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Exhibit D-11
BEFORE THE COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
APPLICATION OF DELMARVA POWER & )
LIGHT COMPANY UNDER THE VIRGINIA )
ELECTRIC UTILITY RESTRUCTURING ACT ) CASE No. PUE____________
AND FOR OTHER FINDINGS )
APPLICATION OF
DELMARVA POWER & LIGHT COMPANY
Delmarva Power & Light Company ("Delmarva" or the "Company") hereby
respectfully seeks approval pursuant to Section 56-590.B of the Code of
Virginia, of a plan for the functional separation of the Company's generation
activities from its transmission and distribution activities (the "Plan") and
necessary approvals for the implementation of the Plan in accordance with the
Virginia Electric Utility Restructuring Act ("Restructuring Act").
As explained in more detail below, the Plan involves complete divestiture
of Delmarva's generation facilities, some of which would be sold to unaffiliated
parties and the remainder of which are proposed to be transferred to an
affiliate. In order to effectuate the Plan, Delmarva also asks for certain
findings relating to Delmarva and its affiliate, Atlantic City Electric Company
("ACE"), that are necessary under the Public Utility Holding Company Act of
1935, as amended ("PUHCA") in order to sell or transfer these generation
facilities to an Exempt Wholesale Generator ("EWG").
Delmarva further requests findings that Delmarva's membership in the PJM
Interconnection, LLC, meets the requirements of Virginia Code Sections
56-577.A.1 and 56-
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579 relating to the transfer of management and control of utility transmission
facilities to regional transmission entities by January 1, 2001.
Delmarva further requests that the Virginia State Corporation Commission
("Commission") exercise its discretion pursuant to Virginia Code Section
56-249.6 to waive the requirements of filing fuel rate adjustments for the
recovery of fuel costs, including purchase power costs, on the grounds that
Delmarva's fuel costs can be reasonably recovered through the rates and charges
established by the Commission in conjunction with the Plan.
The Plan provides for the divestiture of Delmarva's generation facilities
in three Phases. Therefore, Delmarva asks that the Commission enter orders from
time to time as necessary to authorize the conveyances described herein. In
particular, Delmarva asks that orders be entered on or before March 15, 2000,
authorizing the sale to unaffiliated purchasers of its interests in nuclear
baseload generation facilities, with such orders containing the PUHCA findings
that are necessary in order to sell such generation facilities to an EWG.
I. PARTIES AND OTHER RELATED COMPANIES.
1. Delmarva is a Delaware corporation and a Virginia public service
corporation that provides electric service to approximately 21,500 retail
customers and one wholesale customer in Virginia's two Eastern Shore counties.
Delmarva has approximately 445,000 additional electric service customers located
in Delaware and Maryland. Delmarva also provides natural gas service to
approximately 106,000 customers located in Delaware. Delmarva's Virginia
customers produce less than 3% of Delmarva's annual electric revenues. During
the period, October 1, 1998 - September
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30, 1999, Delmarva's Virginia retail load peaked on July 5, 1999, at
approximately 84.8 MW, or about 2.6% of the 3,255 MW total system peak for
Delmarva on that day. Annual energy usage by Virginia retail customers was
367,154 MWH, or about 2.7% of Delmarva's system annual energy usage of
13,657,098 MWH. Delmarva is a wholly owned subsidiary of Conectiv. Delmarva is
also a member of the PJM Interconnection, LLC, ("PJM") which is an Independent
System Operator as defined by the Federal Energy Regulatory Commission ("FERC").
PJM administers a generation bidding, dispatching and scheduling program and
provides interstate transmission service for power generated within and/or
transmitted across all or portions of Pennsylvania, New Jersey, Maryland and the
Delmarva peninsula.
2. Conectiv is a Delaware corporation and a registered holding company
under PUHCA. Conectiv also owns ACE, Conectiv Resource Partners, Inc. ("CRP")
and a number of other corporations with non-regulated businesses. CRP employees
provide various services for Conectiv-owned companies, including financial,
accounting, legal, human resources, and other administrative services.
3. ACE is a New Jersey corporation whose retail utility activities are
regulated by the New Jersey Board of Public Utilities. ACE has approximately
488,800 electric customers located in the southern one-third of New Jersey. ACE
is also a member of PJM.
II. BACKGROUND.
A. THE LAW.
4. The Restructuring Act requires that, prior to January 1, 2001, each
Virginia electric utility file a plan for the functional separation of its
generation activities
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from its distribution and transmission activities. The Commission is to review
each plan. Section 56-590(B).
5. The Restructuring Act provides in Sections 56-577.A.1 and 56-579
for the transfer of management and control of utility transmission facilities to
regional transmission entities by January 1, 2001.
6. Section 56-249.6 provides the Commission with discretion to waive the
requirements of filing fuel rate adjustments for the recovery of fuel costs,
including purchase power costs, if it makes findings that the utility's fuel
costs can be reasonably recovered through the rates and charges established by
the Commission.
7. Section 32 of PUHCA, 15 U.S.C. Section 79z-5a, contains a variety of
provisions relating to EWGs, which are, by definition, exclusively in the
business of owning and/or operating "eligible facilities" and selling the
electric energy from such facilities at wholesale. Because they sell electricity
at retail, Delmarva and ACE cannot be EWGs, and their existing power plants are
not "eligible facilities" under PUHCA.
8. Under PUHCA, the power plants of Delmarva and ACE could become
"eligible facilities" upon the sale or transfer to an EWG if certain findings
are made; namely that:
allowing such facility to be an eligible facility a) will benefit
consumers; b) is in the public interest, and c) does not
violate state law.
15 U.S.C. Section 79z-5a(c).
9. A special PUHCA rule within 15 U.S.C. Section 79z-5a(c) applies to
utilities that are members of a registered utility holding company group, such
as Delmarva and ACE. That special rule requires that the EWG findings be
obtained from each state
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commission with rate-making authority over any utility within the holding
company group for any facility held as of 1992 by any utility in the group. This
means that EWG findings must be sought from the Commission even for facilities
currently owned by ACE that are to be sold to an EWG. The same EWG findings are
being sought in Delaware, Maryland and New Jersey.
B. THE PERTINENT FACTS.
10. In anticipation of retail electric competition, Conectiv, Delmarva,
and ACE have developed a corporate strategy that focuses Delmarva and ACE on the
core utility business of transmitting and distributing energy to retail and
wholesale customers. Under this strategy, Delmarva and ACE would retain their
transmission and distribution facilities, continue to read meters and bill
customers, and, at least during the transition to full competition in the retail
electric generation business, be the provider of last resort to customers who do
not choose another electric supplier. Delmarva and ACE would exit the business
of owning and operating power plants.
11. The corporate strategy also classifies the existing power plants as
"strategic" and "non-strategic," depending on the perceived ability to operate
them profitably. "Non-strategic" facilities include the nuclear and fossil units
in which Delmarva and ACE have only small minority interests and base-load coal
or oil units whose economic value may be driven largely by economies of scale.
"Strategic facilities" are gas- or oil-fired units that are "load-following"
units, (i.e., units that can be fired-up and shutdown relatively rapidly to
match consumer demand for electricity). The corporate strategy is to sell the
non-strategic facilities to unaffiliated companies. The strategic facilities
would be transferred to an affiliate that would be part of a group
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operating in largely unregulated markets, including electric energy trading, oil
and gas trading, and competitive retail electric and gas sales markets.
