LIMITED LIABILITY COMPANY AGREEMENT OF POTOMAC-APPALACHIAN TRANSMISSION HIGHLINE, LLC

Exhibit 10.1

		FOIA Confidential Treatment Requested by Allegheny Energy, Inc.

LIMITED LIABILITY COMPANY AGREEMENT

OF

POTOMAC-APPALACHIAN TRANSMISSION HIGHLINE, LLC

September 1, 2007

		FOIA Confidential Treatment Requested by Allegheny Energy, Inc.

TABLE OF CONTENTS

ARTICLE 1
DEFINITIONS AND INTERPRETATION							1
	1.01			Definitions			1
	1.02			Interpretation			21
ARTICLE 2
FORMATION; ORGANIZATION							22
	2.01			Formation			22
	2.02			Name			22
	2.03			Members			22
	2.04			Voting Members			23
	2.05			Registered Office; Registered Agent; Principal Office			23
	2.06			Purposes			23
	2.07			Powers			23
	2.08			Creation of Series			24
	2.09			No State Law Partnership			25
	2.10			Foreign Qualification			25
	2.11			Term			25
	2.12			Liability to Third Parties			25
	2.13			Series Interests			26
	2.14			Formation of Operating Companies			26
ARTICLE 3
THE PROJECT							27
	3.01			RTEP Designation			27
	3.02			Regulatory Matters			27
	3.03			Maryland Transmission Line			29
	3.04			Services Agreements			31
	3.05			Administrative Services Agreements			32
	3.06			Pennsylvania Facilities			34
	3.07			Additional Facilities			34
	3.08			Duty of Cooperation			37
	3.09			Company Escrow Agreement			37
	3.10			Series Expenses			38
	3.11			Financing			39
	3.12			Ohio Facilities			39
	3.13			West Virginia Facilities			40
	3.14			Interconnections			41
	3.15			Abandonment of the Project			41
	3.16			Compliance with Law			41

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ARTICLE 4
REPRESENTATIONS AND WARRANTIES; DISCLAIMERS							42
	4.01			General Representations and Warranties			42
	4.02			Disclaimer of Certain Duties			42
	4.03			Release			43
	4.04			Business Opportunities			43
ARTICLE 5
DISPOSITIONS AND ENCUMBRANCES OF MEMBERSHIP INTERESTS							45
	5.01			Restrictions on Dispositions			45
	5.02			Permitted Dispositions			45
	5.03			Right of First Offer			46
	5.04			Requirements Applicable to All Dispositions and Admissions			49
	5.05			Tax Partnership Transfer Limitations			50
	5.06			Deemed Membership Disposition			50
	5.07			Admission of Assignee as a Member			51
	5.08			Special Dispositions			51
	5.09			Issuance of Additional Series Interests			51
	5.10			Specific Performance			51
ARTICLE 6
CAPITAL CONTRIBUTIONS							51
	6.01			Series Capital Contributions			51
	6.02			No Other Contribution Obligations			53
	6.03			Return of Contributions			53
	6.04			Series Capital Accounts			53
	6.05			Failure to Make a Series Capital Contribution			54
	6.06			Priority Interest			54
	6.07			Permanent Contribution			56
	6.08			Further Assurance			56
	6.09			Deficit Series Capital Accounts			56
	6.10			Capital Contribution Escrow Agreement			56
ARTICLE 7
DISTRIBUTIONS AND ALLOCATIONS							57
	7.01			Distributions			57
	7.02			Allocations of Series Profits and Series Losses			57
	7.03			Special Allocations for Series Capital Account Purposes			58
	7.04			Income Tax Allocations			60
	7.05			Varying Interests			61

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ARTICLE 8
MANAGEMENT							61
	8.01			Management Generally			61
	8.02			Board of Managers			62
	8.03			Administrative Committees			63
	8.04			Officers and Committees			65
	8.05			Meetings			66
	8.06			Limitation of Duties and Liabilities			67
	8.07			Intentionally Omitted			68
	8.08			Costs and Expenses			68
	8.09			Resolution of Deadlocks			68
	8.10			Conversion of [***]			69
	8.11			Matters Requiring Unanimous Approval of Voting Members of the Company			72
	8.12			Matters Requiring Unanimous Approval of Series Members			72
	8.13			Matters Requiring Super-Majority Approval of Series Members			73
	8.14			Affiliate Contracts			73
ARTICLE 9
TAXES							73
	9.01			Tax Elections			73
	9.02			Series Tax Matters Members			74
ARTICLE 10
INTELLECTUAL PROPERTY							76
	10.01			No Grant of Trademark			76
	10.02			License Agreement			76
	10.03			Disclosure of Certain Know-How			76
ARTICLE 11
ACCOUNTING; AUDIT RIGHTS							76
	11.01			Accounting			76
	11.02			Reports			77
	11.03			Records			77
	11.04			Audits			77
ARTICLE 12
WITHDRAWAL							78
	12.01			Voluntary Withdrawal			78
	12.02			Deemed Withdrawal			81
	12.03			Effect of Withdrawal			81
	12.04			Destruction of Confidential Information			82

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ARTICLE 13
DISPUTES							83
	13.01			Disputes			83
	13.02			Negotiation to Resolve Disputes			83
	13.03			Litigation			83
	13.04			Deadlock Arbitration			83
ARTICLE 14
DEFAULT AND REMEDIES; LIMITATION OF LIABILITY							85
	14.01			Default			85
	14.02			General Remedies			86
	14.03			AET Default			86
	14.04			AEPTHC Default			87
	14.05			Exclusion of Consequential Damages			87
ARTICLE 15
INDEMNIFICATION							87
	15.01			Indemnification Obligations			87
	15.02			Indemnification Procedures			89
	15.03			Subrogation			90
ARTICLE 16
DISSOLUTION, WINDING-UPAND TERMINATION							90
	16.01			Dissolution			90
	16.02			Winding-Up and Termination			91
	16.03			Fair Market Value Appraisals			93
	16.04			Certificate of Cancellation			94
ARTICLE 17
CONFIDENTIAL INFORMATION							94
	17.01			Confidentiality Obligation			94
	17.02			Permissible Disclosures			95
	17.03			Obligation with respect to Third Parties			96
	17.04			Remedy			96
	17.05			Duration			96
ARTICLE 18
GENERAL PROVISIONS							96
	18.01			Setoff Rights			96
	18.02			Notices			97
	18.03			Entire Agreement; Superseding Effect			97
	18.04			Effect of Waiver or Consent			97

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	18.05			Amendment or Restatement			98
	18.06			Binding Effect			98
	18.07			Severability			98
	18.08			Governing Law, Jurisdiction and Venue .			98
	18.09			Waiver of Right to Jury Trial			99
	18.10			Further Assurances			99
	18.11			Waiver of Certain Rights			99
	18.12			Public Announcements			99
	18.13			Counterparts			99
	18.14			Construction			99

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EXHIBITS AND SCHEDULES

Exhibit A		Form of Company Escrow Agreement
Exhibit B		Form of License Agreement
Exhibit C		Form of Administrative Services Agreement
Exhibit D-1		Form of AEPTHC Services Agreement (West Virginia Operating Company)
Exhibit D-2		Form of AEPTHC Services Agreement (AYE Operating Company)
Exhibit D-3		Form of AEPTHC Services Agreement (Ohio Operating Company)
Exhibit D-4		Form of AET Services Agreement (West Virginia Operating Company)
Exhibit D-5		Form of AET Services Agreement (Ohio Operating Company)
Exhibit E		Form of Capital Contribution Escrow Agreement
Exhibit F		Form of Regulatory Undertakings Agreement
Exhibit G		Form of Environmental Indemnity Agreements
Schedule 2.08		Series Information
Schedule 3.01		Description of Project Facilities
Schedule 3.02		Regulatory Plan
Schedule 3.09		Company Revenue Allocation Methodology
Schedule 8.02		Initial Representatives
Schedule 8.03		Initial Administrators
Schedule 9.02		Series Tax Matter Members
Schedule 18.02		Notice Information

		FOIA Confidential Treatment Requested by Allegheny Energy, Inc.

LIMITED LIABILITY COMPANY AGREEMENT
OF
POTOMAC-APPALACHIAN TRANSMISSION HIGHLINE, LLC
A Delaware Limited Liability Company

     This Limited Liability Company Agreement (the “ Agreement ”) of POTOMAC-APPALACHIAN TRANSMISSION HIGHLINE, LLC (the “ Company ”), dated as of September 1, 2007 (the “ Effective Date ”), is adopted, executed and agreed to, for good and valuable consideration, by AET PATH Company, LLC (“ AET ”), a limited liability company organized under the laws of the State of Delaware (with respect to the West Virginia Series, the Ohio Series and the AYE Series), and AEP Transmission Holding Company, LLC (“ AEPTHC ”), a limited liability company organized under the laws of the State of Delaware (with respect to the West Virginia Series and the Ohio Series).

RECITALS

WHEREAS, AET and AEPTHC have formed the Company as a series limited liability company by filing a Certificate of Formation (the “ Delaware Certificate ”) with the office of the Secretary of State of Delaware as initial members of the Company; and

WHEREAS, the purpose of the Company, to be pursued through its Operating Company subsidiaries, is to design, engineer, site, acquire rights-of-way for, procure, permit, construct, commission, finance, own, operate and maintain certain transmission and interconnection facilities in the PJM region subject to the terms set forth in this Agreement; and

WHEREAS, pursuant to Section 18-215 of the Act, this Agreement establishes separate Series, each of which has separate rights, powers and duties regarding: (a) specified property; and (b) the Series Profits and Series Losses associated with such property.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, AET and AEPTHC agree as follows:

ARTICLE 1
DEFINITIONS AND INTERPRETATION

     1.01 Definitions . As used in this Agreement, the following capitalized terms have the respective meanings set forth below or set forth in the Sections or other provisions referred to below:

      Act: The Delaware Limited Liability Company Act.

      Additional Contribution: Section 6.05(a)(ii).

      Additional Contribution Member: Section 6.05(a)(ii).

      Additional Facilities: Section 3.07(a).

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      Additional Facilities Disposition Date: The date, if any, upon which the Disposition of the Additional Facilities by the AYE Operating Company to the West Virginia Operating Company occurs pursuant to Section 3.07.

      Additional Facilities Extension Period: The period of time: (a) commencing on the latest to occur of (i) the date of substantial completion of the Amos Upgrade such that it is capable of being placed in service or (ii) the date as of which elements of the Bedington-Kemptown Facilities with a net book value equal to no less than [***] Dollars [***] are substantially complete such that they are capable of being placed in service; and (b) ending on the Additional Facilities Disposition Date.

      Additional Facilities Return Amount: If the Additional Facilities are Disposed of pursuant to Section 3.07, an amount equal to the return that would have been earned based on the methodology set forth in Schedule 3.09 applied to the Amos Upgrade Cost over the Additional Facilities Extension Period, plus interest on the periodic balance of such amount calculated using the annual rate of interest set forth from time to time in 18 C.F.R. § 35.19a, compounded annually.

      Adjusted Series Capital Account: With respect to each Series, the Series Capital Account maintained for each Series Member: (a) increased by any amounts that such Series Member is obligated to restore or is treated as obligated to restore under Sections 1.704-1(b)(2)(ii)(c), 1.704-2(g)(1) and 1.704-2(i)(5) of the Treasury Regulations; and (b) decreased by any amounts described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Treasury Regulations.

