Post-Effective Amendment No. 1 to
SEC File No. 70-7926
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-1
DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
GENERAL PUBLIC UTILITIES CORPORATION ("GPU")
100 Interpace Parkway
Parsippany, New Jersey 07054
JERSEY CENTRAL POWER & LIGHT COMPANY ("JCP&L")
300 Madison Avenue
Morristown, New Jersey 07960
METROPOLITAN EDISON COMPANY ("Met-Ed")
2800 Pottsville Pike
P.O. Box 16001
Reading, Pennsylvania 19640
PENNSYLVANIA ELECTRIC COMPANY ("Penelec")
1001 Broad Street, Johnstown, Pennsylvania 15907
(Names of companies filing this statement and
addresses of principal executive offices)
GENERAL PUBLIC UTILITIES CORPORATION
(Name of top registered holding company parent of applicants)
Don W. Myers, Vice President Douglas E. Davidson, Esq.
and Treasurer Berlack, Israels & Liberman
M.A. Nalewako, Secretary 120 West 45th Street
General Public Utilities Corporation New York, New York 10036
100 Interpace Parkway
Parsippany, New Jersey 07054
R.S. Cohen, Esq. W. Edwin Ogden, Esq.
Jersey Central Power & Light Ryan, Russell, Ogden &
Company Seltzer
300 Madison Avenue 1100 Berkshire Boulevard
Morristown, New Jersey 07960 P.O. Box 6219
Reading, Pennsylvania 19610
W.C. Matthews, II, Secretary Robert C. Gerlach, Esq.
Metropolitan Edison Company Ballard Spahr Andrews &
2800 Pottsville Pike Ingersoll
P.O. Box 16001 1735 Market Street
Reading, Pennsylvania 19640 Philadelphia, Pennsylvania
19103
and
Pennsylvania Electric Company
1001 Broad Street
Johnstown, Pennsylvania 15907
(Names and addresses of agents for service)
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GPU, JCP&L, Met-Ed and Penelec (the "GPU Companies")
hereby post-effectively amend their Declaration on Form U-1,
docketed in SEC File No. 70-7926, as follows:
A. By Order dated March 18, 1992 (HCAR No. 35-25493)
(the "Order"), the Commission, among other things, authorized the
GPU Companies to enter into a renewal of their Revolving Credit
Agreement (the "Credit Agreement") with a group of commercial banks
for which Citibank, N.A. and Chemical Bank act as Co-Agents and
Chemical Bank also acts as Administrative Agent.
(i) The Credit Agreement provides for the issuance,
sale and renewal by the GPU Companies of their respective unsecured
promissory notes (the "Notes"), having a maturity of not more than
six months from the date of issue. Aggregate borrowings by the GPU
Companies under the Credit Agreement are limited to $150 million
outstanding at any one time.
(ii) The annual interest rate on each borrowing
under the Credit Agreement is either (a) the Alternate Base Rate,
as in effect from time to time, (b) the CD Rate, as in effect from
time to time, plus an amount ranging from .375% to .625% depending
upon the senior secured non-credit enhanced long-term debt rating
issued by Standard & Poor's Corporation, Moody's Investor Services
and Duff & Phelps ("Debt Rating") and the commercial paper rating
issued by Duff & Phelps and Moody's Investor Services ("CP Rating")
for the borrower and, in the case of GPU, the Debt Rating and CP
Rating of JCP&L, or (c) the Eurodollar Rate, as in effect from time
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to time, plus an amount ranging from .25% to .50% depending upon
the Debt Rating and CP Rating of the borrower and, in the case of
GPU, the Debt Rating and CP Rating of JCP&L. The Alternate Base
Rate is defined as the greater of (a) Chemical Bank's Prime Rate in
effect from time to time and (b) the Federal Funds Rate then in
effect for such day plus 1/2 of 1%. The CD Rate is the domestic
money market bid rate for certificates of deposit of various
maturities issued by the reference banks, as specified in the
Credit Agreement, adjusted for the statutory reserve requirement
and Federal Deposit Insurance Corporation assessment. The
Eurodollar Rate is the average annual rate at which deposits in
U.S. dollars are offered by the principal offices of the reference
banks, as specified in the Credit Agreement, in London to prime
banks in the London interbank market from time to time, plus
additional costs for reserves, if applicable.
