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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 2000
Commission File Number 1-267
ALLEGHENY ENERGY, INC.
(Exact name of registrant as specified in its charter)
Maryland 13-5531602
(State of Incorporation) (I.R.S. Employer Identification No.)
10435 Downsville Pike, Hagerstown, Maryland 21740-1766
Telephone Number - 301-790-3400
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.
At May 12, 2000, 110,436,317 shares of the Common Stock ($1.25
par value) of the registrant were outstanding.
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ALLEGHENY ENERGY, INC.
Form 10-Q for Quarter Ended March 31, 2000
Index
Page
No.
PART I--FINANCIAL INFORMATION:
Consolidated Statement of Income -
Three months ended March 31, 2000 and 1999 3
Consolidated Balance Sheet - March 31, 2000
and December 31, 1999 4
Consolidated Statement of Cash Flows -
Three months ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6-10
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-24
PART II--OTHER INFORMATION 25
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ALLEGHENY ENERGY, INC.
Consolidated Statement of Income
(Thousands of Dollars)
Three Months Ended
March 31
2000 1999
OPERATING REVENUES:
Utility $ 622,550 $ 592,592
Nonutility 244,240 97,395
Total Operating Revenues 866,790 689,987
OPERATING EXPENSES:
Operation:
Fuel 135,688 140,609
Purchased power and exchanges, net 264,295 90,835
Deferred power costs, net 2,464 3,686
Other 96,303 82,301
Maintenance 57,075 56,434
Depreciation and amortization 63,661 66,865
Taxes other than income taxes 49,927 47,894
Federal and state income taxes 57,247 61,117
Total Operating Expenses 726,660 549,741
Operating Income 140,130 140,246
OTHER INCOME AND DEDUCTIONS:
Allowance for other than borrowed funds
used during construction 487 336
Other income, net (972) 1,008
Total Other Income and Deductions (485) 1,344
Income Before Interest Charges, Preferred
Dividends, and Extraordinary Charge, Net 139,645 141,590
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest on long-term debt 41,284 38,502
Other interest 12,197 4,225
Allowance for borrowed funds used during
construction and interest capitalized (1,491) (1,168)
Dividends on preferred stock of subsidiaries 1,260 2,256
Total Interest Charges and
Preferred Dividends 53,250 43,815
Consolidated Income Before
Extraordinary Charge 86,395 97,775
Extraordinary Charge, net (1) (70,505) -
CONSOLIDATED NET INCOME $ 15,890 $ 97,775
COMMON STOCK SHARES OUTSTANDING (average) 110,436,317 122,395,644
BASIC AND DILUTED EARNINGS PER AVERAGE SHARE:
Consolidated income before extraordinary charge $0.78 $0.80
Extraordinary charge, net (1) ($0.64) -
Consolidated net income $0.14 $0.80
See accompanying notes to consolidated financial statements.
(1) See Note 5 in the notes to the consolidated financial statements.
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ALLEGHENY ENERGY, INC.
Consolidated Balance Sheet
(Thousands of Dollars)
March 31, December 31,
ASSETS: 2000 1999
Property, Plant, and Equipment:
Utility plant $ 6,574,454 $ 6,547,533
Nonutility plant 2,060,723 2,060,423
Construction work in progress 267,480 231,763
8,902,657 8,839,719
Accumulated depreciation (3,675,227) (3,632,568)
5,227,430 5,207,151
Investments and Other Assets:
Excess of cost over net assets acquired 42,412 42,584
Benefit plans' investments 95,151 94,168
Nonutility investments 13,974 15,252
Other 1,478 1,479
153,015 153,483
Current Assets:
Cash and temporary cash investments 19,160 65,984
Accounts receivable:
Utility service 399,541 383,316
Other 11,033 12,273
Allowance for uncollectible accounts (28,340) (26,975)
Materials and supplies - at average cost:
Operating and construction 96,870 92,560
Fuel 62,810 62,280
Prepaid taxes 67,822 58,190
Deferred income taxes 18,899 30,477
Other, including current portion of regulatory assets 28,381 31,205
676,176 709,310
Deferred Charges:
Regulatory assets 597,835 663,847
Unamortized loss on reacquired debt 33,955 41,825
Other 86,421 76,825
718,211 782,497
Total Assets $ 6,774,832 $ 6,852,441
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common stock $ 153,045 $ 153,045
Other paid-in capital 1,044,085 1,044,085
Retained earnings 865,004 896,602
Treasury stock (at cost) (398,407) (398,407)
1,663,727 1,695,325
Preferred stock 74,000 74,000
Long-term debt and QUIDS 2,249,801 2,254,463
3,987,528 4,023,788
Current Liabilities:
Short-term debt 670,483 641,095
Long-term debt due within one year 121,284 189,734
Accounts payable 211,617 233,331
Taxes accrued:
Federal and state income 64,694 20,699
Other 43,397 67,292
Interest accrued 34,411 34,979
Adverse power purchase commitments 25,099 24,895
Other, including current portion of
regulatory liabilities 113,196 96,510
1,284,181 1,308,535
Deferred Credits and Other Liabilities:
Unamortized investment credit 115,011 116,971
Deferred income taxes 868,756 920,943
Regulatory liabilities 128,753 78,743
Adverse power purchase commitments 297,318 303,935
Other 93,285 99,526
1,503,123 1,520,118
Total Capitalization and Liabilities $ 6,774,832 $ 6,852,441
See accompanying notes to consolidated financial statements.
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ALLEGHENY ENERGY, INC.