      Administrative Committee: Section 8.03(a).

      Administrative Services Agreement: Any of the following agreements: (a) the Administrative Services Agreement between AET and the West Virginia Operating Company, in the form of Exhibit C ; (b) the Administrative Services Agreement between AEPTHC and the West Virginia Operating Company, in the form of Exhibit C ; (c) the Administrative Services Agreement between AET and the Ohio Operating Company, in the form of Exhibit C ; (d) the Administrative Services Agreement between AEPTHC and the Ohio Operating Company, in the form of Exhibit C ; or (e) the agreement between Allegheny Energy Service Corporation and the AYE Operating Company, each dated as of the Effective Date, as any such agreement may be amended from time to time.

      Administrator : Section 8.03(a).

      AEPTHC: The preamble to this Agreement.

      AEPTHC Representatives: The Representatives appointed by AEPTHC, or the Assignee of all of AEPTHC’s Voting Interests in the Company, in either case pursuant to Section 8.02(b).

      AEP Transmission Zone: The geographic area identified on Attachment J to the PJM Tariff (Revised Sheet No. 317) as the Transmission Zone of AEP East.

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      AET: The preamble to this Agreement.

      AET Representatives: The Representatives appointed by AET, or the Assignee of all of AET’s Voting Interests in the Company, in either case pursuant to Section 8.02(b).

      Affiliate: With respect to any Person: (a) each entity that such Person Controls; (b) each Person that Controls such Person; and (c) each entity that is under common Control with such Person; provided, however , that the Company shall not be deemed to be an Affiliate of any Member regardless of the Series Percentage of such Member.

      Affiliate Arrangement: Section 8.14.

      Affiliated Contractor: Section 8.14.

      Affiliates’ Outside Activities: Section 4.04(c).

      Agreement: The preamble to this Agreement.

      Allegheny Assets: As of any date, the portion, if any, of the Bedington-Kemptown Facilities owned as of such date by Potomac Edison or any of its Affiliates other than the AYE Operating Company.

      Allegheny Transmission Zone: The geographic area identified on Attachment J to the PJM Tariff (Revised Sheet No. 317) as the Transmission Zone of Allegheny Power.

      Amos-Kemptown FERC 205 Application: The application submitted to FERC by the Company on behalf of the West Virginia Operating Company and the AYE Operating Company pursuant to Section 205 of the FPA seeking approval of a formula rate and rate incentives for the West Virginia Facilities and the Bedington-Kemptown Facilities.

      Amos Upgrade: Upgrades to the Appalachian Power Company’s Amos Substation related to the construction of the other West Virginia Facilities; provided, however , that the Amos Upgrade shall not include any facilities existing or under construction on the Effective Date.

      Amos Upgrade Cost: Section 3.07(d).

      Appraiser: Section 16.03(d).

      Assignee: Any Person that acquires any Series Interest(s) through a Disposition in accordance with the terms and conditions of this Agreement.

      [***] Notice: Written notice to initiate a [***].

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      Available Cash: With respect to any Series for any Quarter ending prior to the liquidation of the Company: (a) the sum of all cash and cash equivalents distributed to such Series by the Operating Company associated with such Series or otherwise received by the Company on behalf of such Series or exclusively attributable to the property or activities of such Series or the Operating Company associated with such Series; less (b) any costs and expenses of such Series; provided, however , that Available Cash with respect to the Quarter in which a liquidation of a Series occurs and any subsequent Quarter shall be deemed to equal zero.

      AYE Board: The Managers of the AYE Operating Company, as described in the AYE Operating Company Agreement.

      AYE Facilities: Those facilities identified as such in Schedule 3.01 .

      AYE Operating Company: A limited liability company organized under the laws of the State of Delaware: (a) that, subject to Section 3.03(c), owns or will own the AYE Facilities and the real property interests on which such facilities will be located; (b) that is one hundred percent (100%) owned by the Company; and (c) whose property and operations are solely for the benefit of the AYE Series Member(s).

      AYE Operating Company Agreement: The limited liability company agreement of the AYE Operating Company.

      AYE Series: A Series of the Company established pursuant to Section 2.08 that is exclusively entitled to the benefits, and exclusively responsible for the liabilities, of the AYE Operating Company.

      AYE Series Administrative Committee: The Administrative Committee that manages the AYE Series.

      AYE Series Member: The: (a) Series Member of the AYE Series identified on Schedule 2.08 ; (b) Assignees thereof that acquire Series Interests in the AYE Series and are admitted as Series Members of the AYE Series in accordance with this Agreement; and (c) successors in interest to such Persons.

      Bankruptcy or Bankrupt: With respect to any Person: (a) a general assignment for the benefit of creditors occurs; (b) the filing by such Person of a voluntary bankruptcy petition; (c) such Person (i) becomes the subject of an order for relief or is declared insolvent in any federal or state bankruptcy or insolvency proceedings, (ii) files a petition, answer or other pleading seeking a reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any Law, (iii) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against such Person in a proceeding of the type described in clause (a), (d), (e) or (f) of this definition; (d) such Person seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator over such Person or over all or any substantial part of such Person’s assets or properties; (e) the commencement of a proceeding seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or

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similar relief under any Law against such Person and, within sixty (60) Days of such commencement, such proceeding has not been dismissed or the relief requested therein has not otherwise been denied; or (f) the appointment, without such Person’s consent or acquiescence, of a trustee, receiver or liquidator over such Person or all or any substantial part of such Person’s assets or properties, which appointment (A) has not been vacated, stayed or terminated within sixty (60) Days or (B) continues for a period of more than sixty (60) Days after the date of expiration of a stay, if the appointment has not previously been vacated or terminated.

      Bedington-Kemptown Facilities: Subject to Section 3.07, those Project Facilities identified as such in Schedule 3.01 .

      Board of Managers: Section 8.02(a).

      Book Value: With respect to any property of an Operating Company associated with any Series, the adjusted basis of such property for federal income tax purposes, except as follows:

	(a)		The initial Book Value of any property contributed by a Series Member of such Series shall be the Fair Market Value of such property;
	(b)		The Book Value of any such property shall be adjusted to equal its Fair Market Value in connection with: (i) the acquisition of a Series Interest of such Series by, or adjustment to the Series Percentage of, any new or existing Series Member of such Series as a result of more than a de minimis Series Capital Contribution to such Series; (ii) the distribution by such Series to a Series Member of such Series of more than a de minimis amount of property as consideration for a Series Interest of such Series or an adjustment to the Series Percentage of such Series Member; (iii) the grant of a Series Interest of such Series (other than a de minimis interest) as consideration for the provision of services to, or for the benefit of, such Series by an existing Series Member of such Series acting in its capacity as a Series Member thereof, or by a new Series Member of such Series acting in its capacity as a Series Member thereof or in anticipation of becoming a Series Member of such Series; (iv) the liquidation of such Series within the meaning of Section 1.704-1(b)(2)(ii)(g)(1) of the Treasury Regulation (other than pursuant to Section 708(b)(1)(B) of the Code); or (v) any other event to the extent determined by the Administrative Committee of such Series to be necessary to properly reflect Book Values in accordance with the standards set forth in Section 1.704-1(b)(2)(iv)(q) of the Treasury Regulations;
	(c)		The Book Value of property distributed to a Series Member of such Series shall be the Fair Market Value of such property; and
	(d)		The Book Value of property of an Operating Company shall be increased or decreased to reflect any adjustments to the adjusted basis of such

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property pursuant to Section 734(b) or Section 743(b) of the Code, but only to the extent that such adjustments are taken into account in determining Series Capital Accounts for the Series associated with such Operating Company pursuant to Section 1.704-1(b)(2)(iv)(m) of the Treasury Regulations; provided, however , that Book Value shall not be adjusted pursuant to this clause (d) to the extent the Administrative Committee of such Series determines that an adjustment pursuant to clause (b) of this definition is necessary or appropriate in connection with the transaction that would otherwise result in an adjustment pursuant to this clause (d).

If the Book Value of property has been determined or adjusted pursuant to clause (b) or (d) of this definition, such Book Value shall thereafter be adjusted by the Tax Depreciation taken into account with respect to such property for purposes of computing Series Profits and Series Losses and other items allocated pursuant to Article 7.

      Business Day: Any day other than a Saturday, a Sunday or a holiday on which national banking associations in the State of New York are closed.

      Capital Contribution Escrow Agreement: Section 6.10(a).

      Capital Contribution Escrow Account: With respect to each Joint Series, a segregated account established for the benefit of such Joint Series and the Series Members of such Joint Series pursuant to the Capital Contribution Escrow Agreement for deposits of Series Capital Contributions to such Joint Series.

      Capital Contribution Escrow Agent: The escrow agent that is designated under, and is a party to, the Capital Contribution Escrow Agreement, in its capacity as escrow agent thereunder.

      Certified Public Accountants: With respect to any Series, a firm of independent public accountants selected from time to time by the Administrative Committee of such Series.

      Charter Documents: The articles of formation or organization and limited liability company agreement of any limited liability company.

      Claim: Any and all judgments, claims, causes of action, demands, lawsuits, suits, proceedings, governmental investigations or audits, losses, assessments, fines, penalties, administrative orders, obligations, costs, expenses, liabilities and damages (whether actual, consequential or punitive), including interest, penalties, reasonable attorneys’ fees, disbursements and costs of investigations, deficiencies, levies, duties, imposts, remediation and cleanup costs, and natural resources damages, in each case to the extent not reimbursed or paid for by insurance.

      Claiming Member: Section 18.01(b).

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      Class A Administrator: Each Administrator on the Administrative Committee of a Joint Series that is appointed by AET or any Assignee that acquires AET’s right to appoint Administrators to such Administrative Committee pursuant to Section 5.07.

      Class B Administrator: Each Administrator on the Administrative Committee of a Joint Series that is appointed by AEPTHC or any Assignee that acquires AEPTHC’s right to appoint Administrators to such Administrative Committee pursuant to Section 5.07.

      Class A Representative: Section 8.02(b).

      Class B Representative: Section 8.02(b).

      Code: The Internal Revenue Code of 1986, as amended.

      Company: The preamble to this Agreement.

      Company Dissolution Event: Section 16.01(a).

      Company Escrow Agent: Section 3.09(a).

      Company Escrow Agreement: The Escrow Agreement to be executed among the Company, each Operating Company and the Company Escrow Agent, substantially in the form of Exhibit A .

      Company Regulatory Filings: The Amos-Kemptown FERC 205 Application and applications by the Company: (a) to FERC on behalf of the West Virginia Operating Company and the Ohio Operating Company, for approval of the sale of equity and the issuance of debt pursuant to Section 204 of the FPA; (b) to FERC on behalf of the Company and the Joint Operating Companies for approval of interlocking directorates; (c) to FERC on behalf of the Ohio Operating Company pursuant to Section 205 of the FPA seeking approval of incentive rates and a formula rate for the Ohio Facilities; and (d) if required to be filed by the Company, to state utility commissions seeking approval of Company transactions with Affiliates and siting of Project Facilities.