12. On September 27, 1999, Delmarva executed contracts with PECO Energy
Company and PSEG Power, LLC to sell its nuclear interests in the Peach Bottom
Nuclear Generating Station located in York County, Pennsylvania, and the Salem
Nuclear Power Station located in Salem County, New Jersey, subject to obtaining
necessary regulatory approvals. The sales include the nuclear generation units
themselves, nuclear decommissioning trust fund balances, nuclear fuel, and the
associated interests in land and other equipment, including the small turbine at
Salem that is primarily used for start-up and on-site power needs. It is
Delmarva's understanding that on or prior to closing, PSEG Power, LLC will
designate a subsidiary, PSEG Nuclear, LLC, to be the actual purchaser of the
interests.
13. Delmarva currently owns 7.51% of Peach Bottom and 7.41% of Salem,
(representing 173 MW and 172 MW of capacity, respectively). The sales agreements
also provide that Delmarva's affiliate, ACE, will sell its 7.51% share of Peach
Bottom and 7.41% share of Salem. One-half of each of those interests in Peach
Bottom would be sold to PECO Energy Company ("PECO"), and one-half to PSEG
Power, LLC. All of the Delmarva and ACE interests in Salem would be sold to PSEG
Power, LLC. In addition, ACE holds a 5% share in the Hope Creek Nuclear Station
located in Salem County, New Jersey. That 5% interest would also be sold to PSEG
Power, LLC.
14. Under the sales agreements, the purchase price for Delmarva's interest
in Salem and Peach Bottom is approximately $4.1 million and $5.1 million
respectively. In addition, the purchasers will compensate Delmarva for
Delmarva's share of the net book
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value of the nuclear fuel at each facility as of the closing date. Under the
sales agreements, PECO and PSEG Power, LLC, will assume future decommissioning
and environmental liabilities. The net loss (pre-tax) expected from the sale of
the Delmarva interests (including transactional costs) in the Nuclear Facilities
relative to book value is approximately $252.3 million, but that number cannot
be precisely quantified at this time because transaction costs and adjustments
to the purchase price and book value will not be known until closing.
15. On January 18, 2000, Delmarva and ACE executed contracts with NRG
Energy, Inc., a non-utility affiliate of the Minnesota-based utility, Northern
States Power Company, which contracts, among other things, provide for the sale
of: Delmarva's Indian River and Vienna powerplants located in Delaware and
Maryland, respectively; Delmarva's minority interests in the Keystone and
Conemaugh coal plants located in Pennsylvania; the unimproved land acquired by
Delmarva for the once-planned construction of a coal-fired powerplant in
Dorchester County, Maryland; and certain facilities and interests owned by ACE,
including ACE's interests in the Keystone and Conemaugh plants. The sales price
for the assets owned by Delmarva was $621.6 million, subject to adjustments for
certain projected capital costs incurred prior to closing and changes in
inventory levels. The net gain (net of transactional costs and pre-tax) expected
from the sale of the Delmarva interests in the Fossil Facilities relative to
book value is approximately $249.5 million, but that number cannot be precisely
quantified at this time because transaction costs and adjustments to the
purchase price and book value will not be known until closing. Associated with
the sales contracts are various related agreements involving, among other
things, the interconnection of the powerplants to the
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Delmarva or ACE systems, a six month transitional services agreement and a term
sheet for a power purchase agreement to be executed between Delmarva and NRG
Energy, Inc. that will provide Delmarva with 500 MW of firm energy (deliverable
in every hour) from the date of closing the Fossil Facilities transactions
through the end of 2005. It is Delmarva's understanding that on or prior to
closing, NRG Energy, Inc. will assign its interests to several subsidiaries or
affiliates such that each plant or share of a plant will be owned by a separate
legal entity, who will be the actual purchaser of the interests.
16. For many years Delmarva has been a member of the PJM power pool. That
power pool was reorganized in 1997 as the PJM Interconnection, LLC. PJM operates
as a single transmission control area with free-flowing interconnections serving
23 million customers of eight mid-Atlantic utilities, including Delmarva. By
order dated November 25, 1997, the FERC approved PJM's open access transmission
tariff. In addition to its function as an independent system operator (ISO), PJM
operates a competitive energy market through the PJM Interchange Energy Market,
as described in the FERC order.
III. THE FUNCTIONAL SEPARATION PLAN.
A. PROPOSED DIVESTITURES.
17. Delmarva proposes to separate its generation function from its
transmission and distribution function through divestiture. If approved, it is
expected that the divestiture will be complete in the second quarter 2000 and
will occur in three phases: 1) sales to third parties (PECO and PSEG Nuclear) of
minority interests in Peach Bottom and Salem (the "Nuclear Facilities") on or
about March 31, 2000 ("Phase I"); 2) sales to third parties (NRG Energy, Inc.)
of its minority interests in the Keystone and Conemaugh
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coal-fired plants and its 100% interests in the Vienna and Indian River
base-load fossil units (the "Fossil Units") ("Phase II"); and 3) transfer of
intermediate and peak-load facilities to an affiliate ("Phase III").
18. Delmarva currently owns 2,849 MW of capacity, of which 1,455 is
planned for sale to unrelated entities in Phases I and II. The remaining 1,394
MW of capacity would be transferred in Phase III of the Plan to an affiliate
after seeking approval of this Commission in a separate filing under the
Affiliate Act. That Affiliate Act filing will also identify and describe the
proposed transfer to an affiliate of certain intermediate-term and short-term
power purchase contracts that were entered into with unaffiliated parties as
part of Delmarva's wholesale trading activities.
19. The Plan results in a functional separation between employees who work
at the generation plants and employees performing transmission and distribution
functions. Employees at the generation plants will become employees of the
companies to which the plants are sold or transferred.
20. CRP employees will generally be retained by CRP and will continue to
provide services including legal, accounting, financial, fuel procurement and
energy trading services for the Conectiv holding company group, including
Delmarva and the affiliate(s) to which certain of the generation facilities will
be transferred. It is expected that, at some point within the period that rates
are capped, current CRP employees who perform functions primarily associated
with electric generation and supply (e.g., the trading desk employees, fuel
procurement employees) will be transferred out of CRP to an affiliated entity.
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B. RATE PROPOSALS.
(i) Introduction.
21. Delmarva's Plan reduces and stabilizes rates for Virginia retail
electric customers. For each of the first two Phases to close, Delmarva proposes
that there be a base rate decrease and that fuel rates be frozen. When the final
Phase closes, Delmarva proposes an additional rate decrease so there will be an
overall revenue decrease of 2.58%. The rates would stay in effect until at least
January 1, 2004, except for small, scheduled, annual increases in the fuel
rates. Each of the sales and transfers will require approvals from multiple
regulatory authorities. In the event that one or more such approvals is delayed
with respect to the sale of facilities to third parties, it is possible that the
Phase III transfer of generation facilities to an affiliate could occur prior to
implementation of one of the other phases. Delmarva's rate proposals as
described below do not require that the Phases close in I-II-III order. As each
Phase closes, there will be a rate decrease as described with respect to the
Phase that closes. Only two of these reductions would become effective, because,
at the closing of whichever Phase is last to close ("Total Divestiture"), the
Plan calls for a different set of base and fuel rates (which yield the same
overall result) than would result from implementing the base rate reductions in
all three Phases.
22. Because of the rate decreases in the Plan, no separate tracking of
"stranded costs" or net losses or net profits associated with the sale or
transfer of generation facilities will be necessary.
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23. The following illustrates the rate proposals described in more detail
below:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Base Rates Fuel Rates Total Revenues
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Phase I Class decreases Frozen Decrease from
Closing of Sales of 0.88% - 1.03% each Class of
of Nuclear 0.70%.