Consolidated Statement of Cash Flows
(Thousands of Dollars)
Three Months Ended
March 31
2000 1999
CASH FLOWS FROM OPERATIONS:
Consolidated net income $ 15,890 $ 97,775
Extraordinary charges, net of taxes 70,505 -
Consolidated income before extraordinary charges 86,395 97,775
Depreciation and amortization 63,661 66,865
Amortization of adverse purchase power contract (3,125) (2,695)
Deferred investment credit and income taxes, net (802) 8,054
Deferred power costs, net 2,464 3,686
Allowance for other than borrowed funds used
during construction (487) (336)
Changes in certain assets and liabilities:
Accounts receivable, net (13,620) (31,176)
Materials and supplies (4,840) (8,954)
Prepaid taxes (9,632) (9,685)
Accounts payable (21,714) (4,895)
Taxes accrued 20,100 36,307
Other, net 2,346 (7,409)
120,746 147,537
CASH FLOWS FROM INVESTING:
Utility construction expenditures (less allowance for
other than borrowed funds used during construction) (41,019) (34,048)
Nonutility construction expenditures and investments (40,579) (7,669)
(81,598) (41,717)
CASH FLOWS FROM FINANCING:
Repurchase of common stock - (22,517)
Retirement of long-term debt (83,628) -
Funds on deposit with trustees
and restricted funds 13,268 -
Short-term debt, net 29,388 (17,699)
Cash dividends paid on common stock (45,000) (52,648)
(85,972) (92,864)
NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (46,824) 12,956
Cash and temporary cash investments at January 1 65,984 17,559
Cash and temporary cash investments at March 31 $ 19,160 $ 30,515
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of amount capitalized) $37,501 $40,174
Income taxes 5,517 2,791
See accompanying notes to consolidated financial statements.
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ALLEGHENY ENERGY, INC.
Notes to Consolidated Financial Statements
1. The Notes to Consolidated Financial Statements of Allegheny
Energy, Inc. (the Company) in its Annual Report on Form 10-K for
the year ended December 31, 1999 should be read with the
accompanying consolidated financial statements and the following
notes. With the exception of the December 31, 1999 consolidated
balance sheet in the aforementioned annual report on Form 10-K,
the accompanying consolidated financial statements appearing on
pages 3 through 5 and these notes to consolidated financial
statements are unaudited. In the opinion of the Company, such
consolidated financial statements together with these notes
contain all adjustments (which consist only of normal recurring
adjustments) necessary to present fairly the Company's financial
position as of March 31, 2000, and the results of operations and
cash flows for the three months ended March 31, 2000 and 1999.
Certain prior period amounts in these notes have been revised for
comparative purposes.
2. The Company owns all of the outstanding common stock of its
subsidiaries. The consolidated financial statements include the
accounts of the Company and all subsidiary companies after
elimination of intercompany transactions.
3. For purposes of the Consolidated Balance Sheet and
Consolidated Statement of Cash Flows, temporary cash investments
with original maturities of three months or less, generally in the
form of commercial paper, certificates of deposit, and repurchase
agreements, are considered to be the equivalent of cash.
4. The West Virginia Legislature passed House Concurrent
Resolution 27 on March 11, 2000 approving an electric deregulation
plan submitted by the Public Service Commission of West Virginia
(W.Va. PSC) with certain modifications. The need for further
action by the Legislature, including the enactment of certain tax
changes regarding preservation of tax revenues for state and local
government, is required prior to the implementation of the
restructuring plan for customer choice. The Company expects the
West Virginia Legislature to pass the necessary tax law changes in
their next session in the first quarter of 2001 and the
implementation of the deregulation plan is expected to occur in
mid-2001. Among the provisions of the plan are the following:
* Customer choice will begin for all customers when the plan is
implemented (expected in mid-2001).
* Rates for electricity service will be unbundled at current
levels and capped for four years, with power supply rates
transitioning to market rates over the next six years for the
residential and small commercial customers.
After year 7, the power supply rate for large commercial and
industrial customers will no longer be regulated.
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* The Company is permitted to transfer West Virginia
jurisdictional generating assets of its Monongahela Power Company
(Monongahela Power) subsidiary to its non-regulated generation
company at book value. Subject to an order by the W. Va. PSC
granting final approval, the West Virginia jurisdictional assets
of the Company's subsidiary The Potomac Edison Company (Potomac
Edison) may be transferred to a non-regulated affiliate at book
value in conjunction with the Maryland law that allows generating
assets to be transferred to non-regulated ownership.
* The Company will recover the cost of its non-utility
generation contracts through a series of surcharges applied to all
customers over 10 years.
* Industrial customers will receive a 3% rate reduction.
* A special "Rate Stabilization" account of $56.7 million will
be established for residential and small business customers to
mitigate the impact of the market price of power as determined by
the W. Va. PSC.
5. In 1997, the Emerging Issues Task Force (EITF) issued EITF
No. 97-4, "Deregulation of the Pricing of Electricity-Issues
Related to the Application of FASB Statement Nos. 71 and 101."
The EITF agreed that, when a rate order that contains sufficient
detail for the enterprise to reasonably determine how the
transition plan will affect the separable portion of its business
whose pricing is being deregulated is issued, the entity should
cease to apply the Financial Accounting Standards Board's (FASB)
Statement of Financial Standards (SFAS) No. 71 to that separable
portion of its business.
On March 11, 2000, the West Virginia Legislature passed House
Concurrent Resolution 27 based on a company specific electric
deregulation plan submitted by the W. Va. PSC. As required by
EITF 97-4, Monongahela Power and Potomac Edison discontinued
the application of SFAS No. 71 for their West Virginia
jurisdictions' electric generation operations in the first
quarter of 2000. Monongahela Power and Potomac Edison recorded
under the provisions of SFAS No. 101, "Accounting for the
Discontinuation of Application of FASB Statement No. 71," an
extraordinary charge of $70.5 million in the first quarter of
2000 to reflect unrecoverable net regulatory assets that will
not be collected from customers and establishment of a rate
stabilization account for residential and small commercial
customers as required by the deregulation plan as shown below:
Gross Net-of-Tax
(Millions of Dollars)
Unrecoverable regulatory assets $ 60.0 $36.2
Rate stabilization obligation 56.7 34.3
2000 extraordinary charges $116.7 $70.5
6.The Pennsylvania Public Utility Commission (Pennsylvania PUC)
order for restructuring authorized recognition of an additional
Competitive Transition Charge (CTC) regulatory asset (Additional
CTC Regulatory Asset) to reduce the adverse effects, if any, that
competition will have on West Penn during the years 1999 to 2002.
No Additional CTC Regulatory Asset was recorded by West Penn as of
March 31, 2000.
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7.The Consolidated Balance Sheet includes the amounts listed
below for generation assets not subject to SFAS No. 71,
"Accounting for the Effects of Certain Types of Regulation." The
final 1/3 of West Penn Power Company's generation was reclassified
to the Company's nonutility segment on January 2, 2000.