(iii) Issuance of Notes under the Credit Agreement is
subject to certain conditions, and the Notes are subject to
acceleration by the banks under certain circumstances. Borrowings
bearing interest at the Alternate Base Rate are prepayable at any
time without penalty; borrowings bearing interest at the CD Rate or
the Eurodollar Rate are also prepayable, subject to payment of
certain costs incurred by the banks in connection with the
prepayment; borrowings at a competitively bid rate are not
prepayable.
B. The Order further authorized the GPU Companies to
issue and renew from time to time through March 31, 1995 their
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respective unsecured promissory notes ("Unsecured Promissory
Notes"), maturing not more than nine months after issuance, to
various commercial banks pursuant to loan participation
arrangements and informal lines of credit ("Lines of Credit") in
amounts up to the limitations on short-term indebtedness contained
in their respective charters. In the case of GPU, borrowings under
Lines of Credit were limited to $200 million.
C. The Order also authorized JCP&L, Met-Ed and Penelec
to issue and sell their unsecured short-term promissory notes as
commercial paper ("Commercial Paper") in amounts up to the limits
permitted by their respective charters. Finally, the Order
authorized the issuance, sale and renewal by the GPU Companies of
unsecured promissory notes to lenders other than commercial banks,
insurance companies or similar institutions ("Other Short-Term
Debt") in amounts up the limitations on short-term indebtedness
contained in their respective charters and, in the case of GPU,
$200 million.
D. Accordingly, pursuant to the Order, the aggregate
principal amount of indebtedness which each GPU Company could have
outstanding at any one time under the Credit Agreement, Lines of
Credit or as Commercial Paper or Other Short-Term Debt could, in no
event, exceed the amount of such indebtedness permitted by such GPU
Company's charter or, in the case of GPU, $200 million. At June
30, 1994, the GPU Companies had borrowings outstanding under the
Credit Agreement, Lines of Credit and as Commercial Paper and other
Short-Term Debt as follows (in millions):
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Credit Lines of Commercial Other Short-
Agreement Credit Paper Term Debt Total
GPU $ 0 $118.4 $ 0 $ 0 $118.4
JCP&L $ 0 129.4 26.0 0 155.4
Met-Ed $ 0 34.3 0 0 34.3
Penelec $ 0 6.6 82.0 0 88.6
Total $ 0 $288.7 $108.0 $ 0 $396.7
E. At June 30, 1994, the charter limits of JCP&L, Met-
Ed and Penelec would have permitted them to have maximum short-term
indebtedness outstanding at any one time in the following amounts:
JCP&L - $275 million
Met-Ed - $122 million
Penelec - $137 million
F. Following discussions with the Co-Agents, the GPU
Companies believe it would now be desirable both to extend the term
of the Credit Agreement and to provide for an increase in the
amount of borrowings that the GPU Companies may make thereunder.
At the same time, the GPU Companies believe it would also be
appropriate to extend and increase their other short-term borrowing
capability. Accordingly, the GPU Companies now request authority
from the effective date of the authorization herein sought through
December 31, 1999 from time to time (1) to issue, sell and renew
their unsecured promissory notes ("New Notes") to certain banks
("Banks") under the terms of a new revolving credit agreement or an
amendment to the existing agreement ("New Credit Agreement") in
amounts up to $250 million outstanding at any one time, (2) to
issue, sell and renew their unsecured promissory notes pursuant to
loan participation arrangements and lines of credit ("New Lines of
Credit") in amounts up to the limitations on short-term
indebtedness contained in their respective charters and, in the
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case of GPU, $200 million, (3) in the cases of JCP&L, Met-Ed and
Penelec to issue and sell their respective unsecured promissory
notes as commercial paper ("New Commercial Paper") in amounts up to
their respective charter limits, and (4) to incur other short-term
unsecured debt from time to time in amounts up to the limits
permitted by their respective charters and, in the case of GPU,
$200 million. In no event, however, would the total amount of such
unsecured debt of any GPU Company outstanding at any one time
exceed the limitation on such indebtedness imposed by such
Company's charter and, in the case of GPU, $200 million. The
authorization herein requested may be summarized as follows:
New New New
Credit Lines Commercial Other Unsecured
Agreement of Credit Paper Short-Term Debt Total
GPU $200 M $200 M - $200 M $200 M
JCP&L $250 M Charter Charter Charter Charter
Limit Limit Limit Limit
Met-Ed $250 M Charter Charter Charter Charter
Limit Limit Limit Limit
Penelec $250 M Charter Charter Charter Charter
Limit Limit Limit Limit
Citibank, N.A. and Chemical Bank would serve as Co-Agents under the
New Credit Agreement and Chemical Bank would also serve as
Administrative Agent.
