b . 5001 NASA Boulevard

Fairmont, W 26554

Gary A. Jack Senior corporate Counsel

VIA FEDEX OVERNIGHT

304.534.7409 Fax: 330.375.9939

October 29,2012

Ms. Sandra Squire Executive Secretary Public Service Commission of West Virginia 201 Brooks Street PO Box 812 Charleston, WV 25323

Re: Monongahela Power Company Certification of Morgantown Energy Associates Facility for Renewable Energy Credits Case No: 12- iiiij& -E - 53

r - -

Dear Ms. Squire:

Enclosed for filing in the above-referenced matter is the original and 12 copies of a Petition of Monongahela Power Company for certification of Morgantown Energy Associates facility for renewable energy credits.

Sincerely, I

Senior Corporate Counsel WV State Bar No. 1855

GAJ : dml

Enclosures cc: Dan McDonald - Steptoe & Johnson

Byron Harris - CAD

L-1730.20

. I

BEFORE THE PUBLIC SERVICE COMMISSION OF WEST VIRGINIA

CHARLESTON

MONONGAHELA POWER COMPANY Case No. 12- -E--

Certification of Morgantown Energy Associates Facility for Renewable Energy Credits

PETITION

1. Now comes Monongahela Power Company (“Mon Power”) and respectfully

requests that the Public Service Commission of West Virginia (“Commission”) find that the

Morgantown Energy Associates (“MEA”) electric generation facility located in Morgantown,

West Virginia (“MEA Facility”) qualifies for certification as an alternative energy resource

facility and a renewable energy resource facility under the Alternative and Renewable Energy

Portfolio Act, W. Va. Code Section 24-2F-1, et seq. and the Commission rules adopted

thereunder in Series 34. Mon Power believes that the MEA Facility should be certified based on

qualified generation from waste coal, an alternative energy resource identified by W. Va. Code

24-2F-3 (3) and Rule 2.4g. Additionally, Mon Power represents that the MEA Facility is a

renewable energy resource under W. Va. Code 24-2F-3 (13) (I) and Rule 2.22.i. as recycled

energy. Mon Power submits the required support and information for resource certification in

Appendix A, attached hereto.

1

,

INTRODUCTION AND BASIS FOR REQUEST

2. Mon Power makes this request based on its contractual ownership of all of the

electrical output of the MEA Facility under its Electric Energy Purchase Agreement dated March

1, 1989 (“EEPA”), which will remain in effect until 2027. The EEPA was approved by

Commission Orders dated April 7, 1989 and May 15, 1989 in Case No. 89-200-E-PC. Mon

Power also makes this request in accordance with the Commission’s November 22,201 1 order in

Case No. 11-0249-E-P (“Order”) as certified as final in the Commission’s Mandate of July 16,

2012, which authorized Mon Power to seek certification of the MEA Facility for the production

of alternative or renewable energy resource credits should the owner of the facility, MEA, refuse

to do so on its own accord.

3. The MEA Facility is a coal and coal waste-fired cogeneration facility that uses

Circulating Fluidized Bed Boiler technology for the combustion for at least 65% bituminous

waste coal products from former and active mining sites for the production of electricity. The

MEA Facility began commercial operation in April 1992 and has been certified under the

Pennsylvania law that includes waste coal as an eligible alternative energy resource. Waste coal

is an alternative energy resource under Rule 2.4.g of the Commission Portfolio Standard Rules,

and the Commission confirmed in its Order that the MEA Facility likely meets the requirements

as an alternative energy resource facility to qualify for certification under the Portfolio Standards

Rules. (See Order at 41-42, 52 (Conclusion of Law 3).) It also believed that the MEA Facility

would probably qualify as a renewable energy resource defined under W.Va. Code 524-2F-

3(13)(I) and Rule 2.22.i as “electricity or equivalent mechanical energy extracted from a pressure

drop in any gas, excluding any pressure drop to a condenser that subsequently vents the resulting

2

heat.” (See id.) In that previous case, however, the Commission was unable to make the

determination that the MEA Facility qualifies for certification under the Rules as either an

alternative energy resource facility or a renewable energy resource facility because the evidence

presented in that case by Mon Power and Potomac Edison (“PE”) in the Joint Petition and related

filings did not contain sufficient information about the attributes of the fuel type(s) used at the

facility or the energy output from the MEA Facility to show that the facility meets the

requirements for certification under the Rules.’ Accordingly, the Commission declined, at that

time, to grant the relief sought by Mon Power and PE that the Commission deem the facility

certified or to order MEA to certify the facility. (See Order at 42.)

4. The Commission found that if Mon Power and PE filed the information needed to

make this determination, the Commission would consider the filing and enter a ruling

determining whether the MEA Facility meets the requirements for certification under the Rules.

In the meantime, the Companies were instructed to take reasonable steps to secure the credits

from the MEA Facility that are currently in the MEA GATS account, including but not limited to

advising PJM-EIS of the ruling in this case. (See id. at 42, 55 (Conclusions of Law 33-34).)

5. Further, in that Order, the Commission stated MEA had refused to seek

certification of the MEA Facility to generate credits under West Virginia law. (See Order at 55

(Conclusion of Law 32).) MEA had made i t clear that it did not intend to certify the MEA

Facility to generate credits under the Commission Portfolio Standard Rules based on its assertion

that it owns the credits and because MEA elected to certify to generate credits under

That information now is contained in the Appendix A attached which is the information required 1

by PSC Rule 4.4 of Series 34.

Pennsylvania law. The Commission found in its Order that the position taken by M E A was

untenable and inconsistent with its position in another MEA case, in which MEA asserted that

the Commission has jurisdiction to require modification to the EEPA and require Mon Power to

consent to debt refinancing in order to avoid the claimed financial ruin for the MEA Facility by

MEA, The Commission determined that the MEA’S refusal to certify the facility is contrary to

the public interest and thwarts the purposes of the Portfolio Act. The Commission also found

that allowing qualifying credits that are owned by the Companies to not be certified would create

a hardship on ratepayers. It is obvious that there is unusual difficulty involved if the Companies

would seek or expect cooperation from MEA in obtaining certification of the MEA. Under these

unusual circumstances, it would be reasonable, the Commission found, to allow the Companies

to seek certification of the credits that we have determined they own as a result of the

Morgantown EEPA. (See id. at 41-42, 55 (Conclusions of Law 31-35).) Accordingly, the

Companies are filing this Petition.