March December
2000 1999
(Millions of Dollars)
Property, plant and equipment at
original cost $3,914.8 $2,678.4
Amounts under construction included above 168.3 101.8
Accumulated depreciation (1,895.2) (1,238.3)
8.The Company's principal business segments are utility and
nonutility operations. The utility subsidiaries, Monongahela Power,
Potomac Edison, and West Penn, collectively now do business as
Allegheny Power. Allegheny Power is involved in the delivery
(transmission and distribution) and procurement of electric energy
subject to federal and state traditional utility price regulation.
Also, Allegheny Power is involved in generation of electric energy
in jurisdictions which have not yet implemented deregulation of
electric generation and, with the purchase of the assets of West
Virginia Power in December 1999, is now involved in the procurement
and delivery of natural gas. Nonutility operations consist
primarily of the Company's energy supply business, now Allegheny
Energy Supply Company, LLC (Allegheny Energy Supply). Also included
in nonutility operations is Allegheny Ventures, Inc., a wholly owned
subsidiary of the Company, which develops new business
opportunities, including telecommunications. Since January 1, 1999,
the Company's supply business has the primary objective of selling
the output of the West Penn generation that has been freed up by the
Electricity Generation Customer Choice and Competition Act in
Pennsylvania and is no longer regulated by the Pennsylvania PUC. In
November 1999, the Company formed a new non-utility generating
company, Allegheny Energy Supply. West Penn transferred its
generating capacity, which totaled 3,778 MW, at book value as
allowed by the final settlement in West Penn's Pennsylvania
restructuring case. Allegheny Energy Supply also purchased from AYP
Energy its 276 MW of merchant capacity at Fort Martin Unit No. 1.
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Business segment information is summarized below. Significant
transactions between reportable segments are eliminated to
reconcile the segment information to consolidated amounts. The
identifiable assets information does not reflect the elimination
of intercompany balances or transactions which are eliminated in
the Company's consolidated financial statements.
Three Months Ended
March 31
2000 1999
(Thousands of Dollars)
Operating Revenues:
Utility $638,379 $596,968
Nonutility 379,218 167,768
Eliminations (150,807) (74,749)
Depreciation and amortization:
Utility 50,512 52,070
Nonutility 13,149 14,795
Federal and State Income Taxes:
Utility 47,244 51,596
Nonutility 10,003 9,521
Operating Income:
Utility 117,801 119,863
Nonutility 22,329 20,383
Interest Charges and Preferred Dividends:
Utility 51,993 35,622
Nonutility 5,034 8,193
Eliminations (3,777)
Consolidated Income Before Extraordinary Charge:
Utility 67,692 84,158
Nonutility 18,703 13,617
Extraordinary Charges, Net:
Utility 70,505
Capital Expenditures:
Utility 41,506 34,384
Nonutility 40,579 7,669
March 31 December 31
2000 1999
Identifiable Assets:
Utility $5,181,499 $5,293,394
Nonutility 1,593,333 1,559,047
See Note 5 for a discussion of extraordinary charges, net.
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9. Common stock dividends per share declared during the periods
for which income statements are included are as follows:
Three Months Ended
March 31
2000 1999
Number of Shares 110,436,317 122,436,317
Amount per Share $.43 $.43
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ALLEGHENY ENERGY, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
COMPARISON OF FIRST QUARTER OF 2000 WITH FIRST QUARTER OF 1999
The Notes to Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and
Results of Operations in the Allegheny Energy, Inc.'s (the
Company) Annual Report on Form 10-K for the year ended December
31, 1999 should be read with the following Management's
Discussion and Analysis information.
Factors That May Affect Future Results
Management's discussion and analysis of financial condition
and results of operations contains forecast information items
that are "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. These include
statements with respect to deregulation activities and movements
toward competition in states served by the Company, and results
of operations. All such forward-looking information is
necessarily only estimated. There can be no assurance that
actual results will not materially differ from expectations.
Actual results have varied materially and unpredictably from past
expectations.
Factors that could cause actual results to differ materially
include, among other matters, electric utility restructuring,
including ongoing state and federal activities; developments in
the legislative, regulatory, and competitive environments in
which the Company operates, including regulatory proceedings
affecting rates charged by the Company's subsidiaries;
environmental, legislative, and regulatory changes; future
economic conditions; earnings retention and dividend payout
policies; the Company's ability to compete in unregulated energy
markets; and other circumstances that could affect anticipated
revenues and costs such as significant volatility in the market
price of wholesale power and fuel for electric generation,
unscheduled maintenance or repair requirements, weather, and
compliance with laws and regulations.
Acquisition of Mountaineer Gas Company
The Company previously reported that Monongahela Power
Company (Monongahela Power) plans to purchase Mountaineer Gas
Company conditioned upon certain approvals.
The Department of Justice and Federal Trade Commission,
after reviewing the proposed acquisition and exploring antitrust
issues, approved the acquisition.
Monongahela Power filed a Form U-1 application with the
Securities and Exchange Commission (SEC) in February 2000
requesting permission to acquire Mountaineer Gas Company. The
Form U-1 filing is required because the Company is a registered
holding company under the Public Utility Holding Company Act of
1935 (PUHCA).
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A number of key intervenors in the Company's application to
the Public Service Commission of West Virginia (W. Va. PSC)
signed a Joint Stipulation and Settlement Agreement in April 2000
to not oppose Monongahela Power's acquisition of Mountaineer Gas
Company. The settlement agreement is subject to the approval of
the W. Va. PSC and was presented at an evidentiary hearing held
by the W. Va. PSC on April 17, 2000.
The Company anticipates that all required approvals will be
granted by the end of the third quarter 2000. The closing date
will occur shortly after all necessary approvals are received.
Rate Matters
On January 17, 2000, The Potomac Edison Company (Potomac
Edison) filed with the Virginia State Corporation Commission
(Virginia SCC) for a decrease in fuel rates of approximately $4
million to become effective March 8, 2000. The decrease is
primarily due to the refunding of a prior overrecovery of fuel
costs, coupled with a decrease in projected energy costs. On
March 1, 2000, the Virginia SCC approved the decrease on an
interim basis effective March 8, 2000. On April 27, 2000, the
Virginia SCC suspended the procedural schedule pending the filing
and investigation of Potomac Edison's application for approval of
its restructuring plan.
