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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) December 30, 1994
PENNSYLVANIA POWER & LIGHT COMPANY
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(Exact name of registrant as specified in its charter)
PENNSYLVANIA 1-905 23-0959590
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
No.)
TWO NORTH NINTH STREET, ALLENTOWN, PA. 18101-1179
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,including area code 610-774-5151
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(Former name or former address, if changed since last report.)
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Item 5. Other Events
Base Rate Filing with the Pennsylvania Public Utility Commission
On December 30, 1994, Pennsylvania Power & Light Company (the
"Company") filed a request with the Pennsylvania Public Utility Commission
(the "PUC") for a $261 million increase in electric base rates, an 11.7%
increase in PUC-jurisdictional rates. The Company has requested that the
new rates take effect on February 28, 1995, but the PUC is expected to
suspend the request for investigation and hearings and a final rate
decision is not expected before September 30, 1995.
Several of the items included in the rate filing relate to the
Company's Susquehanna nuclear-fueled generating plant. The Company
currently uses a modified sinking fund method of depreciation for property
placed in service at Susquehanna prior to January 1, 1989, which results in
substantial increases in annual depreciation expense each year until 1999.
At that time, annual depreciation expense is scheduled to decline by about
$90 million to the amount that would have been recorded if a straight line
method of depreciation had been in effect since the in-service dates of the
units. The Company is seeking to levelize this depreciation expense at an
annual amount of about $173 million over the period October 1, 1995 through
December 31, 1998, which would eliminate the currently scheduled increases
in depreciation during that time period.
The Company also is seeking recovery, over a 10-year period, of
certain deferred operating and capital costs, net of energy savings,
incurred from the time the Susquehanna units were placed in service until
the effective dates of the rate increases for those units. These costs,
which were deferred in accordance with PUC orders, total about $39 million
including related deferred income taxes.
When the PUC decided the Company's last rate case in 1985, it
determined that the Company had excess generating capacity and disallowed
the Company a return on its common equity investment in Susquehanna Unit
No. 2. The Company's generating reserves have declined over the past 10
years and are projected to be below the level considered excess by the PUC
in 1985. Accordingly, the Company's rate increase request reflects a
return on its common equity investment in Susquehanna Unit No. 2.
Finally, the Company is requesting an $18 million increase in the
amount it collects from customers for the estimated cost to decommission
the Susquehanna plant. This increase reflects a site-specific
decommissioning study completed in late 1993 which shows that the Company's
90 percent share of the cost to decommission Susquehanna will be about $724
million, an amount substantially greater than the amount currently
reflected in rates.
The Company also requested recovery of other costs that currently are
not included in base rate charges. The Company is proposing to begin
collecting now -- at the rate of about $43 million annually -- to cover the
estimated cost of dismantling its fossil-fuel plants in the next century at
the end of their expected useful lives.
The Company also is seeking recovery of the full amount of retiree
health care costs being recorded in accordance with Statement of Accounting
Standard (SFAS) 106, "Employers Accounting for Postretirement Benefits
Other Than Pensions", including the amount the Company began to defer as of
January 1, 1993 pursuant to a PUC order but subsequently charged to expense
due to a decision by the Commonwealth Court of Pennsylvania that
essentially reversed the PUC order.
The Company also is seeking approval to shorten by six to twelve years
the depreciation lives of certain of its coal-fired generating units,
thereby increasing annual depreciation expense for those units. These
changes reflect, among other things, the expected costs that would have to
be expended to comply with environmental regulations. The proposed lives
would not result in the retirement of any of the units before the year
2003. The Company also proposes to lengthen the depreciation lives of
certain of its transmission and distribution property to reflect a new life
study of those facilities. This change would reduce annual depreciation
expense for those facilities, resulting in a net reduction in revenue
requirements of $3 million from changes in depreciation lives.
As part of its continuing efforts to reduce costs and improve
efficiency, the Company offered a voluntary early retirement program to 851
eligible employees. A total of 639 employees have elected to retire under
the program, at an estimated cost of about $74 million. The Company
recorded the cost of the program as a non-recurring charge in the fourth
quarter of 1994, which, after income taxes, reduced net income by about $42
million, or 28 cents per share of common stock. Annual savings in operating
expenses associated with this reduction in employees are estimated to
be approximately $35 million.
The Company's rate filing reflects an estimate of the savings from the
early retirement program and will seek recovery of the cost of the program
over a five-year period. To the extent that the PUC permits recovery of
the cost of the program in rates, the Company will record a credit to
income to reverse the recoverable portion of the charge recorded in the
fourth quarter of 1994.
Finally, in its rate filing the Company proposed a method of
recovering costs currently being billed to other utilities pursuant to
contractual arrangements for the sale of capacity and related energy to
those utilities. These contracts begin to phase-out in 1996, and the
Company has proposed to recover the costs associated with the returning
capacity through its Energy Cost Rate (ECR). Under the Company's proposal,
the ECR would be adjusted automatically each year as capacity is returned
pursuant to the contracts. In this way, customer rates, through ECR
billings, will reflect both the capital-related and operating costs
associated with the returning capacity. The Company's proposal also
provides for all the revenues associated with sales of any returning
capacity to be flowed through the ECR.
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.
PENNSYLVANIA POWER & LIGHT COMPANY
by /s/ R. E. Hill
R. E. Hill
Senior Vice President-
Financial
Date: January 3, 1995