Facilities
---------------------------------------------------------------------------------------
Phase II Class decreases Frozen Decrease from
Closing of Sales of 1.07% - 1.33% each Class of
of Fossil 0.90%
Facilities
----------------------------------------------------------------------------------------
Phase III Class decreases Frozen Decrease from
Affiliate Transfer of 1.19% - 1.49% each Class of
of Remaining 1.00%
Facilities
----------------------------------------------------------------------------------------
Capped Rates Going Class decreases Reset to Energy Decrease from
Forward After of 14.75% - Price of PECO each Class of
Total Divestiture 34.42% Power Purchase 2.58%
(All Three Phases Agreement; 64.01%
Closed) above current
fuel rate but
offset by Base
Rate Reductions
----------------------------------------------------------------------------------------
</TABLE>
(ii) Base Rate Proposal With Respect To Closing of Phases I, II, and III.
24. Delmarva proposes that, as of the first day of the month beginning at
least 15 days after closing (the "Effective Date") of any of the three Phases,
Virginia retail revenues be reduced as follows: for Phase I, the overall revenue
reduction for each class of customer would be 0.7%; for Phase II, the overall
revenue reduction for each class of customer would be an additional 0.9%; and
for Phase III, the overall revenue reduction for each class of customer would be
an additional 1.0%. In each instance, the reductions would be with proration
(based on consumption on and after the Effective Date) and, across rate classes,
would be pro rata based on revenues from each rate class. See Appendix H, Att.
3, page 1, line 9.
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(iii) Fuel Rate Proposals Effective with the First Closing of Any Phase.
25. Delmarva proposes that, as of the Effective Date after the closing of
the transactions involving any Phase of the Plan, Virginia retail fuel rates be
frozen at the level of actual fuel costs for the 12-month period ending at least
30 days prior to the Effective Date. Any deferred fuel balance as of the last
day of the above-referenced 12-month period would continue to be deferred until
the date of Total Divestiture. Approximately 30 days after the date of Total
Divestiture, a final "true-up" of the deferred fuel balance would be computed
for recovery from or crediting to ratepayers over a period to be determined by
the Commission.
(iv) Base and Fuel Rate Proposals Effective upon the Date of Total
Divestiture.
26. In order to establish a reasonable degree of price stability for
Virginia ratepayers after Total Divestiture, Delmarva proposes as part of its
Plan to establish a Virginia fuel rate that is equal to the energy charge of a
recently executed, six and one-half year power purchase contract that is larger
than Delmarva's entire Virginia load, available every hour on an entirely firm
basis and backed by the 30,500 MW of capacity owned by PECO.
27. As of the first month starting at least 15 days after Total
Divestiture, the Virginia retail fuel rate would be set to equal the energy
charges set forth within that PECO power purchase agreement ("PECO PPA"). The
PECO PPA contains a fixed price per MWH with pre-determined increases scheduled
under a fixed price escalator each year.(1) Base rates will be simultaneously
reset such that the aggregate level of charges to
--------
(1) The PECO PPA provides 243 megawatts ("MW") of capacity and 1,835,184
megawatt-hours ("MWH") of energy in 2000. There are scheduled increases in the
amount of
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customers yields a 2.58% overall revenue decrease compared with the existing
base rates and the fuel rates that were frozen at the closing of the first set
of assets to be sold or transferred under the Plan. See Appendix H, Att. 3, page
2, line 16.
28. Under the Plan, the PECO PPA energy charge is used as a proxy price
for the Virginia fuel rate and to establish a schedule of future fuel rate
charges; but that PECO PPA energy charge should not be viewed as Delmarva's
actual cost for serving Virginia's retail load. Because the PECO PPA is a 100%
load factor contract, in order to calculate Delmarva's costs to serve Virginia's
retail load based on the PECO PPA, the energy charges would need to increased by
at least 50% under a formula that takes into account the actual Virginia retail
load factor, offset in part by sales back to PJM of off-peak energy not used by
Virginia customers, and grossed-up to reflect losses. Under the Plan, there
would be no need to establish such a formula or track PJM interchange purchases
and sales -- instead, the Virginia fuel rate would be set to equal the PECO PPA
energy charges and base rates decreased to offset the difference between those
energy charges and the frozen fuel rates and to provide a total bill reduction
of 2.58%.
29. Delmarva's Plan contemplates that the above-described base and fuel
rates would be frozen until January 1, 2004, except that the modest escalation
in PECO PPA energy charges would be reflected each year in fuel rates.
--------------------------------------------------------------------------------
capacity and energy purchased each year through the May 31, 2006
termination date. The price is initially set at $33.90 per MWH (with no
separately stated capacity charge) and slowly escalates to $37.07 per MWH by
2006. The power purchase agreement with PECO has been filed with the FERC and is
to become effective on January 1, 2000. The agreement requires PECO to provide
and Delmarva to purchase firm energy "around-the-clock," (i.e., 24 hours a day
at a 100% load factor). The electric energy provided is not tied to any
particular plant owned by PECO and, thus, is backed by all of PECO's generation
assets.
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30. During this period until January 1, 2004, consistent with the
Commission's discretionary power under Section 56-249.6, Delmarva would not make
filings to recover fuel costs, because Delmarva's rates and charges would be
deemed to be sufficient to reasonably recover its fuel costs. Delmarva would
also request that it not be required to file fuel cost information during this
period beyond identification of annual quantities of Virginia retail sales and
the PECO PPA energy costs.
C. FUTURE FILINGS.
31. Phase III will also require entering into a number of contractual
relationships between Delmarva and one or more affiliates, including: the
transfer of the generation facilities; the assignment to an affiliate of certain
purchase and sales agreements currently between Delmarva and unaffiliated
third-parties; and interconnection and easement agreements between Delmarva and
the affiliate that would permit the affiliate's power to be transmitted across
Delmarva's system. There may also be power sales agreements between Delmarva and
an affiliate. These transactions will be the subject of a subsequent Affiliates
Act application.
32. Delmarva does request, however, that the Commission approve in this
proceeding certain principles associated with these future affiliate
transactions:
- Because of the rate reductions described above, the asset
transfers to a Delmarva affiliate will be at net book value
and no gain or loss will be recognized for ratemaking
purposes.
- Because the Virginia retail fuel clause will be frozen or
established with reference to a contract with an unaffiliated
supplier, the appropriateness of the price of any other power
purchase agreement under which an affiliate sell power to
Delmarva will not be the subject of further regulatory review
by this Commission if such power purchase agreement does not
affect the fuel costs charged to Virginia customers.
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33. Delmarva's Plan contemplates a filing in early 2001 to unbundle rates
and establish a Code of Conduct that would prohibit cross-subsidization among
other things, and make other tariff modifications necessary to comply with the
requirements of the Restructuring Act. Because Delmarva has only about 21,000
Virginia retail customers, the Plan would permit 100% of such customers to
choose an alternative electric supplier on or after January 1, 2002, rather than
proposing a phase-in of retail choice.
34. Delmarva believes that a competitive market will exist in Delmarva's
Virginia service area before January 1, 2004. Consequently, the Plan
contemplates a filing in mid-2003 seeking a termination of Capped Rates pursuant
to Section 56-582.C. In the event the Commission does not terminate Delmarva's
Capped Rates as part of that proceeding, Delmarva would likely file a general
rate case application to reset base and fuel rates effective January 1, 2004.
IV. THE APPROVAL OF THE PLAN IS IN THE PUBLIC INTEREST
A. THE PLAN SATISFIES THE RESTRUCTURING ACT.
35. The Restructuring Act in Section 56-590 requires functional separation
between a utility's generation activities and its transmission and distribution
activities. The Plan provides for such separation by complete divestiture of all
of Delmarva's generation facilities to either third parties or affiliated
entities. The Commission has authority under Section 56-590.B.3 to provide that
a utility retain generating assets "or their equivalent" while the utility
serves as a default provider. The Plan fulfills this requirement by Delmarva's
commitment to obtain, through power purchase agreements and its membership in
PJM, sufficient capacity and energy to serve Delmarva's Virginia retail load,
with such capacity and energy priced with reference to the PECO PPA.