On March 24, 2000, the Maryland Public Service Commission
(Maryland PSC) issued an order requiring Potomac Edison to refund
the 1999 deferred fuel balance overrecovery of approximately $9.9
million to customers over a period of twelve months that began
April 30, 2000. The July 1, 2000, deferred fuel balance will be
collected or refunded beginning no later than October 1, 2000,
over a twelve-month period.
On April 12, 2000 the Maryland PSC approved the Power Sales
Agreement between the Company and Virginia Electric Power Company
covering the sale of the AES Warrior Run output to the wholesale
market for the period July 1, 2000 through December 31, 2000.
The AES Warrior Run cogeneration project was developed under the
Public Utility Regulatory Policies Act of 1978 (PURPA) and
achieved commercial operation on February 10, 2000.
As previously reported, Potomac Edison decreased the fuel
portion of Maryland customers' bills by about $6.4 million
annually effective with bills rendered on or after December 7,
1999, subject to refund, based on the outcome of proceedings
before the Maryland PSC. A proposed order was issued on February
18, 2000, granting the requested decrease in the Company's fuel
rate, and on March 21, 2000 the proposed order became final.
As previously reported, on February 26, 1999, the W. Va. PSC
entered an order to initiate a fuel review proceeding to
establish a fuel increment in rates for Potomac Edison and
Monongahela Power to be effective July 1, 1999, through June 30,
2000. If an agreement was not reached, the proposed fuel rates
which would increase Monongahela Power's fuel rates by $10.9
million and decrease Potomac Edison's fuel rates by $8.0 million
was scheduled to become effective March 15, 2000. The W. Va. PSC
granted an extension, and the parties continue to negotiate.
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Transfer of Generation Assets
On February 11, 2000, Potomac Edison filed a Form U-1
application with the SEC requesting authority to transfer their
Maryland, Virginia, West Virginia, and Federal Energy Regulatory
Commission generation assets to its unregulated affiliate,
Allegheny Energy Supply Company, LLC (Allegheny Energy Supply).
As previously reported, a Maryland PSC decision approving
the transfer of Potomac Edison's Maryland jurisdictional
generation assets is expected prior to July 1, 2000.
America's Fiber Network Partnership
The Company's unregulated subsidiary, Allegheny
Communications Connect, announced in March 2000 that it, along
with five other energy and telecommunications companies, are
partnering to create America's Fiber Network LLC (AFN), a super-
regional high-speed telecommunications company. The network will
initially offer more than 7,000 route miles, or 140,000 fiber
miles, connecting major markets in the eastern United States to
secondary markets with a growing need for broadband access. The
initial footprint of fiber in AFN puts the company in position to
reach areas responsible for roughly 35 percent of the national
wholesale communications capacity market.
By year-end 2000, AFN expects to expand its network from the
current 7,000 route miles to 10,000 route miles or 200,000 fiber
miles. AFN will reach this capacity by adding companies with
existing fiber, installing fiber in areas of opportunity, and
acquiring existing fiber from others or contracting long-term
lease agreements for existing fiber.
Other partners consist of AEP Communications, a subsidiary
of American Electric Power; GPU Telcom, a subsidiary of GPU,
Inc.; FirstEnergy Telecom, a subsidiary of FirstEnergy Corp.; CFW
Communications; and R&B Communications.
Stockholder Protection Rights Agreement
The Company has adopted a Stockholder Protection Rights
Agreement (Rights Agreement). Under the Rights Agreement, rights
were distributed as a dividend at the rate of one right per each
share of the Company's common stock. The dividend was paid to
shareholders of record as of March 16, 2000. Under its principal
provision, if any person or group acquires 15 percent or more of
the Company's outstanding common stock, all other shareholders of
the Company would be entitled to buy, for the exercise price of
$100 per right, common stock of the Company having a market value
equal to twice the exercise price, thereby substantially diluting
the acquiring person's or group's investment.
The rights may cause substantial dilution to a person or
group that acquires 15 percent or more of the Company's common
stock. The rights should not interfere with a transaction that
is in the best interests of the Company and its shareholders,
because the rights can be redeemed prior to a triggering event
for $0.01 per right.
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The SEC previously issued an order pursuant to the PUHCA,
granting the Company authority to adopt and implement the Rights
Agreement.
Review of Operations
EARNINGS SUMMARY
Three Months Ended March
Earnings Per Share
2000 1999 2000 1999
(Millions of Dollars) (Dollars Per Share)
Utility operations $67.7 $84.2 $.61 $.69
Nonutility operations 18.7 13.6 .17 .11
Consolidated income before
extraordinary charge 86.4 97.8 .78 .80
Extraordinary charge, net (70.5) - (.64) -
Consolidated net income $15.9 $97.8 $.14 $.80
The decrease in earnings for the first quarter of 2000
before the extraordinary charge was due to unplanned generating
plant outages, which caused the Company to make purchases of
higher-priced power on the open energy market, and warmer than
1999 weather. The adverse effect on revenues due to weather was
partially offset by revenues and earnings from the assets of West
Virginia Power purchased by Monongahela Power in December 1999,
and lower depreciation expense.
The first quarter extraordinary charge of $70.5 million,
net of taxes, ($.64 per share) reflects write-offs by the
Company's West Virginia subsidiaries, Monongahela Power and
Potomac Edison, of costs determined to be unrecoverable as a
result of West Virginia legislation requiring deregulation of
electric generation and recognition of a rate stabilization
obligation.
SALES AND REVENUES
Total operating revenues for the first quarter of 2000 and
1999 were as follows:
Three Months Ended
March 31
2000 1999
(Millions of Dollars)
Operating revenues:
Utility revenues:
Regulated:
Electric $589.1 $571.3
Gas 9.8 -
Choice 10.8 6.8
Bulk power 14.3 3.3
Transmission and other energy services 14.4 15.6
Total utility revenues 638.4 597.0
Nonutility revenues:
Retail and other 57.4 38.4
Bulk power 321.8 129.3
Total nonutility revenues 379.2 167.7
Elimination between utility and nonutility (150.8) (74.7)
Total operating revenues $866.8 $690.0
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The increase in regulated revenues was primarily due to the
acquisition of the assets of West Virginia Power purchased by
Monongahela Power in December 1999.