      Confidential Information: Trade secret or confidential information that is provided by a Disclosing Party to a Recipient pursuant to this Agreement or any other agreement (including the Mutual Confidentiality Agreement between American Electric Power Service Corporation and Allegheny Energy, Inc. dated as of March 20, 2007 and any other agreement incorporating or invoking the provisions of Article 17), including any of the following kinds of information if confidential: business information, operational information, customer information, technology information, risk management information, personnel, benefits and human resource information, information systems information, intellectual property information, legal information, supplier or vendor information and plans, information concerning sources or terms of financing or credit, supply chain information and processes, tax information, financial information, market analysis information, technical information, process information, product information,

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service information, pricing information, formulae, formulations, technical and product specifications, equipment descriptions, plans, layouts, drawings and computer programs, assembly, quality control, installation and operating procedures, operating and/or maintenance manuals, instructions and other user documentation, technical and marketing information, designs and data; provided, however , that Confidential Information shall include the terms and conditions of this Agreement; and provided further , that Confidential Information shall not include, and all obligations regarding Confidential Information shall not apply to, information that the Recipient can prove:

	(a)		was already known by (as established by dated documentation) the Recipient at the time of receipt of the information by the Recipient from the Disclosing Party;
	(b)		is or becomes available to the industry without confidentiality restrictions ( e.g. , in technical literature, databases or the like that are available with or without subscription) or is in, or subsequently enters, the public domain other than as a result of a disclosure by the Recipient in breach of this Agreement;
	(c)		was received by the Recipient from a third party if such third party was not, or the Recipient reasonably believed such third party was not, subject to any confidentiality obligation to the Disclosing Party or disclosing information that the third party knew at the time of such disclosure was obtained from the Disclosing Party by improper means;
	(d)		was independently developed by a Person without access to information provided by the Disclosing Party;
	(e)		was or is furnished by the Disclosing Party to a third party without confidentiality restrictions; or
	(f)		is approved for release by written authorization of the Disclosing Party.

      Contributing Member: Section 6.05(a).

      Control: The possession, directly or indirectly, through one or more intermediaries, of the following:

	(a)		in the case of a corporation, the power or authority to vote or dispose of more than fifty percent (50%) of the outstanding voting securities entitled to elect directors or individuals who perform similar management functions thereof;
	(b)		in the case of a limited liability company, partnership, limited partnership or other entity, the right to more than fifty percent (50%) of the distributions therefrom or economic interests therein; or

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(c)

in the case of any entity, the power or authority, through ownership of voting securities, by contract or otherwise, to elect or appoint a majority of general partners, directors, managers, managing members, trustees or such other Persons that perform similar management functions, or otherwise exercise predominant control over the management of the entity.

      Converted Member: After a declaration by AET pursuant to, and in accordance with, Section 8.10(a) and for so long as it remains a [***] Member of the West Virginia Series pursuant to the terms of this Agreement, AEPTHC, in its capacity as a Series Member of the West Virginia Series.

      Curative Allocations : Section 7.03(b).

      Day: A calendar day; provided, however , that if any period of Days referred to in this Agreement shall end on a Day that is not a Business Day, then the expiration of such period shall be automatically extended until the end of the first succeeding Business Day.

      Deadlock: A: (a) dispute that has continued for more than fifteen (15) Days among (i) the Voting Members or Representatives on the Board of Managers regarding a material matter concerning the business or affairs of the Company, (ii) the Series Members of a Joint Series or the Administrators on the Administrative Committee of a Joint Series regarding a material matter concerning the business or affairs of such Joint Series or (iii) the Managers of an Operating Company associated with a Joint Series regarding a material matter concerning the business or affairs of such Operating Company; or (b) Revenue Allocation Deadlock; provided, however , that a Deadlock shall not include a disagreement regarding an interpretation of any terms or conditions of this Agreement.

      Deadlock Arbitration: Section 8.09(b).

      Deadlock Arbitration Parties: All of the Voting Members of the Company, or in the case of a Deadlock pertaining to a Joint Series or an Operating Company associated with a Joint Series, the Voting Members of such Joint Series or the Joint Series associated with such Operating Company, as applicable.

      Deadlock Arbitrator: Section 13.04(c).

      Deadlock Notice: Section 8.09(a).

      Deemed Membership Disposition: With respect to any Series Interests that are owned, directly or indirectly, by a Person that owns no substantial assets other than such Series Interests and assets that are directly related thereto, a Disposition of all of the voting securities or other equity interests, or substantially all of the assets, of such Person.

      Deemed Tax Disposition: With respect to any Series that is treated as a partnership for federal income tax purposes, any event that is treated for federal income

*** Confidential Treatment Requested

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

tax purposes as a sale or exchange of a Series Member’s Series Interests or portion thereof for purposes of Section 708(b)(1)(B) of the Code.

      Default: Section 14.01.

      Default [***]: An [***] a Joint Series Operating Company [***] .

      Default Rate: A rate per annum equal to the lesser of: (a) a varying rate per annum equal to the sum of (i) the prime rate as published in The Wall Street Journal , with adjustments in that varying rate to be made on the same date as any change in that rate is so published, plus (ii) two hundred (200) basis points; and (b) the maximum rate permitted by applicable Laws.

      Defaulting Member: A Member that has committed a Default.

      Delaware Certificate: The recitals to this Agreement.

      Deposit Account: Section 3.09(a).

      Disclosing Party: The Company, an Operating Company, a Member or any of its Affiliates that discloses Confidential Information to a Recipient.

      Dispose , Disposing or Disposition: With respect to any asset (including any Series Interest or membership interest in an Operating Company), a sale, assignment, transfer, conveyance, gift, exchange or other disposition of such asset, whether such disposition be voluntary, involuntary or by operation of Law, including the following: (a) in the case of an asset owned by a natural person, a transfer of such asset upon the death of its owner, whether by will, intestate succession or otherwise; (b) in the case of an asset owned by an entity, (i) a merger or consolidation of such entity (other than where such entity is the survivor thereof), and (ii) a distribution of such asset, including in connection with the dissolution, liquidation, winding-up or termination of such entity (unless, in the case of dissolution, such entity’s business is continued without the commencement of liquidation or winding-up); and (c) a disposition in connection with, or in lieu of, a foreclosure of an Encumbrance, provided, however , that neither the creation of an Encumbrance nor the conversion of an entity into another type of entity shall constitute a Disposition.

      Dispute: Section 13.01.

      Disputing Member: Section 13.01.

      Dissolution Notice: Section 16.01(c).

      Economic Risk of Loss: Section 1.752-2(a) of the Treasury Regulations.

      Effective Date: The preamble to this Agreement.

      Election Period: Section 5.03(a).

*** Confidential Treatment Requested

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

      Encumbrance: A security interest, lien, pledge, mortgage or other encumbrance, whether such encumbrance be voluntary, involuntary or by operation of Law.

      Environmental Indemnity Agreement: Any of the following agreements: (a) the Environmental Indemnity Agreement between Appalachian Power Company and the West Virginia Operating Company, dated as of the Effective Date; or (b) in the event the Additional Facilities are transferred to the West Virginia Operating Company, the Environmental Indemnity Agreement between the West Virginia Operating Company and the AYE Operating Company, dated as of the date of such transfer, each in the form of Exhibit G , as any such agreement may be amended from time to time.

      Fair Market Value: The fair market cash value of an asset determined in accordance with Section 16.03(a).

      FERC: The Federal Energy Regulatory Commission or any Governmental Authority succeeding to the powers of such commission.

      FMV Notice: Section 16.03(a).

      FPA: The Federal Power Act, 16 U.S.C. §§ 824 et seq .

      GAAP: Generally accepted accounting principles for financial reporting as in effect from time to time in the United States, applied on a consistent basis.

      Good Utility Practice: Any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry during the relevant time period, or any of the practices, methods and acts that, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition. Good Utility Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather is intended to include acceptable practices, methods or acts generally accepted in the region.

      Governing Body: Each of: (a) the Board of Managers; and (b) each Administrative Committee.

      Governmental Approvals: Licenses, certificates, permits, franchises, orders, approvals, determinations and authorizations from Governmental Authorities having valid jurisdiction.

      Governmental Authority: Any federal, state, commonwealth, foreign, tribal, territorial, local, county, parish, district or municipal governmental body; any governmental, regulatory or administrative agency, commission, body, instrumentality or other authority exercising or entitled to exercise any executive, judicial, legislative, administrative, regulatory or taxing authority or power, including any court or other

*** Confidential Treatment Requested

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

judicial body, FERC, any state utility regulatory commission with jurisdiction; and any officer, official or other representative of any of the foregoing.

      Indebtedness: Indebtedness for borrowed money owed by any Operating Company.

      Indemnified Party: The Person entitled to indemnification pursuant to this Agreement.

      Indemnifying Party: The Person obligated to provide indemnification pursuant to this Agreement.

      Initiating Party: Section 16.03(a).

      Issues Statement: Section 13.04(a).

      Joint Series: Each of the West Virginia Series and the Ohio Series.

      Joint Series Member: A Series Member of a Joint Series.

      Joint Series Operating Companies: The West Virginia Operating Company and, unless and until AET Withdraws therefrom, the Ohio Operating Company.

      kV: Kilovolt(s).

      Law: Any constitution, statute, act, code (including the Code), law, ordinance, executive order, rule, or regulation (including a regulation that has been formally promulgated in a rule making proceeding but, pending final adoption, is in proposed or temporary form having the force of law); any guideline or notice having the force of law; and any Governmental Approval, judgment, decree, writ, ruling, proclamation, injunction, resolution, decision, declaration or interpretative or advisory opinion or letter of a Governmental Authority having jurisdiction.

      License Agreement: The License Agreement by and among American Electric Power Service Corporation, as licensor, and the West Virginia Operating Company, the Ohio Operating Company, the AYE Operating Company and the AET Affiliate(s) that will construct and own the Pennsylvania Facilities, collectively as licensees, in the form of Exhibit B and dated as of the Effective Date, as such agreement may be amended from time to time.

      Manager: With respect to any Operating Company, an individual serving on the OpCo Board of such Operating Company.

      Maryland Regulatory Deadline : The date as of which the Company reasonably determines that the MPSC should have acted to grant either the AYE Operating Company or Potomac Edison a certificate of public convenience and necessity and authority to exercise the right of eminent domain to acquire property necessary to construct the Maryland Transmission Line, which Maryland Regulatory Deadline shall be no earlier

*** Confidential Treatment Requested

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

than one (1) year after the later to occur of: (a) the filing of an application by the AYE Operating Company or Potomac Edison for a certificate of public convenience and necessity to construct the Maryland Transmission Line; or (b) a determination by the United States Department of Energy that the Maryland Transmission Line is within a NIETC.

      Maryland Transmission Line: The portion of the Bedington-Kemptown Facilities consisting of twin circuit 500 kV transmission lines located in the State of Maryland.

      Member: Any: (a) Person identified as a Series Member of any Series on Schedule 2.08 ; (b) Assignee that acquires any Series Interest and is admitted as a Series Member in accordance with this Agreement; and (c) successors in interest to any such Person(s).

      Member Nonrecourse Debt: The definition of “partner nonrecourse debt” in Section 1.704-2(b)(4) of the Treasury Regulations, as determined separately with respect to each Series that is treated as a partnership for federal income tax purposes.

      Member Nonrecourse Debt Minimum Gain: The definition of “partner nonrecourse debt minimum gain” in Section 1.704-2(i)(2) of the Treasury Regulations, as determined separately with respect to each Series that is treated as a partnership for federal income tax purposes.

