money Pool will be loaned on a short-term basis to those eligible pool participants that have short-term debt requirements. If no short-term requirements match the amount of funds that are available for the Money Pool for the period the funds are available, AESC will invest the funds, directly or indirectly, as described below and will allocate the interest earned on these investments among the pool participants providing these funds on a pro rata basis according to the amount of funds each provided:
(1) Direct or indirect obligations of the United States Government;
(2) Certificates of Deposit of commercial banks with assets exceeding $2.5 billion;
(3) Bankers acceptances of commercial banks with assets exceeding $2.5 billion;
(4) Commercial paper of companies having a minimum net worth of $150 million having a "1" commercial paper rating by at least two of the three recognized rating services (Moody's, Standard & Poor's, and Fitch);
(5) Taxable or tax exempt institutional money market funds with assets of at least $500 million which restrict investments to high quality money market instruments; and
(6) Such other investments as are permitted by section 9(c) of the Act and rule 40 under the Act.
All borrowings from and contributions to the Money Pool will be documented and will be evidenced on the books of each pool participant that is borrowing from or contributing surplus funds to the Money Pool. Any pool participant contributing funds to the Money Pool may withdraw those funds at any time without notice to satisfy its daily need for funds. All short-term debt through the Money Pool will be payable on demand, may be prepaid by any borrowing pool participant at any time without penalty, and will bear interest for both the borrower and lender. Interest income and expense will be calculated using the previous day's Fed Funds Effective Interest Rate ("Fed Funds Rate") as quoted by the Federal Reserve Bank of New York, as long as this rate is at least four basis points lower than the previous day's seven-day commercial paper rate as quoted by the same source. Whenever the Fed Funds Rate is not at least four basis points lower than the seven-day commercial paper rate, then the seven-day commercial paper rate minus four basis points should be used. Interest income and expense will be calculated daily and settled on a cash basis on the first business day of the following month.
Each of the utility Applicants may use the proceeds it borrows from the Money Pool (i) for the interim financing of its construction and capital expenditure programs; (ii) for its working capital needs; (iii) for the repayment, redemption, or refinancing of its debt and preferred stock; (iv) to meet unexpected contingencies, payment and timing differences, and cash requirements; and (v) to otherwise finance its own business and for other lawful general corporate purposes.
Each of the following companies requests authority to borrow up to an amount at any one time outstanding from the Money Pool as set forth below: AGC, $100 million; Monongahela Power, $125 million; Mountaineer, $100 million; Potomac Edison, $150 million; West Penn, $200 million.
Fees, commission and expenses incurred in connection with this Amendment will not exceed $10,000. No other state or federal commission, other than this Commission, has jurisdiction over the proposed transactions.
Rule 54 under the Act is applicable, which requires an analysis under rule 53. Allegheny does not satisfy the requirements of rule 53(a)(1).5 Allegheny currently complies with, and will comply with, the record keeping requirements of rule 53(a)(2), the limitation under rule 53(a)(3) on the use of the Allegheny system's domestic public-utility company personnel to render services to EWGs and FUCOs, and the requirements of rule 53(a)(4) concerning the submission of copies of certain filings under the Act to retail regulatory commissions. None of the circumstances described in 53(b)(1) have occurred. The circumstances described in Rule 53(b)(2) and Rule 53(b)(3) have occurred. Allegheny submits that the requirements of rule 53(c) are met.
Allegheny believes that the requested authorization will not have a substantial adverse impact upon the financial integrity of Allegheny, the Operating Companies, and Mountaineer. Moreover, the Operating Companies, Mountaineer, and their customers will not be adversely impacted by the requested relief. The ratio of common equity to total capitalization of each of the Operating Companies and Mountaineer will continue to be maintained at not less than 30 percent.6 In addition, the record states that each of the Operating Companies and Mountaineer is subject to regulation by state commissions that are able to protect utility customers within their respective states.
Due notice of the filing of this Amendment has been given in the manner prescribed in rule 23 under the Act, and no hearing has been requested of or ordered by the Commission. Based on the facts in the record, the Commission finds that, except as to those matters over which jurisdiction has been reserved, the applicable standards of the Act and rules are satisfied and that no adverse findings are necessary.
IT IS ORDERED, under the applicable provisions of the Act and the rules under the Act, that the Amendment, as amended, be granted and permitted to become effective immediately, subject to the terms and conditions prescribed in rule 24 under the Act.
For the Commission, by the Division of Investment Management, pursuant to delegated authority.
Margaret H. McFarland
|Home | Previous Page||