Utility choice revenues represent transmission and
distribution revenues from West Penn Power Company (West Penn)
franchised customers (customers in West Penn's distribution
territory) who chose another supplier to provide their energy
needs. Pennsylvania deregulation gave West Penn's regulated
customers the ability to choose another energy supplier. In the
first quarter of 2000, all of West Penn's regulated customers had
the ability to choose, and in the first quarter of 1999, two-
thirds of West Penn's customers had the ability to choose. At
March 31, 2000, less than 2% of West Penn's customers chose
alternate energy suppliers.
In October 1998, the Maryland PSC approved a settlement
agreement for Potomac Edison. Under the terms of that agreement,
Potomac Edison increased its rates $13 million in 1999 and 2000
and will increase its rates an additional $13 million in 2001 (a
$79 million total revenue increase during 1999 through 2001).
The increases are designed to recover additional costs of about
$131 million over the 1999 through 2001 period for capacity
purchases from the AES Warrior Run cogeneration project, net of
alleged over-earnings of $52 million for the same period. The
net effect of these changes over the 2000 through 2001 time frame
results in pre-tax income reductions of $21 million in 2000 and
$19 million in 2001. Also, Potomac Edison will share on a 50%
customer, 50% shareholder basis, earnings above a return on
equity of 11.4% in Maryland for 1999 and 2000. This sharing
occurs through an annual true-up. Potomac Edison's revenues
reflect an estimated obligation for shared earnings above an
11.4% return on equity.
Utility-related revenues reflect not only changes in kWh sales
and base rate changes, but also any changes in revenues from fuel
and energy cost adjustment clauses (fuel clauses) which are still
applicable in all Company jurisdictions served, except for
Pennsylvania. Effective July 1, 2000, Potomac Edison's Maryland
jurisdiction will cease to have a fuel clause under the terms of
the September 23, 1999, settlement agreement. Also, a fuel
clause will cease to exist for Monongahela Power and Potomac
Edison's West Virginia jurisdictions' when the deregulation plan
is implemented which is expected to occur in mid-2001. Changes
in fuel revenues in jurisdictions for which a fuel clause
continues to exist have no effect on consolidated net income
because increases and decreases in fuel and purchased power costs
and sales of transmission services and bulk power are passed on
to customers by adjustment of customers' bills through fuel
clauses. The first quarter of 2000 also includes gas sales and
services and electric revenues from the assets of West Virginia
Power purchased by Monongahela Power in December 1999. Because a
significant portion of the gas sold by the Company's gas
distribution operations is ultimately used for space heating,
both revenues and earnings are subject to seasonal fluctuations.
West Penn assumes the risks and benefits of changes in fuel and
purchased power costs and sales of transmission services and
bulk power in its Pennsylvania jurisdiction. Effective July 1,
2000, the Company will assume similar risks and benefits for its
Maryland jurisdiction. The Company will also assume this risk
for the West Virginia jurisdiction
- 16 -
when the deregulation plan is implemented which is expected to
occur in mid-2001.
The increase in utility bulk power revenues in the first
quarter of 2000 exists due to a new dispatch arrangement in place
between utility operations and nonutility operations whereby
utility operations sell their bulk power to nonutility operations
to be dispatched in a more efficient manner.
The potential exists for significant volatility in the spot
prices for electricity at the wholesale level to significantly
affect the Company's operating results. The effect may be either
positive or negative, depending on whether the Company's
subsidiaries are net buyers or sellers of electricity during such
periods, the open commitments which exist at such times, and
whether the effects of such transactions by the Company's utility
subsidiaries are included in fuel or energy cost recovery clauses
in their respective jurisdictions.
The increase in nonutility revenues is a result of increased
transactions by Allegheny Energy Supply, the Company's
subsidiary, in the unregulated market place to sell electricity
to both wholesale and retail customers and is also due to having
increased generation available for sale. As a result of the
Electricity Generation Customer Choice and Competition Act
(Customer Choice Act) in Pennsylvania, two-thirds of West Penn's
generation was freed up in the first quarter of 1999 and was
available for sale into the unregulated marketplace by the supply
business. In the first quarter of 2000, the final one-third of
West Penn's generation was freed up and became available for sale
into the deregulated marketplace. As a result, nonutility
operations had more generation available for sale into the
deregulated marketplace in the first quarter of 2000.
The elimination between utility and nonutility revenues is
necessary to remove the effect of affiliated revenues, primarily
sales of power.
OPERATING EXPENSES
Fuel expenses for the first quarter of 2000 and 1999 were as
follows:
Fuel Expenses
Three Months Ended
March 31
2000 1999
(Millions of Dollars)
Utility operations $ 71.5 $ 93.7
Nonutility operations 64.2 46.9
Total fuel expenses $135.7 $140.6
Total fuel expenses for the first quarter of 2000 decreased
3% due to a 6% decrease in average fuel prices offset by a 3%
increase related to kWh generated. The decrease in fuel expenses
for utility operations and the increase in fuel expenses for
nonutility fuel
- 17 -
expenses in the first quarter was due to the fuel expenses
associated with the final one-third of West Penn's freed up
generation transferred to the Company's non-utility subsidiary,
Allegheny Energy Supply, in the first quarter of 2000.
Purchased power and exchanges, net, represents power
purchases from and exchanges with other companies and purchases
from qualified facilities under the PURPA, and consists of the
following items:
Purchased Power and Exchanges, Net
Three Months Ended
March 31
2000 1999
(Millions of Dollars)
Utility operations:
From PURPA generation* $ 46.3 $28.0
Gas Supply 5.7 -
Other 138.4 20.0
Total purchased power for
Utility operations 190.4 48.0
Power exchanges, net 7.3 4.3
Nonutility operations purchased power 213.2 41.5
Elimination (146.6) (3.0)
Purchased power and exchanges, net $264.3 $90.8
*PURPA cost (cents per kWh) 5.2 cents 5.0 cents
The increase of $18.3 million in utility purchased power
from PURPA generation is due to the start of commercial
operations of the AES Warrior Run PURPA cogeneration project in
Potomac Edison's Maryland service territory. The AES Warrior Run
cogeneration contract will increase the cost of power purchases
by about $60 million annually. The Maryland PSC has approved
Potomac Edison's full recovery of the AES Warrior Run purchased
power costs as part of the September 23, 1999, settlement
agreement.