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B. THE PUBLIC INTEREST IS SERVED BY THE
PLAN'S SUBSTANTIAL PRICE PROTECTIONS.
36. Historically, utility rates, particularly fuel rates, have varied
substantially over time and sometimes have fluctuated dramatically. Nuclear
Facilities, in particular, have had a history of millions of dollars being spent
on new capital investment to replace or repair equipment that has failed or is
needed to comply with changing Nuclear Regulatory Commission rules. The future
costs of decommissioning nuclear units are unpredictable, and a major benefit of
the sale of the Nuclear Facilities is the purchasers' agreement to assume future
liability for decommissioning and other environmental costs. Ratepayers are also
currently subject to the risk of sharply higher fuel prices due to demand during
abnormally hot or cold weather and as a result of general trends in fuel costs
that are outside of Delmarva's control.
37. The Plan provides substantial price reductions and price stability,
which, Delmarva respectfully submits, are in the public interest. Between the
date the first closing of any Phase occurs and Total Divestiture, base and fuel
rates will be set so that any rate changes are rate decreases.
38. When Total Divestiture occurs, customers similarly benefit. Base and
fuel rates are set so that the aggregate effect compared to base rates and fuel
costs prior to the sales, will be a revenue reduction of 2.58%.
39. After Total Divestiture, base rates will be fixed and fuel rates will
increase very slowly over time in accordance with the changes set forth in the
PECO PPA. Rate stability is guaranteed until January 1, 2004.
40. The Plan also provides savings relative to that which would occur if
Total Divestiture were to occur and "traditional" cost of service ratemaking
mechanisms were
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employed. See Appendix H, Att.1, line 9. Under a traditional approach: 1) base
rates would be reduced by removing the remaining investment in generation plant
from rate base and removing from cost of service the operations and maintenance
and other costs associated with the generation facilities; 2) base rates would
be increased by the capacity charges incurred under new power purchase contracts
to procure sufficient capacity to meet the needs of Virginia retail customers;
and 3) fuel rates would rise or fall depending on the costs of replacement
energy in the market.
41. Under the "traditional" ratemaking approach, approximately $8.1
million of Delmarva's $21.3 million in Virginia retail base revenues would be
eliminated if the investment and cost of service costs from generation
facilities were removed from base rates. This reduction is almost exactly
offset, however, by approximately $8.1 million in added costs that would be
incurred to replace the capacity and energy provided by the generation
facilities. About 92.4 MW of capacity must be obtained in order to meet
Virginia-retail peak requirements including the reserve requirements established
by PJM. The estimated price for such replacement capacity is $21,900 per MW per
year as of May 2000, based on posted bids in futures markets. Replacement fuel
costs are calculated using the interchange price at which Delmarva can purchase
energy through PJM. The data in Appendix H applies the actual PJM locational
marginal prices for each hour multiplied by the energy used by Virginia retail
customers in such hours over the 12-month period ending September 30, 1999.
42. Under current market conditions, the sale and transfer of all of
Delmarva's generation facilities and replacing the capacity and energy in the
open market would be essentially "break-even," with a slight increase in
customer bills of about $34,000 (about
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0.1%). (Appendix H, Att. 1.) In contrast, the Plan would reduce customer bills
by about 2.58% or $727,543.
43. The workpapers in Appendix H do not reflect a change in the capital
structure of Delmarva caused by the sale of the generation facilities.
Delmarva's current expectations are that, while third quarter write-offs
primarily associated with the expected sale of the Nuclear Facilities have
temporarily increased Delmarva's debt/equity ratio, the proceeds from the sales
of fossil facilities and other sources will permit debt to be paid down to
levels that leave Delmarva's debt/equity ratio at a reasonable level.
C. RELIABILITY IS MAINTAINED UNDER THE PLAN.
44. After the divestiture, Delmarva will meet its retail load obligations
in Virginia through power purchase agreements and its continued membership in
and obligations with the PJM. Under Virginia law, until such time as this
Commission determines that some other entity should be the provider of last
resort, Delmarva has a continuing legal obligation to provide sales service
within its service territory.
45. Under its agreements with PJM, Delmarva is required to designate
resources (i.e., generation or firm power sales agreements) sufficient to meet
its customers' estimated peak demand. PJM is a so-called "tight power pool,"
with member companies that own in excess of 75,000 MW of capacity that is
dispatched by PJM on a daily, bid-in price basis. The physical electron flows of
such power is throughout the pool following the laws of physics (i.e., paths of
least resistance). PJM operates the higher-voltage transmission systems within
the region and the complex accounting systems that track and assign revenues and
costs in accordance with actual power generated and used. PJM is the 2nd largest
non-government-owned power pool in the
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world. Delmarva submits that its membership in PJM complies with the
requirements of Virginia Code Section 56-577(A)(1).
46. On a purely physical basis, virtually nothing short of mothballing or
decommissioning a plant can impair the reliability of supply within the PJM
system. No matter who owns a power plant within PJM, the output of that plant
will be delivered into the interconnected transmission grid and will physically
flow along the lines of least resistance to customers throughout the PJM region.
Thus, a change in ownership of the power plants, by itself, will neither change
the availability of power in the PJM region nor the amount of power delivered
into Delmarva's Virginia service area. All that would change is the accounting
by PJM so that the new power plant owner would receive the revenues for the
output of the plant.
47. With respect to physical reliability, Delmarva also notes the planned
construction near Oak Hall, Virginia, by Commonwealth Chesapeake Company, LLC,
("CCC") of a power plant complex of approximately 135 MW (expected operation in
2000) and an additional 312 MW in a subsequent period. CCC will be executing
sales contracts with various entities and it is expected that, for PJM
accounting and billing purposes, most or all of the power from this facility
will be treated as if delivered to purchasers outside the Delmarva peninsula. On
a purely physical basis, however, it is highly unlikely that the actual power
flow across Delmarva's system will result in deliveries outside the peninsula.
In fact, much of this power will likely flow along paths of least resistance to
Delmarva's retail customers in Virginia and southern Maryland.
48. In the short-run, Delmarva's ability to meet the needs of its
customers is actually enhanced by the onset of customer choice in Delmarva's
service area. Retail
19
<PAGE> 20
customer choice began for larger industrial customers in Delaware on October 1,
1999. As of January 26, 2000, Delmarva had already lost 336 MW of load (an
amount that is four times the peak demand of Delmarva's entire Virginia retail
load) and is only a little less than the 345 MW of nuclear capacity to be sold.
Loss of load is expected to increase over time as all Delaware customers become
eligible to choose an alternative electric supplier on October 1, 2000. On July
1, 2000, 100% of Delmarva's retail customers in Maryland also become eligible
for customer choice.
49. By the end of 2000, the lost load in Delaware and Maryland will far
exceed the size of the nuclear capacity sold. Delmarva recognizes, however, that
customer choice in Delaware and Maryland is not likely in the near-term to
result in lost load that would totally offset the amount of nuclear and fossil
capacity that is to be sold in Phases I and II. By obtaining power through power
purchase agreements and PJM, however, Delmarva will ensure that there is
sufficient capacity and energy to meet the needs of its Virginia customers.
V. REQUESTED FINDINGS UNDER PUHCA.
50. The requested PUHCA findings are that the treatment as "eligible
facilities" of Delmarva and ACE's generation facilities: 1) will benefit
consumers; 2) is in the public interest; and 3) is not contrary to state law.
51. The first two criteria set forth in PUHCA are effectively
indistinguishable from the standard set forth in the Restructuring Act with
respect to the review of a functional separation plan. The Commission is to
review such plans and may impose conditions, "as the public interest requires."