JURISDICTION

6. The Commission has jurisdiction and authority over the MEA Facility to deem the

facility certified to generate credits under the Commission Portfolio Standard Rules. Series 34,

based on the jurisdiction and authority provided in the Portfolio Act in W. Va. Code 24-2F et

seq. to enable Mon Power and PE to meet the compliance requirements of the Act based on the

Commission’s decision in this case. (See Order at 42.)

7. Mon Power has EEPAs with two other PURPA facilities that have previously

In Case No, 11-0019-E-P, by Commission Order dated June 7, 201 1, the been certified.

4

Commission granted certification of the Grant Town facilities owned by American Bituminous

Power Partners, L. P. as qualified energy resource pursuant to Rule 4 of the Commission

Portfolio Standard Rules to generate credits under the Rules. Grant Town is certified based on

qualified generation from waste coal, an alternative energy resource identified by statue and Rule

2.4.g.

8. In Case No. 11-0291-E-P, by Commission Order issued July 20, 201 1 , the

Commission granted certification of the Hannibal facilities owned by the City of New

Martinsville as a qualified energy resource pursuant to Rule 4 of the Commission Portfolio

Standard Rules to generate credits under the Rules. The Hannibal facilities are certified based on

qualified generation as run of river hydropower, a renewable energy resource identified by statue

and Rule 2.22.g.

BASIS FOR CERTIFICATION

9. The MEA Facility meets the requirements as an alternative energy resource

facility to qualify for certification under the Portfolio Standards Rules. The MEA facility is a

qualified energy resource pursuant to the Commission Portfolio Standard Rules to generate

credits under the Rules. The MEA facility should be certified based on qualified generation from

waste coal, an alternative energy resource identified by W. Va. Code 24-2F-3 (3) (G) and Rule

2.4.g. The representation and support for this certification request are shown in the attached

Appendix A, which is the information required by Rule 4.4 of Series 34 of the Commission

Rules, Specific attention is directed to Subsection 4.4.b.7. Additionally, attached as Appendix B

are the Financial Statements and Independent Auditors’ Report for MEA for the years ending

5

December 31, 201 1 and 2010. On page 6 thereof, i t notes that the facility’s primary fuel is a

blend of at least 65% bituminous coal waste.

10. The MEA Facility should also qualify as a renewable energy resource defined

under W.Va. Code $24-2F-3(13)(1) and Rule 2.22.i as recycled energy, “which means useful

thermal, mechanical or electrical energy produced from: (i) exhaust heat from any commercial or

industrial process; (ii) waste gas, waste fuel or other forms of energy that would otherwise be

flared, incinerated, dispose of or vented and (iii) electricity or equivalent mechanical energy

extracted from a pressure drop in any gas, excluding any pressure drop to a condenser that

subsequently vents the resulting heat.” The MEA Facility falls within this definition because it

produces electric energy extracted from a pressure drop in gas. The MEA Facility is a

cogeneration facility, certified under FERC regulations, that sequentially produces electricity and

another form of useful thermal energy that is more efficient than the separate production of both

forms of energy. The facility produces steam for West Virginia University and utilizes the

additional steam to generate sufficient energy to meet the contracted electrical requirements of

Mon Power. The representation and support are shown in the attached Appendix A, at iii and in

Appendix B at page 6.

WHEREFORE, based on the forgoing, Mon Power respectfully requests that the

Commission review the MEA Facility and authorize i t to produce credits for the benefit of West

Virginia and the Company’s West Virginia customers in compliance with the Alternative and

Renewable Energy Portfolio Act, its Rules, and the Order. Specifically, it is requested that the

Commission:

6

1. Certify the MEA Facility as a Qualified Energy Resource Facility entitled to

generate Credits pursuant to the Commission’s Portfolio Standard Rules as both an alternative

energy resource and a renewable energy resource;

2. Issue a certification number for the MEA facility to be duly recorded in PJM’s

Generation Attribute Tracking System pursuant to Portfolio Standard Rule 4.1 ;

3. Authorize the MEA facility to begin producing and recording Credits that may be

used to meet the requirements of the Alternative and Renewable Energy Portfolio Standard, W.

Va. Code 9 24-2f, et. seq., and the Commission’s Portfolio Standard Rules; and

4. Grant such other and further relief as the Commission may deem appropriate or

necessary

Date this 2gth day of October, 2012.

Respectfully submitted,

MONONGAHELA POWER COMPANY

5001 NASA Boulevard Fairmont, WV 26554 3 04.534.7409 gi ack@firstenergycom.com

Christopher L. Callas, Esquire Jackson Kelly PLLC 500 Lee Street, East Suite 1600 Charleston, WV 25301 304.340.1250 ccallas@,iacksonkellv.com

7

APPENDIX A

4.4,a.l. corporation;

Current Certificate of Authority issued by the Secretary of State for a foreign

Not applicable since MEA is a West Virginia general partnership and is not a foreign corporation.

4.4.a.2. A current Certificate of Good Standing for the applicant issued by the state in which the business was formed;

A current Certificate of Good Standing for MEA is attached to this application as Exhibit A.

4.4.b.l. The name and address of the facility for which the application is made;

Mon Power is making application for its contractual ownership of the output of the MEA Facility:

MEA Facility 555 Beechurst Avenue

Morgantown, West Virginia 26505

4.4.b.2. The name of the owner@) of the facility and the owner's contact information;

The MEA Facilty is owned by MEA and is operated by NAES Corporation. The electrical output of the facility is sold entirely to Mon Power through the EEPA. The steam output is sold to West Virginia University, The contact information for MEA and for Mon Power is as follows:

Morgantown Energy Associates 555 Beechurst Avenue

Morgantown, West Virginia 26505

Monongahela Power Company 13 10 Fairmont Avenue Fairmont WV 26554

4.4.b.3. The name and contact information of the operator of the facility;

MEA Facility Station Manager - Jesse Locklar on behalf of the NAES Corporation

555 Beechurst Avenue Morgantown, West Virginia 26505

(304) 284-2520

i

4.4.6.4. The name and contact information of a designated representative authorized by the electricity generator to act on its beha&

The designated representative for the contractual ownership of the output of the MEA Facility on behalf of Mon Power is:

Bob Reeping Manager, Regulated Commodity Sourcing

Monongahela Power Company 800 Cabin Hill Drive

Greensburg, PA 15601 724.838.6393

rreepi3 @,firsteneraycorp. com

Mon Power is not representing, nor is it accepting, any authorization by or from MEA or the MEA Facility to act as its authorized representative, but is instead making this request for certification in accordance with the Commission’s November 22, 201 1 order in Case No, 11- 0249-E-P which authorized Mon Power to seek certification of the MEA Facility for the production of alternative or renewable energy resource credits should MEA refuse to do so on its own accord. MEA has refused.