      Member Nonrecourse Deductions : The definition of “partner nonrecourse deductions” in Section 1.704-2(i)(1) of the Treasury Regulations, as determined separately with respect to each Series that is treated as a partnership for federal income tax purposes.

      Minimum Gain: Section 1.704-2(d) of the Treasury Regulations, as determined separately with respect to each Series that is treated as a partnership for federal income tax purposes.

      MPSC: The Maryland Public Service Commission or any Governmental Authority succeeding to the powers of such commission.

      Net Book Value: With respect to any Operating Company, the net value of all or any portion of property owned by such Operating Company, and with respect to any Series, the net value of all property owned by the Operating Company associated with such Series, in each case based on the net depreciated book value of such property, as recorded in FERC’s “Uniform System of Accounts.”

      NIETC: A National Interest Electric Transmission Corridor designated by the United States Department of Energy.

      Non-Contributing Member: Section 6.05(a).

*** Confidential Treatment Requested

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

      Non-Defaulting Member: With respect to a Default related to a Series, each Member of such Series other than the Defaulting Member and any Affiliates of such Defaulting Member or, in the event of a Default that is not related to a Series, each Member of each Series of which the Defaulting Member is a Series Member other than the Defaulting Member and any Affiliates of such Defaulting Member.

      Nonrecourse Deductions: Section 1.704-2(b) of the Treasury Regulations, as determined separately with respect to each Series that is treated as a partnership for federal income tax purposes.

      Offer Notice: Section 5.03(a).

      Offering Member: Section 5.03(b).

      Ohio Board: The Managers of the Ohio Operating Company, as described in the Ohio Operating Company Agreement.

      Ohio Facilities: Those facilities identified as such in Schedule 3.01 .

      Ohio Operating Company: A limited liability company organized under the laws of the State of Ohio: (a) that owns or will own the Ohio Facilities and the real property interests on which such facilities will be located; (b) that is one hundred percent (100%) owned by the Company; and (c) whose property and operations are solely for the benefit of the Ohio Series Members.

      Ohio Regulatory Deadline : The date as of which the Ohio Series Members reasonably determine that the OPSB should have acted to grant the Ohio Operating Company a certificate of environmental compatibility and public need and authority to exercise the right of eminent domain to acquire property necessary to construct the Ohio Facilities, which Ohio Regulatory Deadline shall be no earlier than one (1) year after the later to occur of: (a) the filing of an application by the Ohio Operating Company for a certificate of environmental compatibility and public need to construct the Ohio Facilities; or (b) a determination by the United States Department of Energy that the Ohio Facilities are within a NIETC.

      Ohio Series: A Series of the Company established pursuant to Section 2.08 that is exclusively entitled to the benefits, and exclusively responsible for the liabilities, of the Ohio Operating Company.

      Ohio Series Administrative Committee: The Administrative Committee that manages the Ohio Series.

      Ohio Series Members: The: (a) Series Members of the Ohio Series identified on Schedule 2.08 ; (b) Assignees thereof that acquire Series Interests in the Ohio Series and are admitted as Series Members of the Ohio Series in accordance with this Agreement; and (c) successors in interest to such Persons.

*** Confidential Treatment Requested

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

      OpCo Agreements: The Services Agreements, the Administrative Services Agreements, the License Agreement, the Regulatory Undertakings Agreements, the Environmental Indemnity Agreements, any interconnection agreements to which an Operating Company is a party, agreements, if any, documenting Indebtedness of an Operating Company and, with respect to the AYE Operating Company, any agreements between such Operating Company and any of its Affiliates.

      OpCo Board: Each of the AYE Board, the Ohio Board and the West Virginia Board.

      Operating Companies: The AYE Operating Company, the West Virginia Operating Company and the Ohio Operating Company.

      Operational Deadlock: With respect to a Deadlock regarding a material matter concerning the business or affairs of a Joint Series Operating Company or the Joint Series associated with such Joint Series Operating Company, any such Deadlock arising after the Project Facilities owned by such Operating Company are energized (other than merely for test purposes).

      OPSB: The Ohio Power Siting Board or any Governmental Authority succeeding to the powers of such board.

      Parent: With respect to any Member, the Person that directly or indirectly Controls such Member and that is not itself Controlled by any other Person.

      Pennsylvania Facilities: Any 765 kV transmission line(s) that may be constructed by or for AET or any of its Affiliates in the Allegheny Transmission Zone that are necessary to connect the Ohio Facilities to any interconnection(s) with any lower voltage transmission facilities.

      Person: The meaning assigned that term in Section 18-101(11) of the Act, including a Governmental Authority and any other entity.

      PJM: PJM Interconnection, L.L.C.

      PJM Agreements: The: (a) Amended and Restated Operating Agreement of PJM Interconnection, L.L.C., dated as of June 2, 1997; (b) PJM Owner Agreement; and (c) PJM Tariff.

      PJM Owner Agreement: The Consolidated Transmission Owner Agreement dated as of December 15, 2005.

      PJM Tariff: The PJM Open Access Transmission Tariff on file with FERC, as such tariff may be revised from time to time.

      Potomac Edison: The Potomac Edison Company, an Affiliate of AET.

*** Confidential Treatment Requested

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

      Pre-Operational Deadlock: With respect to a Deadlock regarding a material matter concerning the business or affairs of a Joint Series Operating Company or the Joint Series associated with such Joint Series Operating Company, any such Deadlock arising before the Project Facilities owned by such Operating Company are energized (other than merely for test purposes).

      Priority Interest: Section 6.06(a).

      Project: The design, engineering, siting, acquisition of rights-of-way for, procurement, permitting, construction, commissioning, financing, ownership, operation and maintenance of the Project Facilities.

      Project Facilities: The West Virginia Facilities (including the Additional Facilities, if any), the Bedington-Kemptown Facilities and the Ohio Facilities, if any.

      PSCWV: The Public Service Commission of West Virginia or any Governmental Authority succeeding to the powers of such commission.

      Qualified Person: With respect to any Deadlock Arbitration, an individual who: (a) at no time has been employed or retained by, or affiliated with, any Member, any Affiliate of a Member or PJM; (b) has experience in the operation of high voltage electric transmission facilities; and (c) is knowledgeable professionally regarding the matters that are the subject of such Deadlock Arbitration.

      Quarter: Unless the context requires otherwise, a fiscal quarter of the Company.

      Recipient: The Company, a Member, an Affiliate of a Member, an Operating Company and their respective managers, directors, officers, employees or agents, in each case, that receive Confidential Information.

      Record Holder: The Person in whose name a Series Interest is owned.

      Regular Series Capital Call: Section 6.01(c).

      Regulatory Allocations: Section 7.03(b).

      Regulatory Plan: The plan for submission of applications for Governmental Approvals, including Necessary Regulatory Approvals, as set forth in Schedule 3.02 .

      Regulatory Undertakings Agreements: An agreement between the AYE Operating Company and the West Virginia Operating Company, dated as of the Effective Date and in the form of Exhibit F , as such agreement may be amended from time to time.

      Representative: Section 8.02(a).

      Responding Party: Section 16.03(c).

      Response Notice: Section 16.03(c).

*** Confidential Treatment Requested

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

      Revenue Allocation Deadlock: A dispute that has continued for more than five (5) Days among the Members of the Company regarding the calculation of any “Allocation Variable” (as defined in Schedule 3.09 ).

      RTEP: A Regional Transmission Expansion Plan issued and approved by PJM, as such plan may be modified by FERC.

      Securities Act: The Securities Act of 1933.

      Series: A separate series of Series Interests in the Company, established pursuant to this Agreement in accordance with Section 18-215 of the Act.

      Series Capital Account: With respect to each Series, the account for each Series Member of such Series to be maintained by the Administrative Committee of such Series in accordance with Section 6.04.

      Series Capital Call: Section 6.01(a).

      Series Capital Contribution: Any contribution by a Series Member or its predecessor in interest with respect to such Series, which contribution may consist of cash, goods, services, contract rights or any other form of real or personal property.

      Series Dissolution Event: Section 16.01(b).

      Series Interest: With respect to any Member: (a) that Member’s status as a Member of a Series; (b) that Member’s share of the income, gain, loss, deduction and credits of, and the right to receive distributions from, such Series; (c) any Priority Interest to which such Member is entitled; (d) all other rights, benefits and privileges enjoyed by that Member (under the Act, this Agreement or otherwise) in its capacity as a Member of such Series, including that Member’s rights, if any, to vote, designate any Representative(s) or Administrator(s), consent and approve and otherwise to participate in the management of such Series, including any right to do so through the Board of Managers or any Administrative Committee; and (e) all obligations, duties and liabilities imposed on that Member (under the Act, this Agreement or otherwise) in its capacity as a Member of such Series, including any obligations to make Series Capital Contributions with respect to such Series.

      Series Member: With respect to any Series as of any date, each Record Holder of Series Interests in such Series.

      Series Percentage: With respect to each Series Member of a Series, the Series Percentage set forth opposite such Series Member’s name on Schedule 2.08 , as such Series Percentage may: (a) be adjusted pursuant to Sections 6.07 and 8.10(c); or (b) be changed as a result of a Disposition, Deemed Membership Disposition or Deemed Tax Disposition of a Series Interest; provided, however , that the total Series Percentages for all Series Members of any Series shall always equal one hundred percent (100%).

*** Confidential Treatment Requested

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

      Series Profits or Series Losses: With respect to each Series, and for each taxable year or other applicable period, an amount equal to taxable income or loss for such taxable year or period, determined in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss) and taking into account only items of income, gain, loss and deduction relating to the affairs of such Series, with the following adjustments (without duplication):

	(a)		any income that is exempt from federal income tax and not otherwise taken into account in computing Series Profits or Series Losses pursuant to this definition shall be added to such taxable income or loss;
	(b)		any expenditures described in Section 705(a)(2)(B) of the Code or treated as expenditures (under Section 705(a)(2)(B) of the Code) pursuant to Section 1.704-1(b)(2)(iv)(i) of the Treasury Regulations and not otherwise taken into account in computing Series Profits or Series Losses pursuant to this definition shall be subtracted from such taxable income or loss;
	(c)		in the event the Book Value of any Series asset is adjusted pursuant to clause (b) or clause (c) of the definition of “Book Value”, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Book Value of such asset) or an item of loss (if the adjustment decreases the Book Value of such asset) from the Disposition of such asset and shall be taken into account for purposes of computing Series Profits or Series Losses;
	(d)		gain or loss resulting from any Disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Book Value of the property Disposed of, notwithstanding that the adjusted tax basis of such property differs from its Book Value;
	(e)		in lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Tax Depreciation for such taxable year or period;
	(f)		to the extent an adjustment to the adjusted tax basis of any Series asset pursuant to Section 734(b) of the Code is required, pursuant to Section 1.704-1(b)(2)(iv)(m)(4) of the Treasury Regulations, to be taken into account in determining Series Capital Account balances as a result of a distribution other than in liquidation of a Series Interest, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of such asset) or an item of loss (if the adjustment decreases the basis of such asset) from the Disposition of such asset and shall be taken into account for purposes of computing Series Profits and Series Losses; and

*** Confidential Treatment Requested

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

(g)

any items that are allocated pursuant to Section 7.03(a)(ix), the Regulatory Allocations or Curative Allocations with respect to a Series shall not be taken into account in computing Series Profits or Series Losses, and the amounts of the items of income, gain, loss or deduction available to be allocated pursuant to the Regulatory Allocations and Curative Allocations with respect to such Series shall be determined by applying rules analogous to those set forth in clauses (a) through (f) of this definition.