Virginia Code Section 56-590(B)(3). Delmarva respectfully submits that these
criteria of PUHCA are met because the Plan, which
20
<PAGE> 21
contemplates a sale or transfer of generation facilities to entities with EWG
status, offers substantial benefits to consumers in the form of rate reductions
and rate stability, without impairing reliability.
52. Delmarva's sales of its nuclear interests are contingent on the entire
set of agreements involving Delmarva, ACE, PECO and PSEG Power, LLC, being
approved and the transactions closed. Thus, the benefits of the Phase I rate
reductions and fuel rate freeze that are triggered by Delmarva's sales of its
Nuclear Facilities cannot be obtained in the absence of the ACE sales. Hence,
the treatment of both Delmarva's and ACE's Nuclear Facilities as "eligible
facilities" is in the public interest and will result in benefits to Virginia
consumers.
53. Delmarva's sales of its fossil interests are contingent on the entire
set of agreements involving Delmarva, ACE, and NRG Energy, Inc. being approved
and the transactions closed. Thus, the benefits of the Phase II rate reductions
that are triggered by Delmarva's sales of its Fossil Facilities cannot be
obtained in the absence of the ACE sales. Hence, the treatment of both
Delmarva's and ACE's Fossil Facilities as "eligible facilities" is in the public
interest and will result in benefits to Virginia consumers.
54. The proposed sales of generation facilities in Phases I and II are not
contrary to state law. The Utilities Transfer Act, Chapter 4 of Title 56 of the
Virginia Code, would not have even required Commission approval for Delmarva's
sale of these Phase I and II facilities, because none of them are located in
Virginia. Under the Restructuring Act, adding Section 56-590, the law
contemplates the possibility that a utility would divest itself of generation
facilities. Thus, in the context of the requested PUHCA findings, the Commission
can and should find that the sale of the Nuclear and Fossil
21
<PAGE> 22
Facilities by Delmarva is not contrary to state law. Clearly, the sale of ACE's
nuclear and fossil facilities is not contrary to Virginia law.
55. Because Delmarva is part of a registered electric utility holding
company group, Section 32(c) of PUHCA imposes a special rule that calls for the
PUHCA findings to be made with respect to any facilities of any member of the
group that will become "eligible facilities." Thus, the same PUHCA findings are
requested with respect to ACE's proposed sales of its nuclear and fossil
interests.
56. Delmarva and ACE plan to transfer the generation facilities that are
not sold to third parties to one or more affiliates. It is expected that, at
some point in the future, such affiliates may seek to qualify as EWGs. Thus,
Delmarva also requests in this Application that the Commission make the
requisite PUHCA findings for the generation facilities owned by Delmarva and ACE
that will be transferred to one or more affiliates.
VI. REQUESTED FINDINGS REGARDING TRANSMISSION
57. As a part of this Application, Delmarva seeks a determination from the
Commission that its participation in PJM satisfies the requirements of those
provisions of the Restructuring Act, Sections 56-577 and 56-579.A and B.
58. Because of the geographic isolation of Delmarva's Virginia service
area on the Eastern Shore from the remainder of Virginia, Delmarva is not
connected to any other electric utility operating in Virginia. Therefore,
Delmarva is not involved in "the transfer of electric energy through the
Commonwealth's interconnected transmission grid" within the meaning of the
definition of "transmission" in Section 56-576 of the Restructuring Act.
Accordingly, Delmarva would not be subject to the provisions of the
22
<PAGE> 23
Restructuring Act relating to the transfer of management and control of
transmission facilities.
59. The Commission noted these unique circumstances relative to Delmarva's
transmission facilities in its Modification of Filing Requirements order dated
June 11, 1998 in Case No. PUE980138 at page 3 which excused Delmarva from
certain reporting requirements relating to the development of Independent System
Operators and Regional Power Exchanges applicable to utilities owning
transmission facilities on "mainland" Virginia.
60. Though not required to do so, Delmarva satisfied the requirements of
Virginia Code Sections 56-577 and 56-579 prior to their enactment by
virtue of its membership in PJM. Therefore, Delmarva asks that the Commission
determine either that (1) the requirements of Sections 56-577 and 56-579.A
and B for transfer of management and control of transmission assets to a
regional transmission entity are not applicable to Delmarva or (2) participation
by Delmarva in the PJM power pool satisfies the Sections 56-577 and
56-579.A and B requirements.
VII. DESCRIPTION OF APPENDICES.
61. The following items are appended:
- Appendix A lists Delmarva's generation facilities and
identifies fuel type, capacity, 1998 energy output, location,
and net book value on a Virginia retail basis.
- Appendix B lists ACE's generation facilities and their
location. None of ACE's generation facilities are located in
Virginia.
- Appendix C is a copy of Delmarva's recently executed power
purchase agreement with PECO (the "PECO PPA").
- Appendices D and E are, respectively, the Delmarva sales
agreements involving Peach Bottom and Salem.
23
<PAGE> 24
- Appendices F and G are, respectively, the Delmarva sales
agreement involving wholly-owned (Indian River and Vienna) and
minority interest owned (Keystone and Conemaugh) Fossil
Facilities.
- Appendix H is a set of workpapers and illustrative rates
demonstrating the revenue reductions proposed under the Plan.
VIII. COMMISSION ACTION REQUESTED.
62. The Restructuring Act, adding Section 56-590(D), provides for
Commission review of a functional separation plan within 60 days after filing,
with a discretionary authority to extend the period for a period not to exceed
120 days. Delmarva respectfully requests that the Commission issue an initial
order upon its review of Delmarva's Plan in order to facilitate the planned
sales to unaffiliated third parties of the Nuclear Facilities (scheduled for
closing on March 31, 2000). Therefore, Delmarva requests expedited consideration
and an order issued on or before March 15, 2000, that:
- Finds that this Application satisfies the requirement of Section
56-590 to file a functional separation Plan prior to January 1,
2001.
- Approves, without further conditions, that portion of the Plan with
respect to the sale to third-parties of the Phase I facilities and
the associated base rate reduction and fuel rate freeze.
- Makes explicit findings that, for the Phase I facilities to be sold
to third parties by Delmarva or by its affiliate, ACE, the treatment
of each such facility as an "exempt facility" as defined by PUHCA:
1) will benefit customers; 2) is in the public interest; and 3) is
not contrary to state law.
- Finds that the rate reductions set forth in the Plan make
unnecessary any separate ratemaking treatment of net losses or net
gains from the sale to third parties of generation facilities.
63. Delmarva respectfully requests that the Commission subsequently enter
an order that:
24
<PAGE> 25
- Approves, without further conditions, that portion of the Plan with
respect to the sale to third-parties of the Phase II facilities and
the associated base rate reduction and fuel rate freeze.
- Approves the Plan with respect to the transfer at net book value to
one or more non-utility affiliates of the Phase III facilities, with
the conditions that the sales, interconnection, easement, power
purchase and related contracts between Delmarva and its affiliate(s)
be filed and submitted for Commission review under the Virginia
Affiliates Act and that the rate adjustments set forth herein be
implemented.
- Approves, without further conditions, that portion of the Plan
relating to future filing dates for unbundling rates and
establishing other mechanisms for 100% of retail customers to become
eligible to choose an alternative electric supplier January 2002.
- In conjunction with the above approvals and to facilitate the sale
of the Phase II facilities and the transfer of the Phase III
facilities, makes explicit findings that, for the treatment of each
such facility currently owned by Delmarva and ACE as an "exempt
facility" as defined by PUHCA: 1) will benefit customers; 2) is in
the public interest; and 3) is not contrary to state law.
- Approves, without further conditions, that portion of the Plan that,
as of the date of complete divestiture, would establish the Virginia
fuel rates with reference to a power purchase agreement between
Delmarva and PECO Energy Company and permit recovery in fuel rates
of the per MWH charges associated with such agreement.