G. New Credit Agreement. (i) New Notes issued under
the New Credit Agreement would mature not more than six months from
their date of issue. The annual interest rate on each borrowing
would be either (a) the Alternate Base Rate, as in effect from time
to time, (b) the CD Rate, as in effect from time to time, plus an
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amount ranging from .375% to .625% depending upon the Debt Rating
of the borrower and, in the case of GPU, the Debt Rating of JCP&L,
or (c) the Eurodollar Rate, as in effect from time to time, plus an
amount ranging from .25% to .50% depending upon the Debt Rating of
the borrower and, in the case of GPU, the Debt Rating of JCP&L.
The Alternate Base Rate, CD Rate and Eurodollar Rate will have
substantially the same meanings as under the current Credit
Agreement as described above.
(ii) The New Credit Agreement will afford the GPU
Companies the option of inviting competitive bids, pursuant to
procedures set forth in the New Credit Agreement, from the Banks
for requested maturities of up to six months in such principal
amounts as a GPU Company may request, subject to the $250 million
limit of the New Credit Agreement ($200 million in the case of
GPU). No Bank would be required to bid for any such loan and the
GPU Companies would not be obligated to accept any bids received.
(iii) The GPU Companies propose to pay the Banks a
facility fee ranging from .125% to .375% per annum, depending on
the Debt Ratings of Met-Ed, JCP&L and Penelec, of the total amount
of the commitment, and a competitive bid fee of $2,500 for each
request for a competitive bid. In addition, an agency fee of
$25,000 would be payable to each of the Co-Agents upon signing of
the New Credit Agreement, and an annual administrative agent fee of
$15,000 would be payable to Chemical Bank.
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(iv) Issuance of the New Notes would be subject to
certain conditions, and the New Notes would be subject to
acceleration under certain circumstances. Borrowings bearing
interest at the Alternate Base Rate would be prepayable at any
time, without penalty; borrowings at the CD Rate or the Eurodollar
Rate would also be prepayable, subject to payment of certain costs
incurred by the Banks in connection with the prepayment; borrowings
at a competitive bid rate would not be prepayable.
(v) At August 10, 1994, the Debt Ratings of JCP&L,
Met-Ed and Penelec were as follows:
Standard & Poor's Duff & Phelps Moody's
JCP&L BBB+ BBB+ Baa1
Met-Ed BBB+ A- Baa1
Penelec A- A A3
Based on the foregoing Debt Ratings, the amounts that would have
been added to the CD Rate to establish the CD Rates were .425%,
.425%, .425% and .375% for GPU, JCP&L, Met-Ed and Penelec,
respectively; and the amounts that would have been added to the
Eurodollar Rate to determine the Eurodollar Rates for the GPU
Companies were .30%, .30%, .30% and .25% for GPU, JCP&L, Met-Ed and
Penelec, respectively.
As of August 10, 1994, indicative borrowing rates for
loans with 30 day maturities under the available New Credit
Agreement options were as follows:
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Option GPU JCP&L Met-Ed Penelec
Alternate Base Rate 7.25% 7.25% 7.25% 7.25%
CD Rate 4.945% 4.945% 4.945% 4.895%
Eurodollar Rate 4.8625% 4.8625% 4.8625% 4.8125%
Competitive Bid 4.8375% 4.8375% 4.8375% 4.7875%
H. New Lines of Credit. (i) Each borrowing pursuant to
an unsecured promissory note issued under New Lines of Credit will
bear interest at a rate (after giving effect to any fees or
compensating balance requirements) not exceeding 125% of the
greater of (A) the lending bank's prime rate for commercial
borrowing in effect from time to time, and (B) the Federal Funds
Rate plus 1/2 of 1%, will mature not more than nine months from the
date of issuance, will be prepayable only to the extent provided
therein and will not be issued as part of a public offering. New
Lines of Credit borrowings may include borrowings under which a GPU
Company would execute a master unsecured promissory note. The
principal amount outstanding under each such master note would
increase or decrease depending upon the amount of borrowings. Such
arrangements are often employed to facilitate the sale of loan
participations by the lending bank.