4.4.b.5. Documentation of authority to sign on behalf of owners of the electricity generating facility;

Documentation of Robert B. Reeping for authority to sign on behalf of Mon Power for the contractual ownership of the output of the MEA Project is attached as Exhibit D.

Mon Power is not representing, nor is it accepting, any authorization by or from MEA or the MEA Facility to act as its authorized signatory, but is instead making this request for certification in accordance with the Commission’s November 22, 201 1 order in Case No, 11- 0249-E-P which authorized Mon Power to seek certification of the MEA Project for the production of alternative or renewable energy resource credits should MEA refuse to do so on its own accord to which MEA has refused.

4.4.b.6. The location of the facility, including an indication of whether the facility is sited upon a reclaimed surface mine;

As previously provided in response to item 4.4.b.1, the location of the MEA Facility under this application is:

WVU Project 555 Beechurst Avenue

Morgantown, West Virginia 26505

To the best of Mon Power’s knowledge, the MEA Facility is not sited upon a reclaimed surface mine.

.. 11

4.4.6.7, The fuel type@) and capacity information;

Station / Unit MEA Facilitv

Capacity (MW) Primary Fuel Secondary Fuel 50 Waste Coal Coal

4.4.b.8. A description of the facility, including whether the facility is a customer generator or B TM generator;

The MEA Facility is a coal and coal waste-fired cogeneration facility. It is located at 555 Beechurst Avenue, Morgantown, West Virginia and is owned by MEA and operated by NAES Corporation. The MEA Facility utilizes circulating fluidized bed boiler technology for the combustion of at least 65% bituminous waste coal products from former and active mining sites for the production of electricity. The MEA Facility began commercial operation in April 1992 under the terms of the EEPA between MEA and Mon Power dated as of March 1 , 1989 that remains in effect until 2027. All electric output of the MEA Facility is sold to Mon Power pursuant to the EEPA. The MEA Facility is a cogeneration facility, certified under FERC regulations, that sequentially produces electricity and another form of useful thermal energy that is more efficient than the separate production of both forms of energy. The facility produces steam for WVU and utilizes the additional steam to generate sufficient energy to meet the contracted electrical requirements of Mon Power.

The MEA Project is not a customer generator or behind-the-meter generator.

4.4.b.9. Identification and description of the metering system that provides the “revenue- quality meter output” as that term is defined in the GA TS operating rules.

The metered data is collected by a meter data acquisition system (MV-90) and pulse accumulator readings are collected by the FirstEnergy Energy Management System and verified through a control area checkout / energy accounting. This data is reported to PJM‘s e-meter each business day and included in the PJM market settlements processes.

4.4.b.10. Whether the electricity generation facility is within the PJM Region;

The MEA Facility is located within PJM.

4.4.b.11. Whether the facility is certified by another state as an eligible generation resource to meet the portfolio standard of that state;

The MEA Facility is certified to create RECs in Pennsylvania. However, under the PJM GATS system, even though a unit is certified in multiple states, a credit produced from any one facility can only be retired once in one jurisdiction. The same credit may not be used in numerous states to comply with different renewable obligations.

iii

4.4.b.12. Whether the facility is being used for a voluntary retail customer program by an electric utility in West Virginia;

The MEA Facility is not being used for a voluntary retail customer program by an electric utility in West Virginia.

4.4.6. 13. The Office of Regulatory Information Systems Plant location (,,ORISP’,) Code for the facility;

MEA Facility 10743

4.4.b.14. A copy of the US Department of Energy, Energy Information Administration Form EIA 860, if the rated capacity is greater than I .O MW.

Also included with the application is a CD entitled “Evidence 4.4.b.14 - Mon Power” which includes two files from the EIA 860 database.

1. “201 1 EIA Form 860 - Copy of GenY 1 1 - WV RPS Unit Registration Data.xls”; and 2. “201 1 EIA Form 860 - Copy of PlantYl 1 -- WV RPS Unit Registration Data.xls”.

iv

APPENDEX B

MORGANTOWN ENERGY ASSOCIATES (A Partnership)

Financial Statements for the Years Ended December 31,2011 and 2010

and Independent Auditors’ Report

MORGANTOWN ENERGY ASSOCIATES

Table of Contents

Page No,

Independent Auditors' Report ...................................................................................... 1

Statements of Income for the years ended December 3 1, 201 1 and 2010 ....................................... 2

3

4

5

6

Balance Sheets at December 3 I , 201 1 and 2010 .................................................................... Statements of Partners' Capital for the years ended December 3 1,20 11 and 2010 ........................... Statements of Cash Flows for the years ended December 3 1, 201 1 and 20 IO ..................................

Notes to Financial Statements .........................................................................................

te

INDEPENDENT AUDITORS’ REPORT

To the Partners of Morgantown Energy Associates Morgantown, West Virginia

Deloittc &Touche WI West Tower 901 East Byrd Street Suite 820 Richmond. VA 2321 9 USA Tel: +1 804 697 1 5 0 0 Fax +1 804 697 1825 www.detoitte.com

We have audited the accompanying balance sheets of Morgantown Energy Associates (the “Partnership”) at December 31,201 1 and 2010, and the related statements of income, partners’ capital, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perfonn the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of the Partnership at December 3 1,201 1 and 2010, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

March 30,2012

MORGANTOWN ENERGY ASSOCIATES

STATEMENTS OF INCOME

Year Ended December 3 1, (thousands) - 2011

Operating Revenues Capacity Energy Steam

Total Operating Revenues

Operating Expenses Solid fie1 and limestone Operations and maintenance External Affiliated

Depreciation Other taxes Other

Total operating expenses

$16,116 13,220 8,635

37.971

11,988

11,408 3

2,794 1,188 2,213

29,594

Income from operations 8,377

Interest income 27

Interest expense and related charges 4.990

Net income %3.414

- 2010

$15,309 12,252 8,332

35,893

10,685

9,625 4,180 2,785 1,248 I .203

29.726

6,167

42

3.683

sL.2J25

The accompanying notes are an integral part of the Financial Statements.