See Sales and Revenues for more information on the
settlement agreement.
The increase in other utility operations purchased power was
due primarily to West Penn's purchase of power from its
nonutility affiliate, Allegheny Energy Supply, in order to
provide energy to its customers eligible to choose an alternate
supplier but electing not to do so. The generation previously
available to serve those customers has been freed up by the
Customer Choice Act in Pennsylvania and has been transferred to
the Company's nonutility subsidiary, Allegheny Energy Supply.
Also, unplanned generating plant outages caused the utility
operations to make purchases of higher-priced power.
The increase in nonutility operations purchased power was
due to increased purchases for sale to its utility affiliate,
West Penn, unplanned generating plant outages which caused the
Company to make purchases of higher-priced power on the open
energy market, and to take advantage of transaction opportunities
in the market.
- 18 -
The elimination between utility and nonutility purchased
power is necessary to remove the effect of affiliated purchased
power expenses.
Other operation expenses for the first quarter of 2000 and
1999 were as follows:
Other Operation Expenses
Three Months Ended
March 31
2000 1999
(Millions of Dollars)
Utility operations $71.5 $70.3
Nonutility operations 28.8 16.3
Elimination (4.0) (4.3)
Total other operation expenses $96.3 $82.3
The increase in total other operation expenses of $14.0
million resulted primarily from increased transmission purchases
($5.5 million), additional expenses related to the assets of West
Virginia Power purchased by Monongahela Power in December 1999
($1.7 million), increased expenses from the Company's
nonregulated subsidiary, Allegheny Ventures, Inc. ($1.6 million)
primarily for costs associated with fiber optic leases, and
higher salaries and wages.
The elimination between utility and nonutility operation
expenses is primarily to remove the effect of affiliated
transmission purchases.
Maintenance expenses for the first quarter of 2000 and 1999
were as follows:
Maintenance Expenses
Three Months Ended
March 31
2000 1999
(Millions of Dollars)
Utility operations $41.5 $46.0
Nonutility operations 15.6 10.4
Total maintenance expenses $57.1 $56.4
Total maintenance expenses for the first quarter of 2000
remained about the same as the first quarter of 1999. The
decrease in utility maintenance and the increase in nonutility
maintenance was due to the maintenance associated with the final
one-third of West Penn generation that has been freed up and
transferred to the Company's nonutility subsidiary, Allegheny
Energy Supply. Nonutility maintenance in the first quarter of
2000 also includes costs related to the establishment of Capital
Recovery Policies by the Company's unregulated subsidiary,
Allegheny Energy Supply. Maintenance expenses represent costs
incurred to maintain the power stations, the transmission and
distribution (T&D) system, and general plant, and reflect routine
maintenance of equipment and rights-of-way, as well as planned
major repairs and unplanned expenditures, primarily from forced
outages at the power stations and periodic storm damage on the
- 19 -
T&D system. Variations in maintenance expense result primarily
from unplanned events and planned major projects, which vary in
timing and magnitude depending upon the length of time equipment
has been in service without a major overhaul and the amount of
work found necessary when the equipment is dismantled.
Depreciation and amortization expenses for the first quarter
of 2000 and 1999 were as follows:
Depreciation and Amortization Expenses
Three Months Ended
March 31
2000 1999
(Millions of Dollars)
Utility operations $50.5 $52.1
Nonutility operations 13.2 14.8
Total depreciation and amortization
expenses $63.7 $66.9
Total depreciation and amortization expense in the first
quarter of 2000 decreased $3.2 million due primarily to the
establishment of capital recovery policies by the Company's
unregulated subsidiary, Allegheny Energy Supply, which is
reflected in nonutility operations. The decrease in utility
depreciation and amortization expenses reflects the transfer of
the additional one-third of West Penn's generation assets from
utility to nonutility operations.
Taxes other than income taxes for the first quarter of 2000
and 1999 were as follows:
Taxes Other than Income Taxes
Three Months Ended
March 31
2000 1999
(Millions of Dollars)
Utility operations $38.0 $40.1
Nonutility operations 11.9 7.8
Total taxes other than income taxes $49.9 $47.9
Total taxes other than income taxes increased $2.0 million
in the first quarter of 2000 due primarily to increased gross
receipts taxes resulting from higher revenues from retail
customers. Utility and nonutility taxes other than income taxes
reflects the movement of taxes other than income taxes associated
with the final one-third of West Penn generation that has been
freed up and transferred to the Company's nonutility subsidiary,
Allegheny Energy Supply which is reflected in nonutility
operations. Federal and state income taxes decreased $3.9 million
in the first quarter of 2000 due to decreased taxable income.
The decrease in other income, net of $2.0 million in the
first quarter of 2000, was due primarily to cost of removal on
plant retirements recorded by the Company's nonutility
subsidiary, Allegheny Energy Supply.
- 20 -
Interest on long-term debt and other interest for the first
quarter of 2000 and 1999 were as follows:
Interest Expense
Three Months Ended
March 31
2000 1999
(Millions of Dollars)
Interest on long-term debt:
Utility operations $39.7 $30.7
Nonutility operations 5.4 7.8
Elimination (3.8) -
Total interest on long-term debt 41.3 38.5
Other interest:
Utility operations 12.2 4.2
Nonutility operations .6 -
Elimination (.6) -
Total other interest 12.2 4.2
Total interest expense 53.5 $42.7
The increase in total interest on long-term debt of $2.8
million resulted from increased average long-term debt
outstanding.
The elimination between utility and nonutility interest on
long-term debt is to remove the effect of pollution control debt
interest recorded by Allegheny Energy Supply and West Penn. The
service obligation for the pollution control debt was assumed by
Allegheny Energy Supply in conjunction with the transfer of West
Penn's generating assets. West Penn continues to be a co-obligor
with respect to the pollution control debt.
Other interest expense reflects changes in the levels of
short-term debt maintained by the companies throughout the year,
as well as the associated interest rates. The increase in other
interest expense of $8.0 million in the first quarter of 2000
resulted primarily from the increase in short-term debt
outstanding in conjunction with the repurchase of the Company's
common stock that began late in the first quarter of 1999.