(ii) The GPU Companies expect that, to the extent
that their needs require, borrowings will be effected from time to
time from such commercial banks which the GPU Companies may, from
time to time, designate and advise the Commission in partial
completion certificates filed pursuant to Rule 24 under the Act.
The GPU Companies undertake that they will not effect a New Line of
Credit borrowing from any bank if, at the time of the borrowing,
the borrower shall have had as an officer or director at any time
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during the preceding twelve months a person or persons having such
a financial connection with that bank as would violate the
provisions of Section 12(f) of the Act or paragraph (b)(2) of Rule
70 thereunder.
I. New Commercial Paper. Unsecured promissory notes
sold as New Commercial Paper would be issued in denominations of
$100,000 or multiples thereof with maturities of up to 270 days and
would not be prepayable prior to maturity. JCP&L, Met-Ed and
Penelec propose to issue and sell New Commercial Paper in the
following manner:
(1) New Commercial Paper would be sold directly
to one or more commercial paper dealers at a discount rate
prevailing at the date of issuance for commercial paper of
comparable quality and of the particular maturity sold by other
issuers of commercial paper. No fee or commission would be payable
by JCP&L, Met-Ed or Penelec in connection with their issuances and
sales of New Commercial Paper. The New Commercial Paper will be
reoffered by the purchasing dealer or dealers to institutional
investors at a discount of not more than 1/8 of 1% per annum less
than the prevailing discount rate to JCP&L, Met-Ed or Penelec. The
commercial paper dealers will offer and resell the New Commercial
Paper to not more than a total of 200 of their respective
customers, identified and designated in a non-public list ("Closed
List") prepared by each such dealer in advance for this purpose.
Additions may, from time to time, be made by each dealer to its
Closed List (but in no event would the number of customers exceed
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200), which will include commercial banks, insurance companies,
pension funds, investment trusts, mutual funds, foundations,
colleges and universities, municipal and state benefit funds,
eleemosynary institutions, finance companies, and non-financial
corporations which invest in commercial paper. It is expected that
the New Commercial Paper will be held to maturity by the purchaser
from the dealer, but if any such purchaser should wish to resell
its New Commercial Paper prior thereto, the dealer, pursuant to a
verbal repurchase agreement, will repurchase New Commercial Paper
from its customers for resale to others on its Closed List.
(2) JCP&L, Met-Ed and Penelec may also utilize
the services of one or more commercial paper placement agents
("Placement Agent") through whom they would sell their New
Commercial Paper directly to one or more institutional investors
included on the Placement Agent's Closed List (as it may be
amended) which would not exceed 200 such investors. The Placement
Agent would arrange for the sale of New Commercial Paper and would
be compensated for its services out of the discount on the sale.
No fee or other commission would be otherwise payable by JCP&L,
Met-Ed or Penelec in connection with the placement of their New
Commercial Paper.
J. Other Unsecured Indebtedness. The GPU Companies
further propose to issue, sell and renew from time to time their
unsecured promissory notes evidencing short-term borrowings from
lenders such as commercial banks, insurance companies or other
institutions. Such notes would mature not later than nine months
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after the date of issue, bear interest at a rate (after giving
effect to any fees and compensating balance requirements) not in
excess of the greater of 125% of (A) such lender's or other
recognized prime rate and (B) the Federal Funds Rate plus 1/2 of
1%, would be prepayable only to the extent therein provided and
would not be issued as part of any public offering. The GPU
Companies undertake that they will not effect a borrowing from any
lender if, at the time of the borrowing, the borrower shall have
had as an officer or director at any time during the preceding
twelve months a person or persons having such a financial
connection with that lender as would violate the provisions of
Section 12(f) of the Act or paragraph (b) (2) of Rule 70
thereunder.
K. The GPU Companies are requesting authority to effect
borrowings in the manner and amounts herein requested as they
believe will provide the necessary flexibility to meet their
changing and unforeseen cash requirements over the next few years.
L. The net proceeds of the borrowings proposed to be
made pursuant to the authorization herein requested would be used
by the GPU Companies for general corporate purposes including to
repay maturing bank borrowings and other short term debt and to
provide temporary working capital.