2

MORGANTOWN ENERGY ASSOCIATES

BALANCE SHEETS

(thousands)

ASSETS Current Assets

Restricted cash and investments Accounts receivable and interest receivable Inventory - fitel Spare parts Prepaid and other current assets

Total current assets

Property, Plant and Equipment Property, plant and equipment Accumulated depreciation

Property, plant and equipment, net

Other Noncurrent Assets and Deferred Charges Other noncurrent assets Deferred charges, net

Other noncurrent assets and deferred charges

December31, December 31, - 201 1 - 2010

$ 18,978 $ 25,618 4,566 3,119

139 144 207 330

24.260 29.524 370 313

173,413 173,384 J70.570) (67,776) 102,843 105,608

436 4.699 1.425 5,135 1.425

Total assets U a U B w

LIABILITIES & PARTNERS' CAPITAL Current Liabilities

Accounts payable Payables to affiliated companies Payables to affiliated companies - subordinated Project financing debt Other current liabilities

Total current liabilities

$ 2,667 $ 2,275 1,025

14 59,040 66,555

471 48 62.184 69.917 -

Partners' capital - unrestricted 70,054 66.640

Total liabilities and partners' capital 2 L c ! 2 & u w

The accompanying notes are an integral part of the Financial Statements.

3

(thousands)

MORGANTOWN ENERGY ASSOCIATES

STATEMENTS OF PARTNERS’ CAPITAL

RCM Dominion Morgantown Hickory

Coeen WV, Power Ltd. Power - Total &&

Balance at January 1,2010 $3 3,648 $20,370 $10,096 $64,114

Net income 1.263 884 379 2.526 Balance at December 3 1,201 0 34,911 2 1,254 10,475 66,640

Net income 456 1,195 1,763 3,414 Transfer of Partnership Interest J35,367) 35,367 - Balance at December 31,201 1 _s %22.449 %47.605%70.054

The accompanying notes are an integral part of the Financial Statements.

4

MORGANTOWN ENERGY ASSOCIATES

STATEMENTS OF CASH FLOWS

Year Ended December 3 1, (thousands)

Operating Activities Net income Adjustments to reconcile net income to cash

from operating activities: Depreciation Amortization of deferred financing costs Changes in:

Accounts receivable and interest receivable Inventory and spare parts Prepaid and other assets Accounts payable Accrued interest Other liabilities

Net cash provided by operating activities

Investing Activities Property additions Restricted cash and investments, net

Net cash provided by investing activities

Financing Activities Sinking fund redemption 1989 Series A bonds Refunding of 1989 Series A WVPEA bonds Issuance of 201 1 Series WVEDA bonds Deferred financing costs

Net cash used in financing activities

Net increase (decrease) in cash Cash at beginning of year Cash at end ofyear

Supplemental Cash Flow Information Cash paid during the year for interest and related charges Significant noncash financing activity:

Accounts payable related to deferred financing costs

2011 - $ 3,414

2,194 1,663

(1,447) 128

(493) (685)

450 0 5,803

(30) 6.640 6,610

(7,515) (59,040) 59,040 J4.898)

J12.413)

2010-

$ 2,526

2,785 1,542

1,224 (39) (188) (670)

(2) (449) 6,729

(3 6) 2.208 2,172

(6,975)

(1,926) 18.901)

%

S 2,900

$ 38

$

$ 2,559

$ -

The accompanying notes are an integral part of the Financial Statements.

5

MORGANTOWN ENERGY ASSOCIATES Notes to the Financial Statements

Note 1. Nature of Operations Morgantown Energy Associates (MEA), a West Virginia general partnership among Dominion Cogen WV, Inc. (Dominion), RCM Morgantown Power, Ltd. (RCM), and Hickory Power LLC (Hickory), was formed October 3, 1988. As of January 1,201 1, Dominion, RCM and Hickory had ownership interests in MEA of 50%, 35%, and 15%, respectively. On January 3 1, 201 1, Dominion sold its 50% ownership interest in MEA to Hickory resulting in Hickory having a post transaction ownership interest of 65% and RCM having an ownership interest of 35%. All profits and losses are shared among the partners in accordance with their respective ownership interests. MEA is managed by a Management Committee. Each partner, through their representative, is entitled to vote in proportion to their ownership interest in MEA. All decisions require at least a majority vote of the Management Committee.

MEA owns and operates a cogeneration facility (the Facility), located in Morgantown, West Virginia. The Facility is a certified qualifying cogeneration facility under Federal Energy Regulatory Commission (FERC) regulations. A cogeneration facility is a generating facility that sequentially produces electricity and another form of useful thermal energy that is more efficient than the separate production of both forms of energy. The Facility has a gross capacity of approximately 69 megawatts (MW) and is designed to generate sufficient energy to accommodate the simultaneous contracted electrical requirements of Monongahela Power Company (Monongahela) and steam requirements of West Virginia University ("VU) and West Virginia University Hospitals, Inc. (Hospital).

The 35-year Electric Energy Purchase Agreement (the Electric Contract) between Monongahela and MEA expires Apnl 17, 2027 and provides that MEA supply Monongahela with up to 50 MW of firm capacity. Payment from Monongahela is comprised of a fixed capacity component for energy delivered up to 50 MW and an energy component for all energy delivered based on the avoided cost of the buyer on a monthly basis at four of the buyer's generating stations.

The Steam Purchase Agreement (the Steam Contract) between MEA and the WW Board of Regents expires April 16,2027 and requires that the Facility will meet W W ' s and the Hospital's combined average steam demand of approximately 94,000 pounds per hour, and a peak steam requirement of 225,000 pounds per hour. The 35-year steam contract has a fixed base rate which is adjusted quarterly, based on a weighted set of indices, and once every fifth year, based upon a review of certain costs. WW has entered into a separate agreement with the Hospital under which WW sells to the Hospital a portion of the steam provided pursuant to the Steam Contract.

The Facility's primary fuel is a blend of at least 65% bituminous coal waste and not more than 35% bituminous coal. Limestone is used to reduce sulfur dioxide emissions.

Coal is obtained from Hunter Ridge Coal Company (Hunter Ridge) pursuant to the Coal Sales Agreement (the Coal Agreement). The expiration of the initial 15-year term of the Coal Agreement occurred in 2007. An amendment to the Coal Agreement, dated April 17, 2007, extended the expiration an additional five years until April 17,2012. The coal waste is obtained pursuant to the Waste Services Agreement with Hunter Ridge. Ash is removed pursuant to the Solid Waste Disposal Agreement with Hunter Ridge. Both the Waste Services Agreement and the Solid Waste Disposal Agreement commenced in 1992 and have 25-year terns. The fuel contracts do not contain any minimum purchase requirements.