- Finds that either (1) the requirements of Sections 56-577 and
56-579.A and B for transfer of management and control of
transmission assets to a regional transmission entity are not
applicable to Delmarva or (2) participation by Delmarva in the PJM
Interconnection, LLC satisfies the Sections 56-577 and
56-579.A and B requirements.
- Finds, pursuant to Section 56-249.6, that Delmarva can reasonably
recover its fuel costs through the rates and charges otherwise
established and, therefore, that Delmarva need not file for rate
recovery or report of fuel costs during the period ending January 1,
2004.
25
<PAGE> 26
WHEREFORE, Delmarva Power & Light Company respectfully asks that the
Commission grant this Application and make the requested findings set forth
herein.
Respectfully submitted,
DELMARVA POWER & LIGHT COMPANY
By: /s/ Thomas S. Shaw
_______________________________
Thomas S. Shaw
Executive Vice President
Peter F. Clark
Randall V. Griffin
Legal Department
Delmarva Power & Light Company
800 King Street, P. O. Box 231
Wilmington, DE 19899
(302) 429-3069
Guy T. Tripp, III
Hunton & Williams
Riverfront Plaza -- East Tower
951 East Byrd Street
Richmond, VA 23219-4074
(804) 788-8328
Dated: February 1, 2000
26
<PAGE> 27
STATE OF DELAWARE )
) ss.
COUNTY OF NEW CASTLE )
On this 31st day of January, 2000, personally came before me, the
subscriber, a Notary Public in and for the state and county aforesaid, Thomas S.
Shaw, Executive Vice President of Delmarva Power & Light Company, a corporation
existing under the laws of the State of Delaware and the Commonwealth of
Virginia, party to this Application, known to me personally to be such, and
acknowledged this Application to be his act and deed and the act and deed of
Delmarva Power & Light Company, that the signature of such Executive Vice
President is in his own proper handwriting, and that the facts set forth therein
are true and correct to the best of his knowledge, information, and belief.
Thomas S. Shaw
------------------------------
Thomas S. Shaw
SUBSCRIBED AND SWORN before me this 31st day of January, 2000.
------------------------------
Notary Public
My Commission Expires: ____/____/____
27
<PAGE> 28
APPENDIX A
DELMARVA POWER & LIGHT COMPANY GENERATING FACILITIES
PHASE I FACILITIES
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Plant Name Location Fuel Capacity 1998 Output Net Book Value
(MW) (MWH) (VA) (7/31/99)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Peach Bottom PA Nuclear 173 1,230,366 $ 2,177,322
-------------------------------------------------------------------------------------------------------------
Salem NJ Nuclear 172 1,046,849 $ 4,374,436
-------------------------------------------------------------------------------------------------------------
</TABLE>
PHASE II FACILITIES
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Plant Name Location Fuel Capacity 1998 Output Net Book Value
(MW) (MWH) (VA) (7/31/99)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Keystone PA Coal 70 493,731 $ 307,272
-------------------------------------------------------------------------------------------------------------
Conemaugh PA Coal 70 488,898 $ 587,478
-------------------------------------------------------------------------------------------------------------
Indian River DE Coal/Oil 790 2,600,894 $ 7,302,330
-------------------------------------------------------------------------------------------------------------
Vienna MD Oil 180 218,207 $ 551.032
-------------------------------------------------------------------------------------------------------------
</TABLE>
PHASE III FACILITIES
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Plant Name Location Fuel Capacity 1998 Output Net Book Value
(MW) (MWH) (VA) (7/31/99)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Edge Moor DE Coal/Gas/ 713 2,500,806 $ 3,471,362
Oil
-------------------------------------------------------------------------------------------------------------
Hay Road DE Gas/ 541 1,045,526 $ 5,742,693
Kerosene
-------------------------------------------------------------------------------------------------------------
Madison St DE Oil 14 178 $ 18,180
-------------------------------------------------------------------------------------------------------------
Christiana DE Gas 56 5,200 $ 44,338
-------------------------------------------------------------------------------------------------------------
Del. City DE Oil 21 79 $ (0)
-------------------------------------------------------------------------------------------------------------
West Sub DE Oil 20 1,013 $ ( 1,517)
-------------------------------------------------------------------------------------------------------------
Crisfield MD Oil 11 6,855 $ 7,525
-------------------------------------------------------------------------------------------------------------
Bayview VA Oil 12 8,816 $ 14,056
-------------------------------------------------------------------------------------------------------------
Tasley VA Oil 27 6,370 $ 41,839
-------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: VA portion of Net Book Value is 2.7963% (from 1998 VA AIF Filing).
Capacity, Output and Net Book Value figures for Salem, Keystone, Conemaugh,
Indian River and Vienna include the small peak units that are part of each of
the facilities.
<PAGE> 29
APPENDIX B
ATLANTIC CITY ELECTRIC COMPANY GENERATING FACILITIES
PHASE I FACILITIES
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Plant Name Location Fuel
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Peach Bottom PA Nuclear
-------------------------------------------------------------------------------------------------------------
Salem NJ Nuclear
-------------------------------------------------------------------------------------------------------------
Hope Creek NJ Nuclear
-------------------------------------------------------------------------------------------------------------
</TABLE>
PHASE II FACILITIES
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Plant Name Location Fuel
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
B.L. England NJ Coal/Oil/Tire Chips
-------------------------------------------------------------------------------------------------------------
Deepwater NJ Gas/Coal/Oil
-------------------------------------------------------------------------------------------------------------
Keystone PA Coal
-------------------------------------------------------------------------------------------------------------
Conemaugh PA Coal
-------------------------------------------------------------------------------------------------------------
</TABLE>
PHASE III FACILITIES
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Plant Name Location Fuel
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cumberland NJ Gas/Oil
-------------------------------------------------------------------------------------------------------------
Missouri NJ Oil
-------------------------------------------------------------------------------------------------------------
Middle Station NJ Oil
-------------------------------------------------------------------------------------------------------------
Cedar Station NJ Oil
-------------------------------------------------------------------------------------------------------------
Carlls Corner NJ Oil
-------------------------------------------------------------------------------------------------------------
Mickleton NJ Gas
-------------------------------------------------------------------------------------------------------------
Sherman Avenue NJ Gas/Oil
-------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 30
APPENDIX C
POWER PURCHASE AGREEMENT BETWEEN
DELMARVA POWER & LIGHT COMPANY AND
PECO ENERGY COMPANY
<PAGE> 31
APPENDIX D
PURCHASE AGREEMENT
AMONG DELMARVA POWER & LIGHT COMPANY
PECO ENERGY COMPANY
AND PSEG POWER LLC
(PEACH BOTTOM ATOMIC POWER STATION)
<PAGE> 32
APPENDIX E
PURCHASE AGREEMENT
BETWEEN DELMARVA POWER & LIGHT COMPANY
AND PSEG POWER LLC
(SALEM NUCLEAR GENERATING STATION)
<PAGE> 33
APPENDIX F
PURCHASE AND SALES AGREEMENT
BETWEEN DELMARVA POWER & LIGHT COMPANY
AND NRG ENERGY, INC.
(INDIAN RIVER AND VIENNA POWER PLANTS, DORCHESTER SITE)
<PAGE> 34
APPENDIX G
PURCHASE AND SALES AGREEMENT
BETWEEN DELMARVA POWER & LIGHT COMPANY
AND NRG ENERGY, INC.