M. It is requested that the filing of Certificates
Pursuant to Rule 24 under the Act required to be filed hereunder be
filed quarterly within ten days of the end of each calendar quarter
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beginning with the quarter in which the authorization herein
requested is granted. Such certificates will include the amount of
short-term indebtedness that each GPU Company has outstanding.
N. Rule 54 under the Act provides, among other things,
that in determining whether to approve transactions by a subsidiary
of a registered holding company, other than with respect to exempt
wholesale generators ("EWGs") or foreign utility companies
("FUCOs"), the Commission shall not consider the effect of the
capitalization or earnings of any subsidiary which is an EWG or a
FUCO upon the registered holding company system if Rules 53(a)(1)
through (a)(4) have been met, and none of the conditions described
in Rules 53 (b)(1) through (b)(3) exist.
(i) The average consolidated retained earnings
for GPU and its subsidiaries, as reported for the four
most recent quarterly periods in GPU's Annual Report on
Form 10-K for the year ended December 31, 1993 and
Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1993, March 31, 1994 and June 30, 1994, as
filed under the Securities Exchange Act of 1934, was
approximately $1.84 billion. At the date hereof, GPU had
invested, or committed to invest, directly or indirectly,
an aggregate of approximately $12.5 million in EWGs and
$0 in FUCOs. (GPU does not own any direct or indirect
interest in a FUCO). Accordingly, GPU's investment in
EWGs and FUCOs equals approximately .7% of such average
consolidated retained earnings.
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(ii) GPU maintains books and records to identify
investments in, and earnings from, each EWG in which it
directly or indirectly holds an interest. (A) For each
United States EWG in which GPU directly or indirectly
holds an interest:
(1) the books and records for such EWG
will be kept in conformity with United States
generally accepted accounting principles ("GAAP");
(2) the financial statements will be
prepared in accordance with GAAP; and
(3) GPU through its subsidiaries
undertakes to provide the Commission access to such
books and records and financial statements as the
Commission may request.
(B) For each foreign EWG which is a
majority-owned subsidiary of GPU:
(1) the books and records for such
subsidiary will be kept in accordance with GAAP;
(2) the financial statements for such
subsidiary will be prepared in accordance with GAAP;
and
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(3) GPU directly or through its
subsidiaries undertakes to provide the Commission
access to such books and records and financial
statements, or copies thereof in English, as the
Commission may request.
(C) For each foreign EWG in which GPU owns
50% or less of the voting securities, GPU directly or through
its subsidiaries will proceed in good faith, to the extent
reasonable under the circumstances, to cause
(1) such EWG to maintain books and
records in accordance with GAAP;
(2) the financial statements of such EWG
to be prepared in accordance with GAAP; and
(3) access by the Commission to such books
and records and financial statements (or copies
thereof) in English as the Commission may request
and, in any event, GPU will provide the Commission
on request copies of such materials as are made
available to GPU and its subsidiaries. If and to
the extent that such foreign EWG's books, records or
financial statements are not maintained in
accordance with GAAP, GPU will, upon request of the
Commission, describe and quantify each material
variation therefrom as and to the extent required by
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subparagraphs (a) (2) (iii) (A) and (a) (2) (iii)
(B) of Rule 53.
(iii) No employees of GPU's domestic public utility
subsidiaries are, at the date hereof, rendering any services,
directly or indirectly, to any EWG or FUCO in which GPU
directly or indirectly holds an interest.
(iv) None of the provisions of paragraph (b) of
Rule 53 render paragraph (a) of that Rule unavailable for the
proposed transactions.
(A) Neither GPU nor any subsidiary of GPU
is the subject of any pending bankruptcy or similar
proceeding.
(B) GPU's average consolidated retained
earnings for the four most recent quarterly periods
(approximately $1.84 billion) represented an
increase of approximately $80 million in the average
consolidated retained earnings for the previous four
quarterly periods (approximately $1.76 billion).
(C) GPU incurred no losses from direct or
indirect investments in EWGs and FUCOs in 1993.
O. The estimated fees, commissions and expenses
expected to be incurred by the GPU Companies in connection with the
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proposed transactions will be supplied by further post-effective
amendment.