      Series Tax Matters Member: Section 9.02(a).

      Services Agreement: Any of the following agreements: (a) the Services Agreement between AEPTHC or one of its Affiliates and the West Virginia Operating Company in the form of Exhibit D-1 ; (b) the Services Agreement between AEPTHC or one of its Affiliates and the AYE Operating Company in the form of Exhibit D-2 ; (c) the Services Agreement between AEPTHC or one of its Affiliates and the Ohio Operating Company in the form of Exhibit D-3 ; (d) the Services Agreement between AET and the West Virginia Operating Company in the form of Exhibit D-4 ; or (e) the Services Agreement between AET and the Ohio Operating Company in the form of Exhibit D-5 , each dated as of the Effective Date, as any such agreement may be amended from time to time.

      Service Provider: With respect to any Services Agreement or Administrative Services Agreement, each Person identified therein as “Service Provider” or “Provider,” respectively.

      Settlement Proposal: Section 13.04(a).

      Stipulated Value: With respect to any Series Interest as of any date, an amount equal to the product of: (a) the Series Percentage of such Series Interest; multiplied by (b) [ *** ] ; multiplied by (c) the excess, if any, of (i) the Net Book Value of the assets owned by the Operating Company associated with the applicable Series, over (ii) the outstanding principal balance of the Indebtedness of such Operating Company.

      Tax Depreciation: For each taxable year or other applicable period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable for federal income tax purposes with respect to property for such taxable year or period, except that: (a) with respect to any property the Book Value of which differs from its adjusted tax basis for federal income tax purposes and which difference is being eliminated by use of the remedial allocation method pursuant to Section 1.704-3(d) of the Treasury Regulations, Tax Depreciation for such taxable year or period shall be the amount of book basis recovered for such taxable year or period under the rules prescribed by Section 1.704-3(d)(2) of the Treasury Regulations; and (b) with respect to any other property the Book Value of which differs from its adjusted tax basis at the beginning of such taxable year or period, Tax Depreciation shall be an amount that bears the same ratio to such beginning Book Value as the federal income tax depreciation, amortization or other cost recovery deduction for such taxable year or period bears to such beginning adjusted tax basis; provided, however , that if the adjusted tax basis of any property at the

*** Confidential Treatment Requested

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

beginning of such taxable year or period is zero, Tax Depreciation with respect to such property shall be determined with reference to such beginning value using any reasonable method selected by the Board of Managers.

      Term: Section 2.11.

      Third Party Purchaser: Section 5.03(g).

      Transferring Member: Section 5.03(a).

      Transmission Zone: The Allegheny Transmission Zone or the AEP Transmission Zone.

      Treasury Regulations: The regulations (including temporary regulations) promulgated by the United States Department of the Treasury pursuant to and in respect of provisions of the Code.

      Triggering Deadlock: A Deadlock that prevents or, if unresolved, imminently will prevent, the Company, a Joint Series or a Joint Series Operating Company from operating as a going concern in accordance with applicable Laws or the PJM Agreements.

      Unanimous Interest: With respect to any vote, consent, approval or other action of the Voting Members of the Company or any Joint Series, the vote of the Voting Members thereof holding among them a one hundred percent (100%) Voting Percentage.

      Venture Agreements: The Company Escrow Agreement and the Capital Contribution Escrow Agreement.

      Voting Member: Any: (a) Member of the Company and each Series Member of each Series designated as a Voting Member of the Company or a Series, respectively, in Section 2.04; (b) Assignee that acquires the voting rights of any such Member in accordance with the terms and conditions of this Agreement; and (c) successors in interest to any such Person(s).

      Voting Percentage: As of any time, with respect to: (a) a Series and each Voting Member of such Series, a fraction, expressed as a percentage, the numerator of which is that Voting Member’s Series Percentage of such Series and the denominator of which is the sum of Series Percentages of all Voting Members of such Series; and (b) the Company and each Voting Member of the Company, a fraction, expressed as a percentage, the numerator of which is that Voting Member’s aggregate Series Capital Contributions to all Joint Series and the denominator of which is the aggregate Series Capital Contributions of all Voting Members to all Joint Series.

      West Virginia Board: The Managers of the West Virginia Operating Company, as described in the West Virginia Operating Company Agreement.

*** Confidential Treatment Requested

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

      West Virginia Facilities: Those facilities identified as such in Schedule 3.01 , and if the Additional Facilities are sold to the West Virginia Operating Company pursuant to Section 3.07, the Additional Facilities.

      West Virginia Operating Company: A limited liability company organized under the laws of the State of Delaware: (a) that owns or will own the West Virginia Facilities and the real property interests on which such facilities will be located; (b) that is one hundred percent (100%) owned by the Company; and (c) whose property and operations are solely for the benefit of the West Virginia Series Members.

      West Virginia Operating Company Agreement: The limited liability company agreement of the West Virginia Operating Company.

      West Virginia Regulatory Deadline : The date as of which the West Virginia Series Members reasonably determine that the PSCWV should have acted to grant the West Virginia Operating Company a certificate of public convenience and necessity and authority to exercise the right of eminent domain to acquire property necessary to construct the West Virginia Facilities, which West Virginia Regulatory Deadline shall be no earlier than one (1) year after the later to occur of: (a) the filing of an application by the West Virginia Operating Company for a certificate of public convenience and necessity to construct the West Virginia Facilities; or (b) a determination by the United States Department of Energy that the West Virginia Facilities are within a NIETC.

      West Virginia Series: A Series of the Company established pursuant to Section 2.08 that is exclusively entitled to the benefits, and exclusively responsible for the liabilities, of the West Virginia Operating Company.

      West Virginia Series Administrative Committee: The Administrative Committee that manages the West Virginia Series.

      West Virginia Series Members: The: (a) Series Members of the West Virginia Series identified on Schedule 2.08 ; (b) Assignees thereof that acquire Series Interests in the West Virginia Series and are admitted as Series Members of the West Virginia Series in accordance with this Agreement; and (c) successors in interest to such Persons.

      Withdraw , Withdrawing or Withdrawal: The withdrawal, resignation or retirement of a Member from the Company; provided, however , that such terms shall not include any Dispositions of Series Interests (which are governed by Article 5), even though the Member making a Disposition may cease to be a Series Member as a result of such Disposition.

      Withdrawn Member: Section 12.03.

1.02 Interpretation . Unless the context requires otherwise:

(a)

the gender of all words used in this Agreement includes the masculine, feminine and neuter;

*** Confidential Treatment Requested

FOIA Confidential Treatment
Requested by Allegheny Energy, Inc.

	(b)		all pronouns used in this Agreement shall be deemed to refer to the singular and plural;
	(c)		references to Articles and Sections refer to Articles and Sections of this Agreement;
	(d)		the section headings of this Agreement are for convenience of reference only, do not form a part of this Agreement, and do not in any manner modify, interpret or construe the intent or agreement of the Members;
	(e)		references to Exhibits and Schedules refer to the Exhibits and Schedules attached to this Agreement, each of which is made a part hereof for all purposes;
	(f)		references to Laws refer to such Laws as they may be amended from time to time, and references to particular provisions of a Law include any corresponding provisions of any succeeding Law;
	(g)		references to money are to the legal currency of the United States of America;
	(h)		the terms “hereof”, “herein”, “hereto”, “hereunder” and words of similar or like import refer to this entire Agreement and not any particular Section or other subdivision of this Agreement; and
	(i)		the words “include”, “includes” and “including” shall be deemed to be followed by “without limitation” or “but not limited to.”

ARTICLE 2
FORMATION; ORGANIZATION

     2.01 Formation . The Company was formed as a Delaware series limited liability company by the filing of the Delaware Certificate.

     2.02 Name . The name of the Company is “Potomac-Appalachian Transmission Highline, LLC.” All Company business shall be conducted in the name of the Company or in such other name(s) as may be authorized from time to time by the Board of Managers. Any business conducted by a Series shall be conducted in the name of such Series.

     2.03 Members . A Person shall be admitted as a Member, and shall become bound by this Agreement, if such Person executes this Agreement or, without such execution, if such Person purchases or otherwise lawfully acquires any Series Interest(s) in accordance with the terms and conditions of this Agreement. Except as may be expressly authorized hereunder, no Member shall have the authority, and each Member agrees that it shall not exercise any apparent authority, to bind or commit the Company to agreements, transactions or other arrangements, or to hold itself out as an agent of the Company, any Series or any Operating Company.

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     2.04 Voting Members . The Voting Members shall be: (a) AEPTHC with respect to the Company, the Ohio Series and, subject to Section 8.10, the West Virginia Series; and (b) AET with respect to the Company, the West Virginia Series, the Ohio Series and the AYE Series. There shall be no Voting Members other than AEPTHC and AET and any Assignees of such Voting Members that obtain voting rights in accordance with the terms and conditions of this Agreement. Members who are not Voting Members shall have no right to vote on any Series or Company matters, or on any matters considered by the Board of Managers or any Administrative Committee.

     2.05 Registered Office; Registered Agent; Principal Office . The registered office of the Company required by the Act to be maintained in the State of Delaware shall be the office of the initial registered agent named in the Delaware Certificate or such other office (which need not be a place of business of the Company) as the Board of Managers may designate in the manner provided by Law. The registered agent of the Company in the State of Delaware shall be the initial registered agent named in the Delaware Certificate or such other Person or Persons as the Board of Managers may designate in the manner provided by Law. The principal office of the Company shall be at such place as the Board of Managers may designate, which need not be in the State of Delaware, and the Company shall maintain records at such principal office or such other place(s) as the Board of Managers shall designate. The Company may have such other offices as the Board of Managers may determine.

     2.06 Purposes . The purposes of the Company and each Series, to be pursued through the Operating Companies, are to: (a) design, engineer, site, acquire rights-of-way for, procure, permit, construct, commission, finance, own, operate and maintain certain high voltage transmission and interconnection facilities in the PJM region; and (b) engage in any activities directly or indirectly relating thereto; provided, however , that (i) the activities of the West Virginia Series shall be limited to such purposes related to the West Virginia Facilities, which shall be pursued by the West Virginia Operating Company, (ii) the activities of the Ohio Series shall be limited to such purposes related to the Ohio Facilities, which shall be pursued by the Ohio Operating Company, and (iii) the activities of the AYE Series shall be limited to such purposes related to the Bedington-Kemptown Facilities, which shall be pursued by the AYE Operating Company. Neither the Company nor any Series shall, nor shall the Company or any Series permit any Operating Company to, engage in any activities other than the foregoing activities.

     2.07 Powers .

	(a)		Subject to all of the terms, covenants, conditions and limitations contained in this Agreement, the Company shall have the power and authority to do any and all acts and things necessary, appropriate, proper, advisable, desirable, incidental to or convenient for the furtherance and accomplishment of the purposes described in Section 2.06 and for the protection and benefit of the Company.
	(b)		Except to the extent expressly authorized by the Board of Managers, the Company shall not, and no Member shall cause the Company to: (i) own

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			property other than interests in the Operating Companies; or (ii) enter into any agreements other than the Venture Agreements.
	(c)		All business related to the Project shall be conducted by the Operating Companies, except:

	(i)		the filing of Company Regulatory Filings, including the retention of experts and consultants required in connection with such filings and/or proceedings related thereto;
	(ii)		execution and delivery of, and performance under, the Venture Agreements; and
	(iii)		any other matters expressly authorized by the Board of Managers.