The elimination between utility and nonutility other
interest expense is to remove the effect of affiliated interest
expense.
Dividends on the preferred stock of the subsidiaries
decreased due to the redemption by Potomac Edison and West Penn
of their cumulative preferred stock on September 30, 1999, and
July 15, 1999, respectively.
The extraordinary charge in the first quarter of $116.7
million ($70.5 million, net of taxes) was required to reflect a
write-off by the Company's West Virginia subsidiaries,
Monongahela Power and Potomac Edison, of net regulatory assets
determined to be unrecoverable from customers and establishment
of a rate stabilization account for residential and small
commercial customers as required by the deregulation plan. The
extraordinary charge was a result of West Virginia legislation
requiring deregulation of electric generation. See Note 5 to the
consolidated financial statements for additional information.
- 21 -
Financial Condition and Requirements
The Company's discussion of Financial Condition,
Requirements, and Resources and Significant Continuing Issues in
its Annual Report on Form 10-K for the year ended December 31,
1999 should be read with the following information.
In the normal course of business, the subsidiaries are
subject to various contingencies and uncertainties relating to
their operations and construction programs, including legal
actions and regulations and uncertainties related to
environmental matters.
* Financings
In the first quarter of 2000 Potomac Edison redeemed $75
million of first mortgage bonds, and West Penn Funding LLC
redeemed $8.6 million of transition bonds.
* Impact of Change in Short-term Interest Rate
A one percent increase in the short-term borrowing interest
rate would increase projected short-term interest expense by
approximately $5 million for the nine months ended December 31,
2000, based on projected short-term borrowings.
* Nonutility Construction Expenditures and Investments
The increase in nonutility construction expenditures and
investments of $33 million in the three months ended March 31,
2000, vs. the three months ended March 31, 1999, is primarily due
to expenditures related to the generation expansion program of
the Company's unregulated subsidiary Allegheny Energy Supply.
* Environmental Issue
As previously reported, the Environmental Protection
Agency's (EPA) nitrogen oxides (NOx) State Implementation Plan
(SIP) call regulation has been under litigation and on March 3,
2000, the District of Columbia Circuit Court of Appeals issued a
decision that basically upheld the regulation. However, an
appeal of that decision was filed in April 2000 by the state and
industry litigants. A court decision on whether to grant an
appeal is expected within a few months. If the appeal is
granted, a final decision could be issued by Spring 2001. Also
in April 2000, the EPA filed a motion with the court to lift the
previous court ordered stay of the September 1999 SIP submittal
deadline by which the states must file their compliance plans to
implement the NOx SIP call regulation. If the court grants the
EPA's request, the new SIP submittal deadline would be September
1, 2000, and the compliance due date would remain May 1, 2003. A
court decision on whether to grant EPA's motion is expected
within a few months.
* Electric Energy Competition
The electricity supply segment of the electric industry in
the United States is becoming increasingly competitive. The
national Energy Policy Act of 1992 deregulated the wholesale
exchange of power within the electric industry by permitting the
Federal Energy Regulatory Commission to compel electric utilities
to allow third parties to sell electricity to wholesale customers
- 22 -
over their transmission systems. Since 1992, the wholesale
electricity market has become more competitive as companies are
engaging in nationwide power trading. In addition, an increasing
number of states have taken active steps toward allowing retail
customers the right to choose their electricity supplier. The
Company has been an advocate of federal legislation to create
competition in the retail electricity markets to avoid
regional dislocations and ensure level playing fields. Legislation
before the U.S. Congress to restructure the nation's electric
utility industry cleared an important hurdle on October 28, 1999,
when a House Commerce Committee subcommittee gave its approval to
a bill. The bill will now move on to the full Commerce Committee.
In the absence of federal legislation, state-by-state
implementation of deregulation of electric generation is under
way. The five states in which the Company's utility operating
companies serve customers are at various stages of implementation
or investigation of programs that allow customers to choose their
electric supplier. Pennsylvania is furthest along with a retail
program in place. Maryland has approved a deregulation plan for
Potomac Edison which will begin July 1, 2000. West Virginia
passed legislation approving a deregulation plan for Potomac
Edison and Monongahela Power which is expected to be implemented
in mid-2001. Ohio and Virginia have passed legislation to adopt
customer choice which requires further action by the regulatory
agencies in those states regarding specific deregulation plans
for the Company's subsidiaries.
Activities at the Federal Level
The Company continues to seek enactment of federal
legislation to bring choice to all retail electric customers,
deregulate the generation and sale of electricity on a national
level, and create a more liquid, free market for electric power.
Fully meeting challenges in the emerging competitive environment
will be difficult for the Company unless certain outmoded and
anti-competitive laws, specifically the PUHCA and Section 210
(Mandatory Purchase Provisions) of PURPA, are repealed or
significantly revised. The Company continues to advocate the
repeal of PUHCA and Section 210 of PURPA on the grounds that they
are obsolete and anti-competitive and that PURPA results in
utility customers paying above-market prices for power. H.R.
2944, which was sponsored by U.S. Representative Joe Barton, was
favorably reported out of the House Commerce Subcommittee on
Energy and Power. While the bill does not mandate a date certain
for customer choice, several key provisions favored by the
Company are included in the legislation, including an amendment
that allows existing state restructuring plans and agreements to
remain in effect. Other provisions address important Company
priorities by repealing PUHCA and the mandatory purchase
provisions of PURPA. Consensus remains elusive, with significant
hurdles remaining in both houses of Congress. It is uncertain
whether momentum on the issue will result in legislation in 2000.
Maryland Activities
On September 23, 1999, a settlement agreement between
Potomac Edison, the Staff of the Maryland PSC, and other parties
working to implement customer choice and deregulation of electric
generation for Potomac Edison in Maryland was filed with the
Maryland PSC. On December 23, 1999, the Maryland PSC approved
the settlement agreement, which provides nearly all of Potomac
Edison's 211,000 Maryland customers with the ability to choose an
electric generation supplier
- 23 -
starting July 1, 2000. Potomac Edison filed an application on
December 15, 1999, to transfer its Maryland generating assets at
book value to an affiliate in accordance with Section 7-508 of the
Electric Customer Choice and Competition Act of 1999. A Maryland
PSC decision approving the transfer of the generating assets is
expected prior to July 1, 2000.