P. The GPU Companies believe that Sections 6(a) and 7
of the Act are applicable to the issuance, sale and renewal of the
unsecured promissory notes described herein.
Q. No State or Federal commission (other than your
Commission) has jurisdiction over the proposed issuance of New
Notes or the unsecured promissory notes to be issued by GPU, JCP&L,
Met-Ed or Penelec under New Lines of Credit, New Commercial Paper
or Other Short-Term Debt, as the case may be, except as set forth
below.
The Pennsylvania Public Utility Commission ("PaPUC") has
jurisdiction with respect to Penelec's and Met-Ed's proposed
issuances of New Notes under the New Credit Agreement. Met-Ed and
Penelec will file with the PaPUC Securities Certificates with
respect to such transactions, and it is expected that such
Securities Certificates will be registered by the PaPUC.
No other state commission has jurisdiction with respect
to any aspect of the proposed transactions and, assuming your
Commission authorizes and approves all aspects of such transactions
(including the accounting therefor), no Federal commission other
than your Commission has jurisdiction with respect to any aspect
thereof.
R. It is requested that the Commission issue an order
with respect to the transactions proposed herein at the earliest
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practicable date but, in any event, not later than October 15,
1994. It is further requested that (i) there not be a recommended
decision by an Administrative Law Judge or other responsible
officer of the Commission, (ii) the Office of Public Utility
Regulation be permitted to assist in the preparation of the
Commission's decision, and (iii) there be no waiting period between
the issuance of the Commission's order and the date on which it is
to become effective.
S. The following exhibits and financial statements are
filed in Item 6 thereof:
(a) Exhibits:
A-1(a) - Forms of New Notes proposed to be
issued and sold -- to be filed by
further post-effective amendment.
A-2(a) - Forms of unsecured promissory notes
to be issued and sold under New Lines
of Credit and Other Short-Term Debt -
- to be filed by further post-
effective amendment.
B-1(a) - Form of New Credit Agreement -- to be
filed by further post-effective
amendment.
C - None.
D-1(b) - Copy of Securities Certificate of
Met-Ed filed with the PaPUC -- to be
filed by further post-effective
amendment.
D-1(c) - Copy of Order of the PaPUC
registering Met-Ed's Securities
Certificate -- to be filed by further
post-effective amendment.
D-2(b) - Copy of Securities Certificate of
Penelec filed with the PaPUC -- to be
filed by further post-effective
amendment.
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D-2(c) - Copy of Order of PaPUC registering
Penelec's Securities Certificate --
to be filed by further post-effective
amendment.
E - None.
F-1(a) - Opinion of Berlack, Israels &
Liberman -- to be filed by further
post-effective amendment.
F-2(a) - Opinion of Richard S. Cohen, Esq. --
to be filed by further post-effective
amendment.
F-3(a) - Opinion of Ryan, Russell, Ogden &
Seltzer -- to be filed by further
post-effective amendment.
F-4(a) - Opinion of Ballard Spahr Andrews &
Ingersoll -- to be filed by further
post-effective amendment.
G - Charter Restrictions on Unsecured
Indebtedness -- Incorporated by
reference to Exhibit G, Declaration
on Form U-1, SEC file No. 70-7926.
H - Source and Application of Funds
Statement.
I - Proposed form of public notice.
(b) Financial Statements:
1-A(a) - GPU (Corporate) Balance Sheets,
actual and pro forma, as at June 30,
1994, and Statements of Income and
Retained Earnings, actual and pro
forma, for the twelve months ended
June 30, 1994; pro forma journal
entries.
1-B(a) - GPU and Subsidiary Companies Consol-
idated Balance Sheets, actual and pro
forma, as at June 30, 1994, and
Consolidated Statements of Income and
Retained Earnings, actual and pro
forma, for the twelve months ended
June 30, 1994; pro forma journal
entries.
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1-C(a) - JCP&L Balance Sheets, actual and pro
forma, as at June 30, 1994, and
Statements of Income and Retained
Earnings, actual and pro forma, for
the twelve months ended June 30,
1994; pro forma journal entries.
1-D(a) - Met-Ed Consolidated Balance Sheets,
actual and pro forma, as at June 30,
1994, and Consolidated Statements of
Income and Retained Earnings, actual
and pro forma, for the twelve months
ended June 30, 1994; pro forma
journal entries.