     2.08 Creation of Series .

	(a)		As permitted by, and in accordance with, Section 18-215 of the Act, this Agreement and the Delaware Certificate, provide for the designation and creation of separate Series Interests. Each Series shall be accounted for separately and independently from each other Series and separate and distinct records shall be kept for each Series. The Company shall not be operated or treated as a single partnership or joint venture.
	(b)		The Series Profits and Series Losses of each Series shall be determined solely by reference to the operations and activities of such Series, and no transaction, property or obligation of any other Series shall be taken into account in determining such Series Profits and Series Losses.
	(c)		Except as required by applicable Law: (i) with respect to each Series with a single Series Member and for which no entity classification election is made pursuant to Section 301.7701-3 of the Treasury Regulations, such Series Member shall report the affairs and results of such Series for federal income tax purposes as if the Series were disregarded as an entity separate from its owner; (ii) with respect to each Series with multiple Series Members, the Series Members shall report the affairs and results of such Series as if such Series were a separate business entity treated as a partnership for federal income tax purposes and as if each Operating Company associated with such Series (if an eligible entity within the meaning of Section 301.7701-3 of the Treasury Regulations) were disregarded as an entity separate from its owner (the partnership constituted by such Series) for federal income tax purposes.
	(d)		Schedule 2.08 identifies each Series and the following information applicable to each such Series and the Series Members thereof:

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	(i)		the Series Percentages of each Series Member in each Series as of the Effective Date; and
	(ii)		the Voting Members of each Series and the Voting Percentages of each Voting Member with respect to the Company and each Series.

(e)

The legal name, place of organization, mailing address and Series Percentages of each Series Member shall be listed on the books and records of the Series. An officer of the Series shall be required to update the books and records from time to time as necessary to accurately reflect the information therein.

     2.09 No State Law Partnership . The Series Members intend that the Company shall: (a) be a limited liability company divided into Series as permitted by the Act; and (b) not be a state Law partnership (including a limited partnership) or joint venture, and no Series Member shall be a state Law partner or joint venturer of any other Series Member, for any purposes, and this Agreement shall not be construed to suggest otherwise.

     2.10 Foreign Qualification . Prior to the Company’s conducting business in any jurisdiction other than Delaware, the Board of Managers shall cause the Company to comply, to the extent procedures are available and those matters are reasonably within the control of the Board of Managers, with all requirements necessary to qualify the Company as a foreign limited liability company in such jurisdictions and, to the extent recognized by the Law of such jurisdiction, as a limited liability company whose business, rights, obligations and liabilities have been divided into series. At the request of the Board of Managers, each Member shall execute, acknowledge, swear to, and deliver all certificates and other instruments that are necessary or appropriate to qualify, continue and terminate the Company as a foreign limited liability company in any jurisdiction(s) in which the Company conducts business.

     2.11 Term . The period of existence of the Company and each Series (with respect to each, the " Term ”) commenced as of September 1, 2007. The existence of the Company shall end at such time as a certificate of cancellation of the Company is filed with the Secretary of State of Delaware in accordance with Section 16.04. The existence of a Series shall end upon the earlier of the filing of a certificate of cancellation of the Company in accordance with Section 16.04 or the dissolution of such Series in accordance with Section 16.01(b).

     2.12 Liability to Third Parties .

(a)

Except as otherwise provided by the Act: (i) the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company (which may be attributed or allocated to one or more of the Series, in which case they shall be borne exclusively by such Series as contemplated in this Agreement), and no Member shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member of the Company; and (ii) the debts, obligations and liabilities of a Series, whether arising in contract, tort or otherwise, shall be solely the

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			debts, obligations and liabilities of such Series, and no Series Member of any other Series shall be obligated personally for any such debt, obligation or liability solely by reason of being a Member of the Company or a Series Member of any other Series.
	(b)		The debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a Series shall be enforceable only against the assets of such Series, and not against the assets of the Company generally, any other Series or any Operating Company associated with any such other Series.

     2.13 Series Interests .

	(a)		An officer of each Series shall keep a register of all outstanding Series Interests and the Record Holders thereof.
	(b)		An Assignee shall become the Record Holder of Series Interests when a transfer of such Series Interests is reflected in the register of such Series; provided, however , that no Assignee shall become a Record Holder of any Series Interest(s) without obtaining any necessary Governmental Approvals required in connection with such Assignee’s acquisition of such Series Interest(s).
	(c)		The Company and the Series Members shall be entitled to recognize the Record Holder(s) as the owner(s) of Series Interests and, except as otherwise required by applicable Law, shall not be bound to recognize any equitable or other claim to, or interest in, any Series Interests on the part of any other Person, whether or not the Company or any Member shall have actual or other notice of any such claim. The Disposition of any Series Interests in accordance with this Agreement and the admission of any new Member(s) shall not constitute an amendment to this Agreement.

     2.14 Formation of Operating Companies.

	(a)		The West Virginia Series Members shall cause the Company to form the West Virginia Operating Company as a wholly-owned subsidiary of the Company. For purposes of this Agreement, the West Virginia Operating Company shall be deemed to be associated with the West Virginia Series.
	(b)		The Ohio Series Members shall cause the Company to form the Ohio Operating Company as a wholly-owned subsidiary of the Company. For purposes of this Agreement, the Ohio Operating Company shall be deemed to be associated with the Ohio Series.
	(c)		The AYE Series Member shall cause the Company to form the AYE Operating Company as a wholly-owned subsidiary of the Company. For

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purposes of this Agreement, the AYE Operating Company shall be deemed to be associated with the AYE Series.

ARTICLE 3
THE PROJECT

     3.01 RTEP Designation .

(a)

The Members shall exercise commercially reasonable efforts to cause PJM, in its 2007 RTEP, to designate an Operating Company or, with respect to any Project Facilities to be located in the Transmission Zone of a Series Member or any Affiliate of such Series Member, the Person determined in accordance with Section 3.01(b), to construct:

	(i)		the Bedington-Kemptown Facilities; and
	(ii)		the West Virginia Facilities.

(b)

Notwithstanding any other provision of this Agreement, with respect to any Project Facilities to be located in the Transmission Zone of a Series Member or any Affiliate thereof, such Series Member shall have the exclusive right to determine whether PJM’s designation of such Project Facilities shall be made to an Operating Company, to such Series Member or to any Affiliate thereof; provided, however , that in the event PJM designates a Series Member or any Affiliate thereof to construct any West Virginia Facilities (including the Additional Facilities if such facilities are required to be sold to the West Virginia Operating Company pursuant to Section 3.07) or any Ohio Facilities, such Series Member shall, and shall cause its Affiliates to, designate the West Virginia Operating Company or the Ohio Operating Company, as applicable, to exercise such Person’s rights and obligations with respect to the development, construction and ownership of such Project Facilities.

     3.02 Regulatory Matters .

	(a)		The Members acknowledge that each Operating Company will be a “public utility” as defined in Section 201 of the FPA.
	(b)		The Board of Managers shall cause the Company to: (i) prepare and file applications seeking all Governmental Approvals required to be obtained in the name of the Company in accordance with the Regulatory Plan; (ii) diligently prosecute applications to obtain such approvals; and (iii) exercise all commercially reasonable efforts to obtain such Governmental Approvals.
	(c)		Without limiting the generality of the foregoing, each Member shall, and shall cause its Affiliate(s) to, as necessary or appropriate: (i) respond as

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			promptly as practicable to any inquiries or requests issued by any Governmental Authority in respect of the Project; and (ii) reasonably cooperate with other Members in the regulatory review process; provided, however , that a Member shall not be obligated pursuant to this Section 3.02(c) to disclose Confidential Information except to the extent that it is otherwise required to disclose such Confidential Information: (A) by Law; (B) by any Governmental Authority; or (C) pursuant to the express terms of this Agreement, any Venture Agreement or any OpCo Agreement. Except to the extent permitted by Section 3.02(f), no Member shall oppose (nor shall it permit any of its Affiliates to oppose), obstruct or otherwise interfere with the efforts of another Member to obtain any Governmental Approval required in connection with the Project.
	(d)		The Board of Managers shall prepare and file, or cause to be prepared and filed, the Company Regulatory Filings; provided, however , that the Amos-Kemptown FERC 205 Application shall include requests that FERC approve: (i) a single return on equity and the same formula rate for the West Virginia Facilities and the Bedington-Kemptown Facilities; and (ii) in advance, the transfer from Potomac Edison (or any of its Affiliates that own any Allegheny Assets) to the AYE Operating Company of the Allegheny Assets and all real property interests on which any of the Allegheny Assets will be located.
	(e)		Each Member agrees, on behalf of itself and its Affiliates, that it shall not: (i) oppose the right of any other Member or any of its Affiliates, any Series of which such Member is not a Series Member or any Operating Company of such Series to participate in any regulatory proceedings concerning the Project; (ii) file any pleading or other document in any such proceedings without first giving the Voting Members of all Series a reasonable opportunity to review and comment on such pleading or document; or (iii) engage in any substantive communications with any Governmental Authorities or their personnel concerning the Project (including any Operating Company) without providing the other Members with reasonable advance notice of the proposed communication and a reasonable opportunity to participate therein, except to the extent providing such advance notice is prohibited by Law; provided, however , that the covenants set forth in clauses (ii) and (iii) of this Section 3.02(e) shall not apply to the AYE Series Member or its Affiliates in connection with any actions before the MPSC pertaining solely to the AYE Series, the AYE Operating Company, any of the Bedington-Kemptown Facilities or the acquisition of real property interests on which such facilities are to be located; and provided further , that the AYE Series Member shall prepare and deliver to the Series Members of the Joint Series a monthly status report on actions before the MPSC pertaining to the AYE Series, the AYE Operating Company, the Bedington-Kemptown Facilities and

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			the acquisition of real property interests on which such facilities are to be located and shall promptly respond to all reasonable inquires from the Series Members of the Joint Series concerning such actions.
	(f)		Nothing in this Agreement shall restrict any Member or any of its Affiliates from appealing any Governmental Approval, or the denial of any Governmental Approval.
	(g)		The Members hereby acknowledge that the Company will seek, or will cause the West Virginia Operating Company to seek, eminent domain authority in the State of West Virginia; provided, however , that the Company (or the West Virginia Operating Company) may, upon the approval of a Unanimous Interest of the Voting Members of the West Virginia Series, seek siting approval and federal eminent domain authority from FERC for the West Virginia Facilities.
	(h)		At AET’s request, AEPTHC shall exercise commercially reasonable efforts to support AET and its Affiliates in connection with their efforts to obtain siting approval from state regulatory commissions of the Bedington-Kemptown Facilities; provided, however , that AET shall reimburse AEPTHC for its costs incurred in providing such support on the same cost basis as such charges are determined from time to time for equivalent services that AEPTHC provides to its utility Affiliates, including allocations for overhead (but excluding any markup for profit).