Limestone is obtained pursuant to the Limestone Sales Agreement with Greer Steel. The Limestone Sales Agreement that commenced in 1992 has a 25-year term. Purchases under the Limestone Sales Agreement were $1.9 million and $1.6 million for the years ended December 31,201 1 and 2010, respectively.

Dominion Energy Services Company, Inc. (DESCO), an affiliate of Dominion, operated and maintained the Facility pursuant to the Operation and Maintenance Agreement (the O&M Agreement) through September 5,2010. On September 6,2010 the operating and maintenance of the facility was assumed by NAES Corporation under the Contract for Operation and Maintenance Services (O&M Services Agreement). The expiration of the NAES O&M Services Agreement is 5 years. The management responsibilities for the facility were also assumed by Power Plant Management Services, LLC (PPMS) effective September 6,20 10 under the Contract for Project Management and Administrative Services. The initial term of the PPMS agreement is also 5 years.

MEA conducts annual planned maintenance outages. Major outages are also performed periodically based on equipment manufacturers' recommendations and operating history. The year 2010 was a major outage year in which extensive inspection, evaluation, and maintenance of the boilers and the generating equipment were planned

6

MORGANTOWN ENERGY ASSOCIATES Notes to the Financial Statements

and executed. Although subject to change, the next major outage is currently planned for 2017 with subsequent major outages every seven years.

Note 2. Summary of Significant Accounting Policies General Management makes certain estimates and assumptions in preparing MEA’S Financial Statements in accordance with accounting principles generally accepted in the United States of America, These estimates and assumptions affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses for the periods presented. Actual results could differ from those estimates. Subsequent events have been evaluated through March 30,2012, the date the financial statements were issued.

Revetrue Recognition Steam sales revenue is recognized based upon steam delivered pursuant to the Steam Contract. Electric sales revenue is recognized in accordance with accounting guidance for revenue recognition of long-term power sales contracts, and is based on monthly invoices provided to MEA by Monongahela that calculate electrical revenues based upon electricity delivered. The electric sales revenue includes a capacity and an energy component. The capacity component is determined at a rate of 4.0 cents per kilowatt hour. The energy component is determined by Monongahela’s avoided costs for the billing period. These avoided costs are estimated based upon information available on the billing date and may be corrected or adjusted in subsequent months.

Income Teres Income or loss of MEA is includable in the tax returns of the partners. Accordingly, no provision for income taxes has been made in the accompanying financial statements.

Restricted Cash and Investments MEA does not report any cash or cash equivalents on its Statements of Cash Flows. All of MEA’s fbnds are considered restricted cash and investments by the terms of MEA’S debt ageements and include highly liquid shott- tcrm instruments, predominately commercial paper and money market funds, purchased with a maturity of three months or less.

Inventory und Spure Purrs Spare parts are valued at the weighted-average cost method. Fuel inventory is valued using the lower of the first-in, first-out method or market.

Proper@, PIunt and Eguiptnent Property, plant and equipment, including additions and replacements, are recorded at original cost, consisting of labor, materials, other direct costs and capitalized interest. The cost of repairs and maintenance, including minor additions and replacements are charged to expense in the period incurred. Substantially all of the MEA’s assets are pledged as collateral for the debt.

Depreciation on the Facility, as originally placed in service, is computed using the straight-line method over a 55- year estimated useful life. Depreciation on new equipment and betterments is computed using the straight-line method over estimated useful lives ranging from 5 years to the remaining estimated useful life of the Facility.

MEA performs an evaluation for impairment whenever events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable. A long-lived asset is written down to fair value if the sum o f its expected future undiscounted cash flows is less than its canying account. There were no impairment charges for the years ended December 31,201 1 and 201 0.

There were no capitalized interest costs in 201 1 or 2010,

Deferred Charges Deferred charges include costs associated with obtaining two letter of credit (LC) extensions, a replacement LC, and a refunding of the debt to extend the maturity. On August 1,2008, the expiration of an irrevocable LC provided for under the Reimbursement and Loan Agreement (the RLA) was extended from September 28,2008 to September 28, 2010. See Note 8 for additional information on the RLA. The costs of obtaining the extension were deferred and

7

MORGANTOWN ENERGY ASSOCIATES Notes to the Financial Statements

amortized over the 2-year extension period. On August 18,2010, the expiration of an irrevocable LC was again extended from September 28,2010 to September 28,201 1. The costs of obtaining the extension were deferred and amortized over the 1-year extension period. On September 29,201 1, the West Virginia Public Energy Authority Bonds (WVPEA) bonds were refunded and reissued as West Virginia Economic Development Bonds (WVEDA) Series 201 1, extending the maturity on the bonds from 2017 to 2027. In addition, a new LC was obtained under the Amended and Restated Reimbursement Agreement (RA), dated September 15,201 1. The new LC term is 5 years with an expiration of September 29,2016. The cost of refunding the bonds is being deferred and amortized over the 15.5-year term of the bonds and the cost of obtaining the new LC is being deferred and amortized over the 5-year term of the LC.

The balance of deferred charges at December 31, 201 1 and 2010, included $4.9 million and $1.9 million of charges and $0.2 million and $0.5 million of accumulated amortization, respectively. Amortization costs are recorded in interest expense and related charges.

Note 3. Newly Adopted and Recently Issued Accounting Standards Fair Value Measurmcnts In January 2010, the FASB issued new guidance which requires additional disclosures for recumng and nonrecurring fair value measurement and clarifies certain existing disclosure requirements. These additional disclosures include: amounts and reasons for significant transfers between Level 1 and Level 2 of the fair value hierarchy; reasons for significant transfers in and out of Level 3 of the fair value hierarchy; and information about purchases, sales, issuances and settlements on a gross basis in the reconciliation of recurring Level 3 measurements

The clarification of existing fair value disclosure requirements includes the requirement for entities to disclose information about both the inputs and valuation techniques used in estimated Level 2 and Level 3 fair value measurements and to provide disclosures for fair value measurements for each class of assets and liabilities. The requirements of this guidance were effective for periods beginning after December 15,2010. The new guidance did not have a material impact on the financial statements.