Ohio Activities
On June 22, 1999, the Ohio General Assembly passed
legislation to restructure its electric utility industry.
Governor Taft added his signature soon thereafter, and all of the
state's customers will be able to choose their electricity
supplier starting January 1, 2001, beginning a five-year
transition to market rates. Total electric rates will be frozen
over that period, and residential customers are guaranteed a 5%
cut in the generation portion of their rate. The determination of
stranded cost recovery will be handled by the Public Utilities
Commission of Ohio (Ohio PUC). On January 3, 2000, Monongahela
Power filed a transition plan with the Ohio PUC, including its
claim for recovery of stranded costs of $21.3 million. The Ohio
PUC is expected to hold hearings on Monongahela Power's
transition plan filing and issue a decision by October 2000.
Rulemaking proceedings to implement customer choice are ongoing
at the Ohio PUC.
Pennsylvania Activities
As of January 2, 2000, all electricity customers in
Pennsylvania had the right to choose their electric suppliers.
The number of customers who have switched suppliers and the
amount of electrical load transferred in Pennsylvania far exceed
that of any other state so far. However, for the Company, less
than 12,500 of its 680,500 Pennsylvania customers have chosen an
alternate energy supplier. The Company has retained about 98% of
its Pennsylvania customers through April 1, 2000. More than 100
electric generation suppliers have been licensed to sell to
retail customers in Pennsylvania.
Virginia Activities
On March 25, 1999, Governor Gilmore signed the Virginia
Electric Utility Restructuring Act (Restructuring Act) passed by
the Virginia General Assembly. All utilities must submit a
restructuring plan by January 1, 2001, to be effective on January
1, 2002. Customer choice will be phased in beginning on January
1, 2002, with full customer choice by January 1, 2004. The
Restructuring Act was amended during the 2000 General Assembly
legislative session. In addition to a number of clarifying and
technical changes, the amendments direct the State Corporation
Commission to prepare for legislative approval a plan for
competitive metering and billing and authorize the Commission to
implement a consumer education program on electric choice funded
through the Commission's regulatory tax. Legislation was also
adopted in 2000 governing the ability of rural electric
cooperatives to engage in competitive businesses, including
certain restrictions on the competitive sale of electricity by
cooperatives and their affiliates.
Various rulemaking proceedings to implement customer choice are
ongoing before the State Corporation Commission.
- 24 -
West Virginia Activities
In March 1998, legislation was passed by the West Virginia
Legislature that directed the W.Va. PSC to meet with all
interested parties to develop a restructuring plan which would
meet the dictates and goals of the legislation. In January 2000,
the W.Va. PSC submitted a restructuring plan to the legislature
for approval that would open full retail competition on January
1, 2001. Generation would be deregulated and electricity rates
initially would be reduced for large commercial and industrial
customers and then frozen for all customers for four years, with
power supply rates gradually transitioning to market rates over
the next six years. Other highlights of the plan include the
ability to transfer generation assets, the transfer of control of
transmission to a regional transmission organization by 2003, a
utility-funded rate stabilization deferral mechanism to offset
residential and small commercial rates in later years, a wires
charge for customers who shop, and a systems benefit charge to
assist low income customers and displaced employees in utility
and related industries. The plan was endorsed by virtually all
of the interested parties, including Monongahela Power and
Potomac Edison. On March 11, 2000, the West Virginia Legislature
approved the Commission's plan, but assigned the tax issues
surrounding the plan to the 2000 Legislative Interim Committees
to recommend the necessary tax changes involved and come back to
the Legislature in 2001 for approval of those changes and
authority to implement the plan. The start date of competition
is contingent upon the necessary tax changes being made and
approved by the legislature. The Company expects that
implementation of the deregulation plan will occur in mid-2001.
The W. Va. PSC is currently in the process of developing the
rules under which competition will occur. Associated rulemaking
proceedings are scheduled for the remainder of this year.
Accounting for the Effects of Price Deregulation
In July 1997, the Emerging Issues Task Force (EITF) of the
Financial Accounting Standards Board (FASB) released Issue No. 97-
4, "Deregulation of the Pricing of Electricity - Issues Related
to the Application of FASB Statement Nos. 71 and 101," which
concluded that utilities should discontinue application of
Statement of Financial Accounting Standards (SFAS) No. 71 for the
generation portion of their business when a deregulation plan is
in place and its terms are known. In accordance with guidance of
EITF Issue No. 97-4, the Company has discontinued the application
of SFAS No. 71 to its electric generation business in Maryland,
Pennsylvania, and West Virginia. The legislation passed in Ohio
and Virginia established definitive processes for transition to
deregulation and market-based pricing for electric generation.
However, the deregulation plans and their terms in Ohio and
Virginia will not be known until relevant regulatory proceedings
are complete and final orders are received. The Company expects
that charges to earnings, if any, due to discontinuing SFAS No.
71 for the electric generation portion of its business in Ohio
and Virginia will be less than $25 million, pre-tax.
- 25 -
ALLEGHENY ENERGY, INC.
Part II - Other Information to Form 10-Q
for Quarter Ended March 31, 2000
ITEM 1. LEGAL PROCEEDINGS
As previously reported, on December 17, 1999, AES/Beaver
Valley, Inc., (AES/BV) filed a demand for arbitration with the
American Arbitration Association. AES/BV requested a declaratory
judgment that the Electric Energy Purchase Agreement (EEPA)
approved by the Pennsylvania Public Utility Commission in 1986
continues to govern the transaction between West Penn and AES/BV
for the sale of up to 125 megawatt-hours (MWh) per hour of power
as set forth in the EEPA, even if AES/BV's proposed improvements
to the plant to comply with the more rigorous NOx standards
result in an increase in the amount of energy the plant produces
annually. AES/BV also requested an award of its attorneys fees
and costs.
On April 4, 2000, an arbitrator granted the declaratory
judgment request of AES/BV but denied its request for attorneys
fees and costs.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(27)Financial Data Schedule
(b) The Company filed Form 8-K's on March 6, 2000 and March 7,
2000.
Signature
Pursuant to the requirements 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.
ALLEGHENY ENERGY, INC.
/s/ T. J. KLOC
T. J. Kloc, Vice President
and Controller
(Chief Accounting Officer)
May 12, 2000