     3.03 Maryland Transmission Line .

(a)

The AYE Series Member shall cause Potomac Edison to file an application with the MPSC on behalf of the AYE Operating Company (or alternatively, on behalf of itself) seeking: (i) a certificate of public convenience and necessity and authority to construct the Maryland Transmission Line; and (ii) authority to exercise the right of eminent domain to acquire real property interests necessary to construct the Maryland Transmission Line. If, pursuant to such application, the MPSC grants a certificate of public convenience and necessity to Potomac Edison and authorizes only Potomac Edison to exercise the right of eminent domain to acquire real property interests necessary to construct the Maryland Transmission Line, the AYE Series Member shall cause Potomac Edison to: (A) exercise such rights to acquire all real property interests on which the Maryland Transmission Line is to be located; (B) construct the Maryland Transmission Line; and (C) exercise commercially reasonable efforts to transfer such real property interests and the Maryland Transmission Line to the AYE Operating Company before such date as the Maryland Transmission Line is energized (other than for test purposes).

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	(b)		If: (i) by the Maryland Regulatory Deadline, the MPSC fails to grant either the AYE Operating Company or Potomac Edison a certificate of public convenience and necessity and authority to exercise the right of eminent domain to acquire real property interests necessary to construct the Maryland Transmission Line; (ii) the Maryland Transmission Line is within a NIETC; and (iii) the Company determines that it would be more expeditious and/or more certain to obtain a certificate of public convenience and necessity to construct the Maryland Transmission Line from FERC under Section 216 of the FPA, the AYE Operating Company shall file an application with FERC under Section 216 of the FPA seeking siting authority (including the right to exercise federal eminent domain rights) to construct the Maryland Transmission Line.
	(c)		If the MPSC grants a certificate of public convenience and necessity to Potomac Edison to construct the Maryland Transmission Line and, despite the commercially reasonable efforts of the AYE Series Member, the MPSC fails to permit Potomac Edison to transfer to the AYE Operating Company the Maryland Transmission Line and the real property interests on which it is to be located, the Maryland Transmission Line shall continue to be owned by Potomac Edison.
	(d)		The AYE Series Administrative Committee shall cause the AYE Operating Company and the West Virginia Series Administrative Committee shall cause the West Virginia Operating Company to execute and deliver the Regulatory Undertakings Agreement.
	(e)		In any filing that the AYE Operating Company may make under Schedule 12 of the PJM Open Access Transmission Tariff or pursuant to Section 205 of the FPA with respect to any of the Bedington-Kemptown Facilities, the AYE Operating Company shall request the same formula rate and return on equity as those then being requested for the West Virginia Facilities or, if no such formula rate or return on equity is then being requested for the West Virginia Facilities, the same formula rate and return on equity as then allowed for the West Virginia Facilities.
	(f)		In any filing that the AYE Series Member or any of its Affiliates (other than the AYE Operating Company) may make under Schedule 12 of the PJM Open Access Transmission Tariff or pursuant to Section 205 of the FPA with respect to any of the Allegheny Assets, the AYE Series Member shall request, or shall cause its Affiliates to request, the same formula rate and return on equity for the Allegheny Assets as those then being requested for the Bedington-Kemptown Facilities owned by the AYE Operating Company or, if no such formula rate or return on equity is then being requested for the Bedington-Kemptown Facilities owned by the AYE Operating Company, the same formula rate and return on equity as then allowed for the Bedington-Kemptown Facilities owned by the AYE Operating Company.

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	(g)		The AYE Series Member shall, and shall cause the AYE Operating Company and their respective Affiliates to: (i) make any filings for a change in rates with respect to the Bedington-Kemptown Facilities solely in conjunction with and at the same time as rate change filings for the West Virginia Facilities; and (ii) request that FERC approve use of the same formula rate and return on equity for all the West Virginia Facilities and the Bedington-Kemptown Facilities.
	(h)		Notwithstanding anything to the contrary in this Agreement, if FERC requires the AYE Series Member or any or its Affiliates to make a single rate filing under Section 205 of the FPA for all or any portion of the Bedington-Kemptown Facilities and any other facilities owned by the AYE Series Member or any of its Affiliates, the AYE Series Member and/or its Affiliates may make such filing but shall request the same formula rate and return on equity for the Bedington-Kemptown Facilities that are the subject of such filing as are then in effect for the Bedington-Kemptown Facilities owned by AYE Operating Company.
	(i)		Nothing in this Section 3.03 shall obligate the AYE Operating Company or any of its Affiliates to take any action or assert any position that is contrary to any ruling previously issued by FERC with respect to rates for the Bedington-Kemptown Facilities.
	(j)		In the event a proceeding is initiated pursuant to Section 206 of the FPA with respect to the rates applicable to the Bedington-Kemptown Facilities, the AYE Series Administrative Committee shall not permit the AYE Operating Company to enter into a settlement agreement that would reduce the return on equity then included in the formula rate applicable to such Bedington-Kemptown Facilities if such reduction would result in a return on equity that was lower than the return on equity then included in the formula rate applicable to the West Virginia Facilities without the prior written approval of the West Virginia Operating Company, such approval not to be unreasonably withheld.

     3.04 Services Agreements .

	(a)		A Member or its Affiliates may perform services for any Operating Company pursuant to one or more Services Agreements.
	(b)		Upon: (i) a Withdrawal by a Joint Series Member, a sale by a Joint Series Member of all of its Series Interests in a Joint Series or the conversion of a Voting Member of a Joint Series to a Converted Member pursuant to Section 8.10, any Services Agreements (or any service schedule(s) executed pursuant to such Services Agreements) pursuant to which the Withdrawn Member, selling Series Member, Converted Member or any Affiliate of such Withdrawn Member, selling Series Member or Converted Member is a Service Provider to an Operating Company

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			associated with a Series of which such Withdrawn Member, selling Series Member or Converted Member is no longer a Voting Member may be terminated by either party thereto; and (ii) the transfer by a Voting Member of its right to appoint Representatives pursuant to Section 5.07, any Services Agreements (or any service schedule(s) executed pursuant to such Services Agreements) pursuant to which such transferring Voting Member (or any Affiliate of such transferring Voting Member) is a Service Provider to an Operating Company associated with such Series may be terminated by any other Voting Member; and (iii) the transfer by a Voting Member of a Series of its right to appoint Administrators for such Series pursuant to Section 5.07, any Services Agreements (or any service schedule(s) executed pursuant to such Services Agreements) pursuant to which such transferring Voting Member (or any Affiliate of such Voting Member) is a Service Provider to an Operating Company associated with such Series may be terminated by any other Voting Member of such Series, and in any such case neither party to any terminated Services Agreement (or any terminated service schedule(s)) shall have any liability thereunder except the liability to pay amounts owed thereunder as of the date of termination (including amounts owed but not yet due in respect of services performed prior to the date of termination) and any additional amounts that may be owed in respect of transition services as required hereunder or thereunder.
	(c)		Upon a termination of a Services Agreement (or any service schedule(s) executed pursuant to such Services Agreements) pursuant to this Section 3.04: (i) the Withdrawn Member, selling Series Member, Converted Member or transferring Member, as applicable, shall remain liable under such terminated Services Agreement (and any terminated service schedule(s)) both as a Service Provider (with respect to performance prior to such termination) and as if it remained a Member, Series Member or Voting Member of the Company, as applicable, with respect to the terminated Services Agreement and terminated service schedule(s); and (ii) the Service Provider under any such terminated Services Agreement (or terminated service schedules(s)) shall, upon the request of an Operating Company, cooperate with such Operating Company in transitioning any services to a replacement service provider.

     3.05 Administrative Services Agreements .

(a)

The costs incurred by a Voting Member or its Affiliate(s) to perform administrative, management, oversight and support functions for a Joint Series Operating Company or for the Company on behalf of such Joint Series Operating Company (including the costs of providing Representatives, Administrators, Managers and other personnel and the costs of retaining third party consultants and contractors) shall be subject to reimbursement by such Joint Series Operating Company in accordance

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			with an Administrative Services Agreement to be executed by each such Joint Series Operating Company.
	(b)		Upon a Withdrawal by a Joint Series Member from the Company or a Joint Series, a sale by a Joint Series Member of all of its Series Interests in a Joint Series or the transfer by a Joint Series Member of its right to appoint Representatives or Administrators for a Joint Series pursuant to Section 5.07, all of the Administrative Services Agreements pursuant to which such Joint Series Member, or any Affiliate of such Joint Series Member, is a Service Provider to an Operating Company associated with the Joint Series from which such Joint Series Member is Withdrawing, or the Series Interests of which are being sold or transferred, shall terminate without any liability thereunder except the liability of the parties thereto to pay amounts owed thereunder as of the date of termination (including amounts owed but not yet due in respect of services performed prior to the date of termination) and any additional amounts that may be owed in respect of transition services as required thereunder; provided, however , that the Withdrawn, selling or transferring Joint Series Member, as applicable, shall remain liable under any terminated Administrative Services Agreements both as a Service Provider (with respect to performance prior to such termination) and as if it remained a Joint Series Member with respect to the terminated Administrative Services Agreement(s).
	(c)		The Voting Member of the AYE Series shall enter into, or cause one of its Affiliates to enter into, an Administrative Services Agreement with the AYE Operating Company pursuant to which such Person or one or more of its Affiliates shall be responsible for the administration, management and oversight of the AYE Series and the AYE Operating Company. The Person(s) performing administrative, management, oversight and support functions for the AYE Operating Company or the Company on behalf of the AYE Operating Company (including providing Representatives, Administrators, Managers and other personnel and retaining third party consultants and contractors) shall be entitled to charge the AYE Operating Company for such services, pursuant to such Administrative Services Agreement; provided, however , that charges for such services shall be determined on the same cost basis as such charges are determined from time to time for equivalent services that such Person(s) provide(s) to its utility Affiliates, including allocations for overhead, but excluding any markup for profit.
	(d)		To the extent that any costs incurred by a Voting Member or any of its Affiliates pursuant to an Administrative Services Agreement cannot be attributed to any Series or Operating Company, such costs shall be deemed to be Company costs and shall be allocated as follows: (i) any such costs incurred before the Ohio Operating Company is designated to

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construct the Ohio Facilities shall be allocated sixteen percent (16%) to the AYE Operating Company and eighty-four percent (84%) to the West Virginia Operating Company; and (ii) any such costs incurred after such date shall be allocated to the AYE Operating Company, the West Virginia Operating Company and the Ohio Operating Company based on the proportionate length of line miles (determined on a straight-line basis from end-point to end-point) of transmission lines comprising the Project Facilities owned by each Operating Company.

     3.06 Pennsylvania Facilities . Notwithstanding any other provision of this Agreement, AET and its Affiliates shall have the right, on its or their own and without participation by the Company, AEPTHC or any of its Affiliates, to engineer, design, construct, own and operate the Pennsylvania Facilities. At AET’s request, AEPTHC shall, or shall cause one of its Affiliates to, enter into an agreement with AET or an Affiliate of AET designated to construct the Pennsylvania Facilities, which agreement shall include and be limited to the same terms and conditions as the Services Agreement, pursuant to which AEPTHC or such Affiliate shall, to the extent reasonably requested by AET or such Affiliate engineer, design and/or provide technical support relating to any 765 kV facilities included in the Pennsylvania Facilities in the same manner as AEPTHC or its Affiliate performs services under Schedule 8 of the Services Agreement with the AYE Operating Company. AEPTHC, on behalf of itself and its Affiliates, agrees not to seek designation by PJM or any other Person to construct the Pennsylvania Facilities during the period prior to PJM’s issuance of the 2010 RTEP.