Note 4. Restricted Cash and Investments Restricted cash and investments represent $19.0 million and $25.6 million at December 31, 201 1 and 2010, respectively, reskicted by Union Bank (UB), Bank of New York and Monongahela. The use of restricted cash and cash equivalents is subject to the requirements and restrictions of UB per the RLA and RA. Restricted funds may only be disbursed with the approval of UB.

Restricted cash and investments, includes a "Reserve Fund" established by MEA with UB upon cornpletion of the Facility as required by the Electric Contract between MEA and Monongahela. The initial deposit was $4.0 million and the minimum reserve fund requirement IS adjusted annually a rcquired by the Elcctric Contract. The balance in the Reserve Fund was $7.0 million at both December 31,201 1 and 2010, respectively.

Restricted cash and investments at December 31,201 1, also includes a "WVU Litigation Reserve Fund" account established during 201 1 by MEA with UB as required under the RA. The initial WW Litigation Reserve Fund requirement of $10.2 million was satisfied with cash of $6.5 million and irrevocable letters of credit of $3.7 million provided by Hickory. The balance in the W W Litigation Resewe Fund account was $6.5 million at December 3 I , 201 I .

Restricted cash and investments at December 31,2010, also included a $2.0 million debt service reserve account with UB. The debt service reserve fund was established upon completion of the Facility for the benefit of the banks. The initial reserve requirement o f $2.0 million was satisfied with irrevocable letters of credit established by each individual partner in proportion to their ownership interest (see Note 8). Thereafter, MEA funded the remaining $2.0 million reserve requirement from operating revenues in accordance with the RLA until the reserve requirement was fully funded at $4.0 million, The debt service reserve fund was no longer required when the RA replaced the RLA in September 201 1.

The remaining $5.5 million and $16.6 million of restricted cash and investments at December 31, 201 1 and 2010, respectively, is restricted by the funds flow requirements of the RA and RLA and restrictions on partner cash distributions. See Note 8 for discussion on partner distribution restrictions.

8

MORGANTOWN ENERGY ASSOCIATES Notes to the Financial Statements

Note 5. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. MEA utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure the fair value based upon observability. Fair value measurements are categorized based upon the lowest level of input that is significant to the fair value measurement. Level 1 inputs include quoted market prices in an active market for identical assets or liabilities. Level 2 inputs are market data, other than Level 1, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in a n inactive market, and other information that can be corroborated by market data. Level 3 inputs are unobservable and corroborated by little or no market data.

MEA applies fair value measurements to certain assets and liabilities including restricted cash and investments. MEA maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Fair value is based on actively-quoted market prices, if available. In the absence of actively-quoted market prices, MEA seeks price information from external sources, including broker quotes and industry publications.

The following table provides information on those assets and liabilities measured at fair value on a recurring basis for each hierarchy level:

(thousands) Level 1 Level 2 Level 3 Total

At December 31,201 1 Assets:

Commercial paper $18,853 $18,853 Cash equivalents and other - 51 51 Interest Rate Cap 436 436

Total assets ( I ) S 19,340 %19,340

At December 31,2010 Assets:

Coinmercial paper $25,048 $25,048 Cash equivalents and other 239 239 Interest Rate Cap

Total assets (1) $25,287 $25,287 -- -- _ _ __

(1) Restrrctcd cash m d investments at Deceinbcr 3 I , 201 1 and 2010, includes cash of $0.1 million and $0.3 million, respectively.

MEA used price quotes from the counterparty for the interest rate caps and quoted interest rates as a basis for measuring the estimated fair value of the interest rate cap obligations. See Note 6 for additional information on the interest rate cap agreements.

Fair Value of Financial Instruments At December 31,201 1 and 2010, the carrying amounts of accounts receivable and interest receivable, and accounts payable are representative of fair value because of the short-term nature of these instruments. At December 3 I , 201 1 and 2010, the carrying amount of the project financing debt is also considered representative of fair value due to its ongoing remarketing in a variable rate mode (weekly following the RA or for terms not to exceed 180 days prior to the RA). SeeNote 8 for additional information on the debt.

Note 6. Derivatives MEA has entered into various interest rate cap agreements over time to limit its variable rate exposure related to the underlying debt. These cap agreements include the following:

Date Notional Period cost (thousands) 05/27/09 $73,500 07/01/09 - 07/01/10 $28 06/10/10 $66,600 07/01/10 - 07101l11 $3 1 06/30/11 $59,040 07/01/11 - 08/01/11 $6 07/28/11 $59,040 08/01/11 - 09/01/11 $8 08/25/11 $59,040 09/01/11 - 11/01/11 $12

9

MORGANTOWN ENERGY ASSOCIATES Notes to the Financial Statements

10/06/11 $22,140 11/01/11 - 10/01/24 $255 10/06/ 1 I $22,140 1 1/01/11 - 10/01/24 $256

Under accounting guidance for derivatives, the interest rate cap does not qualify for hedge accounting, and as a result, is marked to fair value through earnings. Changes in the fair value of the interest rate cap agreement are recorded as a gain or loss in interest expense and related charges in the Statements o f Income in the period i n which the change occurs and cash flows from derivative instruments are presented in net cash flow from operating activities on the Statements of Cash Flows. The fair value of the interest rate cap agreements was $0.4 million and zero at December 31,2011 and 2010, respectively.

Note 7. Property, Plant and Equipment The components ofproperty, plant and equipment at December 3 1,201 1 and 2010 were as follows:

At December 3 I , 2011 201 0 (thousands) Spare parts, long term 3 1,380 $ 1,351 Land 1,890 1,890 Plant and equipment 170,143 170,143 Total property, plant and equipment 5173.413

Note 8. Project Financing Debt MEA issued various series of Energy Revenue Bonds pursuant to various agreements with the WVPEA, UB, and the Bank of New York in order to fund construction and secure permanent project financing. On September 29, 201 1, the outstanding WVPEA bonds were refunded and reissued as West Virginia Economic Development Bonds (WVEDA) Series 201 1 Energy Revenue Bonds, extending the maturity on the bonds from 2017 to 2027. The cost of refunding the bonds of $1.3 million is being deferred and amortized over the 15.5-year remaining term of the bonds, MEA is liable for repayment of principal and interest under these loans, to the limited extent of the assets of MEA. These financing agreements contain customary covenants and default provisions. As of December 3 1,201 1, there were no events of default under these covenants.