(KEYSTONE AND CONEMAUGH INTERESTS)
<PAGE> 35
APPENDIX H
WORKPAPERS
AND
RATES
<PAGE> 36
DESCRIPTION OF APPENDIX H ATTACHMENTS
ATTACHMENT 1:
Attachment 1 demonstrates that the "Total Divestiture" proposal results
in overall lower revenue requirements to Delmarva Power & Light Company's
Virginia retail customers than current revenues, with updated fuel costs, or
revenues reflecting divestiture of generation assets under a traditional
regulatory approach. This Attachment illustrates that current revenues,
including updated fuel costs, result in revenues of $28,223,815 for the 12 month
period ending July 31, 1999. Delmarva Power & Light Company's "Total
Divestiture" proposal results in revenues of $27,496,272 for the same time
period. This is a $727,543 or 2.58% revenue reduction when compared to current
revenue levels, adjusted for updated fuel costs. Under a traditional regulatory
approach (reflecting removal of generation and associated costs and replacement
of this capacity by capacity purchased at market-based capacity prices and fuel
costs replaced by Virginia hourly load priced at the PJM Locational Marginal
Price (LMP) adjusted for losses and gross receipts taxes) the revenues would be
$28,257,779 for the 12 month period ending July 31, 1999. This represents a
revenue increase of $33,964 or .12% above current revenue levels, adjusted for
updated fuel costs.
ATTACHMENT 2:
Page 1 of Attachment 2 summarizes impact on the revenue requirement of
removing generation plant and associated costs from the Virginia jurisdictional
revenue requirement calculation. The impact of this removal, before the
inclusion of replacement capacity for the generation capacity removed, is a
reduction in the revenue requirement of $8,074,896. This figure is used in the
calculation of revenues under the traditional regulatory approach on page 1 of
Attachment 1.
Page 2 of Attachment 2 summarizes the impact of updating fuel costs and
basing the fuel cost on the actual fuel costs from October 1998 through
September 1999. The average fuel rate based on this calculation is $0.02067 per
kWh. This figure is used in the calculation of current revenues on page 1 of
Attachment 1.
Page 2 of Attachment 2 also includes the calculation of the fuel rate
based on the Virginia hourly load data applied to PJM energy rates which results
in a fuel rate of $0.03890 per kWh. This figure is used in the calculation of
revenues under the traditional regulatory approach on page 1 of Attachment 1.
Finally, page 2 of Attachment 2 contains the calculation of the
replacement capacity costs for the Virginia retail electric jurisdiction of
$2,024,326 per year., based on the cost of capacity as of May 2000 and 1999 peak
load for the Virginia retail jurisdiction. This figure is used in the
calculation of revenues under the traditional regulatory approach on page 1 of
Attachment 1.
ATTACHMENT 3:
Page 1 of Attachment 3 provides a summary of the present revenues by
customer rate class using August 1, 1998 through July 31, 1999 base revenues and
fuel rates based on actual fuel costs for the period October 1, 1998 through
September 30, 1999. In addition, page 1 of Attachment 3 provides a summary of
revenues for Phases I, II and III reflecting proposed bases rate decrease and
frozen fuel rates.
Page 2 of Attachment 3 provides a summary of the Phase III revenues
developed on page 1 of Attachment 3 and "Total Divestiture" revenues which
reflect fuel charges set at the contract level and base rates adjusted to yield
the same overall revenues as the Phase III revenues.
ATTACHMENT 4:
Pages 1 through 9 of Attachment 4 provide the specific rates by
customer rate class for Phases I, II and III of the proposed rate decrease and
the "Final Proposed Rates" reflecting the "Total Divestiture" proposal.
<PAGE> 37
Exhibit D-11 Appendix H
Attachment 2
Page 2 of 2
-----------
Delmarva Power & Light Company
Calculation of Virginia Retail Electric Fuel Rate
Based on Actual Fuel Cost Data From October 1998 - September 1999
-----------------------------------------------------------------
Exhibit D-11
<TABLE>
<CAPTION>
Based On
Existing System
Fuel Costs
----------
<S> <C>
System Fuel and Interchange Cost..................... $ 270,262,191
System Output (kWh).................................. 14,328,081,678
Cost per kWh Output.................................. $ 0.01886
x Loss Factor........................................ 1.06730
Cost per kWh Sold.................................... $ 0.02013
Less: Base Cost of Fuel.............................. 0
--------------
Current Year Factor.................................. $ 0.02013
Fuel Rate Before Gross Receipts Tax.................. $ 0.02013
Gross Receipts Tax Factor............................ 1.02880
--------------
Fuel Rate with Gross Receipts Tax.................... $ 0.02067
Delmarva Power & Light Company
Calculation of Virginia Retail Electric Fuel Rate
Based on Virginia Hourly Load Data Applied to PJM Energy Rates Only
For The Period October 1998 - September 1999
-----------------------------------------------------------------
Total Virginia Retail Fuel Costs (VA Hr. Load - PJM
Rates)............................................. $ 13,028,528
Virginia Output (Total Hourly Virginia load data).... 367,153,987
Cost per kWh Output.................................. $ 0.03549
x Loss Factor........................................ 1.08730
Cost per kWh Sold.................................... $ 0.03788
Less: Base Cost of Fuel.............................. 0
-----------
Current Year Factor.................................. $ 0.03788
Fuel Rate Before Gross Receipts Tax.................. $ 0.03788
Gross Receipts Tax Factor............................ 1.02880
-----------
Fuel Rate with Gross Receipts Tax.................... $ 0.03880
Delmarva Power & Light Company
Calculation of Capacity Dollars For The Virginia Retail Electric Jurisdiction
Based on The Maximum Virginia Load Recorded on July 5, 1999
-----------------------------------------------------------------
Maximum Virginia Load Recorded on 7/5/99 (KW)........ 84,803
Multiplied by
Capacity Reserve Margin For PJM...................... 109%
-----------
Virginia Load Grossed Up............................. 92,435
Multiplied by
Cost Of Capacity as of May 2000 ($/KW Year).......... $ 21.90