     3.07 Additional Facilities .

	(a)		If: (i) AEPTHC, the Ohio Series or the Ohio Operating Company is designated in any RTEP through and including the 2010 RTEP; and (ii) the Ohio Operating Company subsequently receives a certificate of environmental compatibility and public need from the OPSB to construct the Ohio Facilities, the AYE Series Administrative Committee shall, subject to the conditions set forth in this Section 3.07, cause the AYE Operating Company to offer to transfer to the West Virginia Operating Company discrete equipment included in the Bedington-Kemptown Facilities (the “ Additional Facilities ”) with a Net Book Value approximately equal to the Amos Upgrade Cost. The Administrators of the West Virginia Series appointed by AEPTHC shall have exclusive authority to elect, on behalf of the West Virginia Operating Company, whether or not to purchase the Additional Facilities.
	(b)		The AYE Series Member shall cause the AYE Operating Company to seek authority to Dispose of the Additional Facilities to the West Virginia Operating Company promptly upon the later to occur of: (i) the substantial completion of the Amos Upgrade such that it is capable of being placed in service; (ii) the substantial completion of the Additional Facilities such that they are capable of being placed in service; and (iii) issuance of a certificate of environmental compatibility and public need from the OPSB to the Ohio Operating Company to construct the Ohio

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			Facilities. Any obligation to Dispose of the Additional Facilities to the West Virginia Operating Company shall be subject to the receipt by the AYE Series and the AYE Operating Company of any and all Governmental Approvals required to Dispose of such Additional Facilities.
	(c)		The Series Members of the West Virginia Series acknowledge and agree that the AYE Operating Company shall have exclusive authority to identify the Additional Facilities at its discretion; provided, however , that: (i) the Additional Facilities shall be located in West Virginia; and (ii) the Additional Facilities shall, to the extent practicable (as determined in the reasonable judgment of the AYE Operating Company), be operationally proximate to Bedington-Kemptown Facilities that operate at 765 kV.
	(d)		Promptly upon completion of the Amos Upgrade, the West Virginia Series Administrative Committee shall deliver to the AYE Series Administrative Committee written certification (with reasonable supporting documentation), in form and substance reasonably acceptable to the AYE Series Administrative Committee, of the total capitalized cost incurred by the West Virginia Operating Company to construct and install the Amos Upgrade (such cost, the “ Amos Upgrade Cost ”). The West Virginia Series Administrative Committee shall cause all capitalized costs incurred by the West Virginia Operating Company to construct and install the Amos Upgrade to be accounted for separately from other costs of the West Virginia Operating Company or the West Virginia Series.
	(e)		In consideration of the Disposition of the Additional Facilities, the West Virginia Operating Company shall be obligated to pay to the AYE Operating Company an amount equal to: (i) the Net Book Value of the Additional Facilities; less (ii) the Additional Facilities Return Amount, if any. In order to facilitate the purchase of the Additional Facilities by the West Virginia Operating Company, the West Virginia Series Administrative Committee shall issue Series Capital Calls to the West Virginia Series Members in an aggregate amount equal to such amount.
	(f)		The Additional Facilities Disposition Date shall occur no earlier than the latest to occur of: (i) the date of substantial completion of the Amos Upgrade such that it is capable of being placed in service; (ii) the date of substantial completion of the Additional Facilities such that they are capable of being placed in service; and (iii) receipt of all Governmental Approvals necessary for the Disposition of the Additional Facilities by the AYE Operating Company. As of the Additional Facilities Disposition Date, if any, the Additional Facilities shall be included in the West Virginia Facilities and shall no longer be part of the Bedington-Kemptown Facilities.

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	(g)		In connection with the Disposition of the Additional Facilities pursuant to this Section 3.07, the AYE Operating Company shall: (i) represent and warrant to the West Virginia Operating Company that (A) it has good title to the Additional Facilities, (B) there are no Encumbrances for any indebtedness or any other Encumbrances on such Additional Facilities other than pursuant to this Agreement, (C) the AYE Operating Company has due authority to Dispose of such Additional Facilities to the West Virginia Operating Company, (D) the agreement transferring the Additional Facilities to the West Virginia Operating Company is valid and enforceable against the AYE Operating Company, and (E) the Disposition of the Additional Facilities to the West Virginia Operating Company does not violate any applicable Law in any material respect or cause a default under any material agreement to which the AYE Operating Company is a party; (ii) disclose in writing the existence and nature of any pending or, to the AYE Operating Company’s actual knowledge without any obligation of due inquiry, threatened litigation or arbitration or any audit or investigation initiated by any Governmental Authority against the AYE Operating Company related to the Additional Facilities; and (iii) sign such documents as may reasonably be requested by the West Virginia Operating Company. The representations and warranties described in clause (i) of this Section 3.07(g) shall not survive the closing of the sale of the Additional Facilities, except for the representations and warranties described in clauses (i)(A), (i)(C), (i)(D) and (i)(E) of this Section 3.07(g), each of which shall survive such closing on such Disposition for a period of one (1) year.
	(h)		Notwithstanding any other provision of this Agreement to the contrary, in the event the AYE Operating Company discloses the existence of any pending or threatened litigation or other proceeding required to be disclosed pursuant to Section 3.07(g), or the West Virginia Operating Company reasonably determines that the representation and warranty required by clause (i)(B) of Section 3.07(g) is inaccurate, the West Virginia Operating Company may, in its sole discretion, and as its exclusive remedy based on such disclosure, elect not to purchase the Additional Facilities.
	(i)		Simultaneous with any Disposition of the Additional Facilities to the West Virginia Operating Company: (i) the AYE Operating Company shall grant the West Virginia Operating Company such access to the Additional Facilities as may be reasonably necessary to own, operate and maintain the Additional Facilities; and (ii) the AYE Series Administrative Committee shall cause the AYE Operating Company to execute and deliver an Environmental Indemnity Agreement to the West Virginia Operating Company. Upon the Disposition of the Additional Facilities by the AYE Operating Company, such Additional Facilities shall no longer be included in the Bedington-Kemptown Facilities.

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     3.08 Duty of Cooperation .

	(a)		No Series Member of a Joint Series, nor its Representatives, Administrators, employees, officers, agents or consultants shall, without the approval of the Administrative Committee of such Joint Series: (A) engage in any negotiations of any agreements with respect to such Joint Series or the Joint Series Operating Company associated with such Joint Series except as permitted by the Services Agreements or the Administrative Services Agreements; or (B) act with apparent authority of the Company, such Joint Series or the Joint Series Operating Company associated with such Joint Series; provided, however , that nothing in this Section 3.08 shall limit or restrict any rights of AET acting in good faith in its capacity as a Series Member of the AYE Series.
	(b)		In the event the Voting Members or the Administrative Committee of any Series elects to take any action that: (i) materially affects the Operating Company associated with such Series; (ii) does not materially affect any other Series or Operating Company; and (iii) requires the approval or consent of the Board of Managers, each Member shall cause its Representatives to (A) not withhold or condition their respective approvals or consents to such action, and (B) cooperate in connection with such action.

     3.09 Company Escrow Agreement .

	(a)		The Board of Managers shall cause the Company to enter into the Company Escrow Agreement and, together with the Operating Companies, to direct that all monies paid by PJM to the Company, the West Virginia Operating Company or the AYE Operating Company in respect of the West Virginia Facilities and/or the Bedington-Kemptown Facilities be deposited into a single account (the “ Deposit Account ”) administered pursuant to such Company Escrow Agreement. The Deposit Account and any other account established pursuant to the Company Escrow Agreement shall be administered by a bank, financial institution or other depository (the “ Company Escrow Agent ”) as shall be designated from time to time by the Board of Managers. No funds deposited into the Deposit Account or any other account established pursuant to the Company Escrow Agreement shall be commingled with funds of any other Person, including any Member.
	(b)		The Deposit Account shall be maintained for the benefit of the Operating Companies in accordance with the terms and conditions of the Company Escrow Agreement.
	(c)		The Board of Managers shall direct the Company Escrow Agent to disburse funds from the Deposit Account to the West Virginia Operating Company and the AYE Operating Company, or accounts established for

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			the benefit of such Operating Companies, based on the methodology set forth in Schedule 3.09 ; provided, however , that in the event that the AYE Series Member fails to comply in any material respect with the requirements of Section 3.03, the Board of Managers shall direct the Company Escrow Agent to disburse funds from the Deposit Account to each of the West Virginia Operating Company and the AYE Operating Company, or accounts established for the benefit of such Operating Companies, in accordance with the formula rates then applicable to such Operating Companies and without reference to the allocation methodology set forth in Schedule 3.09 .
	(d)		In the event the Company (though the AYE Series) ceases to own any material interest in the AYE Operating Company, the Company Escrow Agreement shall be terminated and each of the West Virginia Operating Company and the AYE Operating Company shall be entitled to monies paid by PJM based on their respective formula rates.

     3.10 Series Expenses .

	(a)		Subject to Section 8.10, each West Virginia Series Member shall: (i) solely through its obligation under this Agreement to fund Series Capital Contributions for the West Virginia Series, be responsible for that portion of the aggregate costs and expenses incurred by the West Virginia Operating Company on or after the Effective Date corresponding to such West Virginia Series Member’s Series Percentage; and (ii) be obligated to contribute such amounts to the West Virginia Series pursuant to Series Capital Calls. The West Virginia Series Administrative Committee shall cause the West Virginia Operating Company to reimburse certain costs and expenses related to the West Virginia Facilities and/or the real property interests on which such facilities are to be located incurred prior to the Effective Date pursuant to the terms and conditions set forth in the Administrative Services Agreements executed by the West Virginia Operating Company.
	(b)		Subject to Section 8.10, each Ohio Series Member shall: (i) solely through its obligation under this Agreement to fund Series Capital Contributions for the Ohio Series, be responsible for that portion of the aggregate costs and expenses incurred by the Ohio Operating Company on or after the Effective Date corresponding to such Ohio Series Member’s Series Percentage; and (ii) be obligated to contribute such amounts to the Ohio Series pursuant to Series Capital Calls. The Ohio Series Administrative Committee shall cause the Ohio Operating Company to reimburse certain costs and expenses related to the Ohio Facilities and/or the real property interests on which such facilities are to be located incurred prior to the Effective Date pursuant to the terms and conditions set forth in the Administrative Services Agreements executed by the Ohio Operating Company.

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(c)

The AYE Series Member shall: (i) solely through its obligation under this Agreement to fund Series Capital Contributions for the AYE Series, be responsible for costs and expenses incurred by the AYE Operating Company; and (ii) be obligated to contribute such amounts to the AYE Series pursuant to Series Capital Calls.

     3.11 Financing . The Series Members of each Series shall exercise reasonable efforts to obtain third-party financing for their respective Operating Companies; provided, however , that: (a) the principal amount of any Operating Company Indebtedness at the time such Operating Company’s facilities are energized (other than merely for test purposes) shall not, without the approval of the Board of Managers, exceed fifty percent (50%) of total capital investment in such Operating Company; and (b) no Operating Company shall have any obligation to coordinate or aggregate the financing of its Project Facilities with the financing of Project Facilities owned by any other Operating Company. The Series Members of each Series shall cooperate with Series Members of the other Series and prospective lenders in connection with proposed financing arrangements, including providing information regarding their respective Operating Companies and/or Series Members as may be reasonably requested by such prospective lenders. Nothing in this Agreement shall require a Member to prov