Under the terms of the RLA and RA between UB and MEA, the Energy Revenue Bonds are secured by bank-issued Irrevocable LCs. At December 3 1,201 1 and 2010, these LCs totaled $64.6 million and $70.4 million, respectively. LC fees are charged to interest expense as incurred. On August 1,2008, the expiration of the existing LC was extended from September 28, 2008 to September 28,2010. The costs of obtaining the extension of $2.8 million were deferred and amortized over the 2-year extension period. On August 10,2010, the expiration of the existing LC was extended from September 28,2010 to September 28,201 1. The costs of obtaining the extension of $1.9 million were deferred and amortized over the I-year extension period. On September 15,201 1 , a new LC was obtained under the RA with a 5 year term and expiration of September 29,2016. The costs of obtaining the new LC of $3.6 million are being amortized over the 5-year new LC term.

The RA requires a Debt Service Reserve (DSR) account be established at closing for the benefit of the lenders and a total DSR LC commitment be provided by the lender in the amount of $3.9 million. The amount of the DSR LC is considered a deposit in the DSR account for purposes of the RA. Amounts from the DSR are available to be drawn up011 by the Agent Bank in the event other available finds are insufficient to meet debt service requirements.

The RLA required a debt service reserve fund of the Facility for the benefit of the banks, until all loans under the RLA are repaid. The initial reserve requirement of $2.0 million was satisfied with irrevocable letters of credit established by each individual partner in proportion to their ownership interest. Thereafter, MEA funded the remaining $2.0 million reserve requirement from operating revenues in accordance with the R1.A until the reserve requirement was fully funded at $4.0 million. The debt service reserve fund was 110 longer required when the RA replaced the RLA in September 201 1.

Amortization expense was $1.7 million and $1.5 million for the years ended December 31,201 1 and 2010, respectively. The remaining expected amortization is $4.7 million over years 2012 to 2027.

Under the RA, MEA is prohibited from making cash distributions to parlners unless certain conditions are met including but not limited to: 1) achieving ofa Debt Service Coverage Katio (IISCR) of I .20, 2 ) all Major Project

10

MORGANTOWN ENERGY ASSOCIATES Notes to the Financial Statements

Document expirations must be beyond certain specified time frames, 3) the Coal Sales Agreement expiration must be on or after April 17,2017, 4) the W W Litigation Reserve Fund must be fully funded, and 5) the Environmental Reserve Requirement must be funded as well. The RA Environmental Reserve Requirement requires additional deposits be made to the Reserve Fund required by the Electric Contract if the Utility Maximum Achievable Control Technology (MACT) and Boiler MACT rules have been finalized and compliance is required within 24 months and estimates of achieving compliance exceeds the amount then on deposit in the Reserve Fund prior to any partner distributions. The Energy Revenue Bonds are subject to mandatory redemption on the fiAh business day preceding the date of termination of the LC securing the bonds, unless a substitute letter of credit or an alternate credit facility has been provided.

On July 1, 1994, the 1989 Series A bonds were subject to mandatory tender for remarketing purposes and conversion to a fixed or flexible interest rate mode. At that time, the 1989 Series A bonds were issued in a variable rate mode and subsequently were remarketed in minimum denominations of not less than $1 00,000 for periods not to exceed 180 days. Effective with the September 29,201 1 refunding, the WVEDA 201 1 Series bonds were placed in a weekly interest rate mode. The actual weighted average interest rates incurred for 201 1 and 2010 were 2 13% and 0.47%, respectively. In the event of a remarketing failure the Irrevocable LCs are drawn upon to pay existing bond holders and an LC Loan Borrowing (the LC Loan) is issued in accordance with the RLA and/or RA to repay the LC draw. The LC Loan must be repaid upon the earlier of a successful remarketing or 90 days.

The bonds are classified as a current liability on the Balance Sheets due to the uncertainty of MEA’s ability to refinance the obligation on a long-term basis should a remarketing failure occur. In the event of an issuance of an LC Loan, management would endeavor to arrange replacement financing within the 90-day period, but cannot assure that such replacement financing would be obtained, or that the terms and conditions of replacement financing would be comparable to the terms and conditions of the existing debt.

Mandatory sinking fund redemptions associated with the 1989 Series A Bonds, totaling $80.0 million, were required annually on July 1, for the years 2009 through 2017. Through July 1,201 1 mandatory sinking fund redemptions of $21 .O million had been made. Following the September 29,201 1 refunding, mandatory sinking fund redemptions associated with the 201 1 Series Bonds, totaling $59.0 million, are required semi-annually on April I and October 1, for the years April 2012 through April 2027. Sinking fund redemptions of $.I million, $3.7 million, $2.9 million, $3.4 million, and $3.6 million are due for the years 2012 through 2016, respectively, with the remaining balance due thereafter.

Project financing debt i s comprised of the following: At December 3 1, 201 1 2010 (thousands) Energy Revenue Bonds, 1989 Series A, variable interest rate, due 2009-201 7

Energy Revenue Bonds, 201 1 Series, variable interest rate, due 2012-2027 - $66,555

$59,040

Less: Amounts due within one year

Less: Amounts subject to short term LC loans, if unable to remarket l58.990) j59.040) Long-term project financing debt % %

Note 9. Commitments and Contingencies Enviroirmeirtul Matters MEA is subject to costs resulting from a number of federal, slate and local laws and regulations designed to protect human health and the environment. These laws and regulations affect future planning and existing operations. They can result in increased capital, operating and other costs as a result of compliance, remediation, containment and monitoring obligations.

The final Mercury and Air Toxics (MATS) regulation, originally proposed as the Utility Maximum Achievable Control Technology (MACT) regulation, was published in February 2012 and will regulate mercury, rnetaldpaiticulate, and hydrogen chloride (HCI)/S02 emissions from the waste coal boilers. MEA will likely be required to install additional controls by 2015 to meet the HCIISO2 standards and has budgeted accordingly for this requirement.

11

MORGANTOWN ENERGY ASSOCIATES Notes to the Financial Statements

Implementation of the Cross-State Air Pollution Rule, a replacement to the Clean Air Interstate Rule (CAR), h a s been delayed due to legal proceedings. While CSAPR was anticipated to result in higher market allowance pricing for NOx and S02, the result of the court rulings could alter the rule and, therefore, MEA is unable to predict the impact on the Partnership’s operations, cash flows or financial position.

