SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 18, 1998
Commission Registrant; State of Incorporation; I.R.S.
File Number Address; and Telephone Number Employer
Identification
No.
- ----------- ---------------------------------- --------------
333-21011 FIRSTENERGY CORP. 34-1843785
(An Ohio Corporation)
76 South Main Street
Akron, Ohio 44308
Telephone (800)736-3402
1-2578 OHIO EDISON COMPANY 34-0437786
(An Ohio Corporation)
76 South Main Street
Akron, OH 44308
Telephone (800)736-3402
1-2323 THE CLEVELAND ELECTRIC 34-0150020
ILLUMINATING COMPANY
(An Ohio Corporation)
c/o FirstEnergy Corp.
76 South Main Street
Akron, OH 44308
Telephone (800)736-3402
1-3583 THE TOLEDO EDISON COMPANY 34-4375005
(An Ohio Corporation)
c/o FirstEnergy Corp.
76 South Main Street
Akron, OH 44308
Telephone (800)736-3402
1-3491 PENNSYLVANIA POWER COMPANY 25-0718810
(A Pennsylvania Corporation)
1 East Washington Street
P. O. Box 891
New Castle, Pennsylvania 16103
Telephone (412)652-5531
This combined Form 8-K is separately filed by FirstEnergy
Corp., Ohio Edison Company, Pennsylvania Power Company, The
Cleveland Electric Illuminating Company and The Toledo Edison
Company. Information contained herein relating to any individual
registrant is filed by such registrant on its own behalf. No
registrant makes any representation as to information relating to
any other registrant, except that information relating to any of
the four FirstEnergy subsidiaries is also attributed to
FirstEnergy.
Item 5. Other Events
Power Supply --
In late June, the midwestern and southern regions of the
United States experienced electricity shortages caused mainly by
record temperatures and humidity and unscheduled generating unit
outages. The Company's Davis-Besse Nuclear Power Station was
removed from service on June 24 and is expected to return to
service on July 6, 1998, as a result of damage to related
transmission facilities caused by a tornado. Avon Lake Unit 9
also experienced an unscheduled outage in June due to lightning-
related transformer damage and is expected to be back in service
in mid-July.
To help ease this situation, the electric utility
companies of FirstEnergy Corp. (Company), Ohio Edison Company,
Pennsylvania Power Company (Penn Power), The Cleveland Electric
Illuminating Company and The Toledo Edison Company, asked their
customers to reduce nonessential uses of electricity to avoid the
implementation of other load-shedding programs, including short-
term rolling blackouts. Despite these measures, the Company's
electric utility subsidiaries purchased significant amounts of
power on the spot market at prices that substantially exceed the
amounts expected to be recovered from retail customers. Although
final results are not yet available, the recovery shortfall for
all of the utility subsidiaries (assuming sales revenue at the
May 1998 average composite retail rate) for the month of June
1998 could reduce consolidated net income by approximately $53
million ($.24 per share of common stock) in the second quarter of
1998. In a comparison of results for the second quarter of 1998
with the second quarter of 1997, the recovery shortfall would be
partially offset by the effect of increased retail sales. Total
power purchases for the month of June are expected to be less
than ten percent of the Company's retail load requirements.
Allocation of purchased power costs in June 1998 among the
utility subsidiaries is not yet available.
Power Marketing and Trading --
Due to the constrained power supply conditions in the
region, spot prices for power recently reached unprecedented
levels. One power marketer with which the Company's FirstEnergy
Trading and Power Marketing Corp. (Trading) subsidiary has
transactions under contract has defaulted, and others may be
unable to perform as a result of these events. This exposes
Trading to potentially significant credit losses and substantial
costs to replace contracts that may not be fulfilled by other
marketers. Trading expects to recognize a provision for potential
credit losses which will reduce consolidated net income in the
second quarter of 1998 by approximately $27 million ($.12 per
share of common stock). Such losses will be partially offset by
trading gains to be recognized in the second quarter of 1998.
Trading has filed suit against the defaulting supplier and would
expect to file suit should others default. Any credit losses
that exceed the amounts currently estimated would reduce
consolidated net income in future periods as would any related
trading losses. The Company expects to advance funds to Trading
to cover the losses it incurs.
Penn Power Rate Restructuring Plan --
On June 18, 1998, the Pennsylvania Public Utility
Commission authorized a plan for Penn Power, which would
essentially result in the deregulation of Penn Power's
generation business. Accordingly, Penn Power will discontinue
the application of Statement of Financial Accounting Standards
No. 71 (SFAS 71) with respect to its generation business as of
June 30, 1998.
The Securities and Exchange Commission (SEC) recently
issued interpretive guidance regarding asset impairment
measurement when a regulated enterprise such as an electric
utility discontinues SFAS 71 for separable portions of its
operations and assets. That guidance concludes that any
supplemental regulated cash flows such as a competitive
transition charge (CTC) should be excluded from the cash flows of
assets in a portion of the business not subject to regulatory
accounting practices. If such assets are impaired, a regulatory
asset should be established if such costs are recoverable through
regulatory cash flows. Consistent with the SEC guidance, Penn
Power will reduce its nuclear generating unit investments by
approximately $306 million, of which approximately $227 million
will be recognized as a regulatory asset to be recovered through
a CTC over a seven-year transition period. The net effect of
discontinuing the application of SFAS 71 to Penn Power's
generation business will be reflected as an extraordinary item
which reduces consolidated net income in the second quarter of
1998 by approximately $31 million ($.14 per share of common
stock).
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
July 6, 1998
FIRSTENERGY CORP.
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Registrant
OHIO EDISON COMPANY
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Registrant
THE CLEVELAND ELECTRIC
ILLUMINATING COMPANY
----------------------
Registrant
THE TOLEDO EDISON COMPANY
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Registrant
/s/ Harvey L. Wagner
------------------------
Harvey L. Wagner
Controller
PENNSYLVANIA POWER COMPANY
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Registrant
/s/ Harvey L. Wagner
-----------------------
Harvey L. Wagner
Comptroller