Total Cost of Capacity per Year...................... $ 2,024,332
</TABLE>
<PAGE> 38
EXHIBIT D-11
DELMARVA POWER & LIGHT COMPANY d/b/a CONECTIV POWER DELIVERY - VIRGINIA
1996-1998 SALES, REVENUE AND NUMBER OF CUSTOMERS
Revised 10/28/99
jdv
<TABLE>
<CAPTION>
1996
---------------------------
SERVICE RATE RATE DEC 1996 1996
CLASSIFICATION CLASS CODE CUST SALES kWh
-------------- ----- ---- ---- ---------
<S> <C> <C> <C> <C>
RESIDENTIAL TIME-OF-USE NON-DEMAND R-TOU-ND (1) 2 34,434
RESIDENTIAL R - W/O WH AND SH (6) 9,804 59,578,279
RESIDENTIAL R - WITH WATER HEATING (7) 3,566 31,357,569
------ -----------
SUBTOTAL RESIDENTIAL W/O SPACE HEATING SUBTOTAL RESIDENTIAL W/O RSH 13,372 90,970,282
RESIDENTIAL R - SPACE AND WATER HEATING (8) 3,338 45,394,392
RESIDENTIAL TIME-OF-USE NON-DEMAND R-TOU-ND (1) 1 4,087
RESIDENTIAL R - SPACE HEATING (9) 65 893,475
------ -----------
SUBTOTAL RESIDENTIAL SPACE HEATING RSH SUBTOTAL RES SPACE HEATING RSH 3,404 46,291,954
SMALL GENERAL SERVICE - SECONDARY SGS-S (11) 2,645 82,516,376
LARGE GENERAL SERVICE - SECONDARY LGS-S (16) 12 19,409,340
GENERAL SERVICE - PRIMARY GS-P (18) 7 53,480,160
OUTDOOR RECREATIONAL LIGHTING ORL (21) 6 18,234
------ -----------
TOTAL COMMERCIAL TOTAL COMMERCIAL 2,670 155,424,110
SMALL GENERAL SERVICE - SECONDARY SGS-S (11) 47 1,983,339
LARGE GENERAL SERVICE - SECONDARY LGS-S (16) 2 19,327,500
GENERAL SERVICE - PRIMARY GS-P (18) 4 18,616,800
------ -----------
TOTAL INDUSTRIAL TOTAL INDUSTRIAL 53 39,927,639
PRIVATE LIGHTING - RESIDENTIAL PL - RES (25) 1,216 1,054,661
PRIVATE LIGHTING - COMMERCIAL PL - COM (25) 326 464,651
PRIVATE LIGHTING - INDUSTRIAL PL - IND (25) 11 16,377
------ -----------
TOTAL PRIVATE LIGHTING TOTAL PRIVATE LIGHTING 1,553 1,535,689
TOTAL STREET LIGHTING SL (30) 28 1,714,762
------ -----------
TOTAL VIRGINIA RETAIL W/O UNBILLED TOTAL VIRGINIA RETAIL W/O UNBILLED 21,080 335,864,436
UNBILLED UNBILLED (3,600,010)
TOTAL VIRGINIA RETAIL WITH UNBILLED TOTAL VIRGINIA RETAIL WITH UNBILLED 332,264,426
FERC FORM NO. 1 FERC FORM NO. 1 332,266,000
DIFFERENCE DIFFERENCE (1,574)
kWh
</TABLE>
<TABLE>
<CAPTION>
1996 REVENUE 1997
---------- -----------------------------
SERVICE 1996 WITH UNBILLED 1996 DEC 1997 1997
CLASSIFICATION REVENUE FERC FORM 1 REV DIFF CUST SALES KWH
-------------- ------- ----------- -------- ---- ---------
<S> <C> <C> <C> <C> <C>
RESIDENTIAL TIME-OF-USE NON-DEMAND $2,922 2 25,370
RESIDENTIAL $6,034,817 9,748 58,095,589
RESIDENTIAL $3,073,901 3,633 30,973,641
----------- ------ -----------
SUBTOTAL RESIDENTIAL W/O SPACE HEATING $9,111,640 $0 $9,111,640 13,383 89,094,600
RESIDENTIAL $4,196,978 3,445 42,637,819
RESIDENTIAL TIME-OF-USE NON-DEMAND $404 1 2,687
RESIDENTIAL $82,906 66 787,532
----------- ------ -----------
SUBTOTAL RESIDENTIAL SPACE HEATING RSH $4,280,289 $13,381,290 ($9,101,001) 3,512 43,428,038
SMALL GENERAL SERVICE - SECONDARY $7,036,749 2,709 81,175,179
LARGE GENERAL SERVICE - SECONDARY $1,348,213 13 21,303,220
GENERAL SERVICE - PRIMARY $3,017,579 7 50,823,260
OUTDOOR RECREATIONAL LIGHTING $2,366 6 32,491
----------- ------ -----------
TOTAL COMMERCIAL $11,404,908 $11,373,607 $31,301 2,735 153,334,150
SMALL GENERAL SERVICE - SECONDARY $182,247 47 1,892,694
LARGE GENERAL SERVICE - SECONDARY $1,293,924 2 17,805,000
GENERAL SERVICE - PRIMARY $1,137,710 4 18,222,000
----------- ------ -----------
TOTAL INDUSTRIAL $2,613,881 $2,598,278 $15,603 53 37,919,694
PRIVATE LIGHTING - RESIDENTIAL $131,467 1,232 1,069,022
PRIVATE LIGHTING - COMMERCIAL $58,327 331 460,923
PRIVATE LIGHTING - INDUSTRIAL $2,009 12 16,758
----------- ------ -----------
TOTAL PRIVATE LIGHTING $191,802 $0 $191,802 1,575 1,546,703
TOTAL STREET LIGHTING $232,360 $231,767 $593 30 1,721,405
----------- ------------ --------- ------ -----------
TOTAL VIRGINIA RETAIL W/O UNBILLED $27,834,880 21,288 327,044,590
$27,584,942 $249,938
UNBILLED ($249,698) UNBILLED ($249,698) 6,407,704
TOTAL VIRGINIA RETAIL WITH UNBILLED $27,585,182 333,452,294
FERC FORM NO. 1 $27,584,942 333,451,000
DIFFERENCE $240 DIFFERENCE $240 1,294
Revenue kWh
</TABLE>
<TABLE>
<CAPTION>
1997 REVENUE 1998
--------- --------------------------------------
SERVICE 1997 WITH UNBILLED 1997 DEC 1998 1998 1998
CLASSIFICATION REVENUE FERC FORM 1 REV DIFF CUST SALES KWH REVENUE
-------------- ------- ----------- -------- ---- --------- -------
<S> <C> <C> <C> <C> <C> <C>
RESIDENTIAL TIME-OF-USE NON-DEMAND $2,388 2 23,831 $2,132
RESIDENTIAL $5,997,541 9,688 60,117,366 $5,985,298
RESIDENTIAL $3,098,578 3,681 32,470,246 $3,149,462
----------- ------ ----------- -----------
SUBTOTAL RESIDENTIAL W/O SPACE HEATING $9,098,507 $0 $9,098,507 13,371 92,611,443 $9,136,891
RESIDENTIAL $4,062,419 3,542 43,340,236 $4,042,238
RESIDENTIAL TIME-OF-USE NON-DEMAND $273 1 2,814 $272
RESIDENTIAL $75,558 66 766,679 $72,051
----------- ------ ----------- -----------
SUBTOTAL RESIDENTIAL SPACE HEATING RSH $4,138,251 $13,799,674 ($9,661,423) 3,609 44,109,729 $4,114,561
SMALL GENERAL SERVICE - SECONDARY $7,072,129 2,764 83,216,657 $7,010,669
LARGE GENERAL SERVICE - SECONDARY $1,487,474 14 23,207,860 $1,550,864
GENERAL SERVICE - PRIMARY $2,960,034 8 47,497,420 $2,659,693
OUTDOOR RECREATIONAL LIGHTING $3,845 6 32,830 $3,699
----------- ------ ----------- -----------
TOTAL COMMERCIAL $11,523,482 $11,582,440 ($58,958) 2,792 153,954,767 $11,224,925
SMALL GENERAL SERVICE - SECONDARY $176,354 42 2,010,728 $178,435
LARGE GENERAL SERVICE - SECONDARY $1,222,658 - 1,506,000 $100,990
GENERAL SERVICE - PRIMARY $1,148,439 3 34,257,015 $2,027,768
----------- ------ ----------- -----------
TOTAL INDUSTRIAL $2,547,451 $2,549,531 ($2,080) 45 37,773,743 $2,307,194
PRIVATE LIGHTING - RESIDENTIAL $135,747 1,247 1,068,854 $133,796
PRIVATE LIGHTING - COMMERCIAL $58,959 327 454,294 $57,708
PRIVATE LIGHTING - INDUSTRIAL $2,080 9 15,029 $1,835
----------- ------ ----------- -----------
TOTAL PRIVATE LIGHTING $196,786 $196,786 1,583 1,538,177 $193,339
TOTAL STREET LIGHTING $239,455 $239,455 $0 36 1,736,325 $241,262
----------- ------------ --------- ------ ----------- -----------
TOTAL VIRGINIA RETAIL W/O UNBILLED $27,743,931 21,436 331,724,184 $27,218,172
$28,171,100 ($427,169)
UNBILLED $427,169 UNBILLED $427,169 UNBILLED (2,467,179) ($295,335)
TOTAL VIRGINIA RETAIL WITH UNBILLED $28,171,100 329,257,005 $26,922,837
FERC FORM NO. 1 $28,171,100 N/A N/A
DIFFERENCE $0 DIFFERENCE $0
Revenue
</TABLE>