The EPA proposed regulations on March 28,201 1 that govern existing utilities that employ a cooling water intake structure and that have flows exceeding a minimum threshold. As proposed, the rule would require a velocity limit at the water intake screen of 0.5 feet per second. MEA has already demonstrated compliance with this limit through a site-specific flow study. MEA will evaluate the final rule upon its release to ensure that the limits are adopted as proposed.

The EPA has proposed regulations for management of coal combustion byproducts at power plants under the Resource Conservation and Recovery Act. The regulations address ash impoundments, ash landfills, and ash handling practices, providing options for regulation of ash as hazardous or non-hazardous. Depending on the final rules adopted, significant expenditures could be required at facilities that generate coal combustion byproducts. Due to the uncertain nature of the final content and timing of these regulations, MEA is unable to estimate a reasonable range of impact on the Partnership’s operations, cash flows or financial position.

While federal legislative greenhouse gas (GHG) cap-and-trade programs are not currently under consideration, the EPA has begun regulating GHGs under the New Source Review and Title V programs and is developing a New Source Performance Standards for the electricity industry that could potentially apply to existing facilities. Given the highly uncertain outcome and timing of future action by the U S . federal government and states, MEA is unable to estimate a reasonable range of impact of future GHG emission reduction programs on the Partnership’s operations, cash flow or financial position.

Purchase Commitments The Limestone Sales Agreement has an annual minimum purchase requirement of 60,000 tons per year. The minimum limestone purchases required, based on the base price effective as of December 31, 201 1, are $1.2 million annually for the years 2012 to 201 8. The base price is adjusted annually based upon changes in four reference indices specified in the Limestone Sales Agreement. Limestone tons purchased for the years ended December 3 1, 201 1 and 2010 were 94,295 and 84,473, respectively.

Cotitingetit Liabilities WW has disputed the manner in which certain price adjustments were calculated and implemented underthe Steam Purchase Agreement between MEA and WVU. MEA disagrees with WVU’s contentions and has so advised WVU. On May 28, 2010 W W filed a complaint in the Circuit Court of Monongalia County, West Virginia naming MEA as the defendant. Although the complaint does not specify a specific amount, it alleges that MEA improperly charged inflated steam prices and seeks recovery of the alleged overcharges. MEA believes WVU’s claims are without merit and intends to vigorously defend its position. Since the complaint was filed, various legal proceedings have occurred as well as discovery requests and responses, depositions, and court ordered mediation. These proceedings are expected to continue through 2012 until the matter is heard at trial which is currently scheduled for June 2012. m A does not believe it is probable that a loss has been incurred and has not recorded any liability as of December 31,201 1. MEA estimates a possible range of loss including potential interest at December 31,201 1 of $0 to $16.8 million.

As discussed in Note 4, a “WMr Litigation Reserve Fund” has been established to minimize lender risk associated with the WVU Litigation. The initial reserve requirement was $10.2 million and increases by cash from Operations until a total Reserve Requirement of $17.7 IS met. The Reserve Requirement is reduced if all or a portion of the litigation is definitively resolved.

Note 10. Credit Risk Credit risk is the risk of financial loss if counterparties fail to perform their contractual obligations. MEA sells all of its electric generating capacity to one customer, Monongahela, and all of its steam production to one customer, W W . If either customer does not fulfill its obligations, terminates its agreements with MEA, or experiences severe credit deterioration and if MEA cannot make adequate alternate arrangements, its revenues could decrease

12

MORGANTOWN ENERGY ASSOCIATES Notes to the FinRncial Statements

materially. At March 30,2012, the ratings for Monongahela and WW by Standard & Poor’s Rating Services and Moody’s Investor Service are considered investment grade.

Note 11. Related Party Transactions Prior to Dominion’s January 201 I sale of its partnership interest, MEA incurred certain costs with companies affiliated with Dominion. There were no significant amounts incurred during 2011 nor my amounts included in accounts payable as of December 3 1,201 1. The 201 0 amounts incurred and payable as of December 31,2010 are listed below.

Included in A/P Affiliated Party Agreement / Description Incurred in 2010 at 12/31/10

(thousands)

Dominion Energy DESCO O&M Agreement $3,300 $1,000

$100 $0

Hope Gas, Inc. Limited Term Transportation Agreement $700 $0 Dominion Insurance Allocations $400 $100

Emissions Allowances Master Purchase and Marketing Inc. Sales Agreement

Effective September 6,2010, PPMS assumed management responsibilities for the facility (see Note 1). PPMS has an exclusive contractual arrangement with Energy Investors Funds, an affiliate of Hickory. During 201 I and 20 10, MEA incurred other operating costs related to PPMS of $0.6 million and $0.3 million, respectively, under the Contract for Project Management and Administrative Services. At December 31, 201 1 and 2010, $0.1 million and $0.0 million, respectively, are included in accounts payable related to these costs.

Prior to the September 2011 refinancing, the initial debt service reserve. requirement under the RLA of $2.0 million was satisfied with irrevocable LCs established by each individual partner in proportion to their ownership interest. Under the Accommodation Agreement between MEA and UB, an interest risk LC was represented by irrevocable LCs totaling $2.0 million by Dominion (76.9%) and Hickory (23.1%). Under the Rate Hedging Agreement, dated July I , 1994 between MEA and UB, and in conjunction with the remarketing of the 1989 Series A Bonds, a basis risk LC was required for the benefit of the banks. The basis risk represents the risk associated with an imperfect hedging relationship provided for under the Rate Hedging Agreement. The basis risk LC amount as of December 3 1, 2010 was $6.5 million. The partners bear the economic risks and costs of the basis risk LC in proportion to their ownership interests.

Following the refinancing in September 201 1, a portion of the WVU Litigation Reserve Requirement under the RA was satisfied with irrevocable letters of credit of $3.7 million provided by Hickory.

Note 12. Subsequent Event Under a Letter Agreement dated March 7, 2012, the parties to the Coal Agreement agreed to extend the expiration to July 31, 2012.

13

Re: Monongahela Power Company Certification of Morgantown Energy Associates Facility for Renewable Energy Credits

VERIFICATION

COMMONWEATH OF PENNSYLVANIA,

COUNTY OF WESTMORELAND, TO WIT:

Robert B. Reeping, Manager, Regulated Commodity Sourcing, being duly sworn, says that

the facts and allegations in the attached petition are true, except so far as they are therein stated to

be on information, and that, so far as they are therein stated to be on information, he believes them

to be true.

/

Taken, sworn to and subscribed before me this 29th day of October 2012.

My commission expires:

/7