1-E(a) - Penelec Consolidated Balance Sheets,
actual and pro forma, as at June 30,
1994, and Consolidated Statements of
Income and Retained Earnings, actual
and pro forma, for the twelve months
ended June 30, 1994; pro forma
journal entries.
2 - Not Applicable.
3 - Not Applicable.
4 - Statement of Material Changes since
the date of the balance sheets which
are not reflected in the Notes to the
Financial Statements - None.
T. The proceeds from the issuance and sale of the
unsecured promissory notes as proposed herein will be used by the
GPU Companies to finance their businesses. As such, the issuance
of an order by your Commission with respect thereto is not a major
federal action significantly affecting the quality of the human
environment.
No Federal agency has prepared or is preparing an
environmental impact statement with respect to the proposed
transactions which are the subject hereof. Reference is made to
paragraph (Q) hereto regarding regulatory approvals with respect to
the proposed transactions.
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SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935, THE UNDERSIGNED COMPANIES HAVE DULY
CAUSED THIS STATEMENT TO BE SIGNED ON THEIR BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
GENERAL PUBLIC UTILITIES CORPORATION
JERSEY CENTRAL POWER & LIGHT COMPANY
METROPOLITAN EDISON COMPANY
PENNSYLVANIA ELECTRIC COMPANY
By:________________________________
Don W. Myers, Vice President
and Treasurer
Date: August 16, 1994
<PAGE>
EXHIBITS AND FINANCIAL STATEMENTS TO BE FILED BY EDGAR
Exhibits:
H - Source and Application of Funds Statement.
I - Proposed form of public notice.
Financial Statements:
1-A(a) - GPU (Corporate) Balance Sheets, actual and
pro forma, as at June 30, 1994, and
Statements of Income and Retained
Earnings, actual and pro forma, for the
twelve months ended June 30, 1994; pro
forma journal entries.
1-B(a) - GPU and Subsidiary Companies Consolidated
Balance Sheets, actual and pro forma, as
at June 30, 1994, and Consolidated
Statements of Income and Retained
Earnings, actual and pro forma, for the
twelve months ended June 30, 1994; pro
forma journal entries.
1-C(a) - JCP&L Balance Sheets, actual and pro
forma, as at June 30, 1994, and Statements
of Income and Retained Earnings, actual
and pro forma, for the twelve months ended
June 30, 1994; pro forma journal entries.
1-D(a) - Met-Ed Consolidated Balance Sheets, actual
and pro forma, as at June 30, 1994, and
Consolidated Statements of Income and
Retained Earnings, actual and pro forma,
for the twelve months ended June 30, 1994;
pro forma journal entries.
1-E(a) - Penelec Consolidated Balance Sheets,
actual and pro forma, as at June 30, 1994,
and Consolidated Statements of Income and
Retained Earnings, actual and pro forma,
for the twelve months ended June 30, 1994;
pro forma journal entries.
<PAGE>
<TABLE>
Exhibit H
Page 1 of 4
GENERAL PUBLIC UTILITIES CORPORATION
FORECASTED SOURCE AND APPLICATION OF FUNDS
($ Millions)
<CAPTION>
1994 1995
3Q 4Q 1Q 2Q 3Q 4Q 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
APPLICATION OF FUNDS
GPU COMMON DIVIDENDS* $ 52 $ 52 $ 54 $ 55 $ 55 $ 55 $224 $224 $230 $230
EQUITY CONTRIBUTIONS - 80 - - - - - 100 - -
OPERATING COSTS 1 1 1 2 1 2 6 6 6 6
TOTAL APPLICATION $ 53 $133 $ 55 $ 57 $ 56 $ 57 $230 $330 $236 $236
SOURCE OF FUNDS
SUBSIDIARY DIVIDENDS TO GPU
JCP&L $ 30 $ 30 $ 5 $ 15 $ - $ 90 $155 $140 $140 $140
MET-ED 15 15 10 10 5 5 20 100 40 40
PENELEC 5 5 10 10 10 30 50 85 45 45
COMMON STOCK SALES - 125 - - - - - 100 - -
SHORT TERM DEBT 3 - 30 22 41 (68) 5 (95) 11 11
TEMPORARY INVESTMENTS - (42) - - - - - - - -
TOTAL SOURCES $ 53 $133 $ 55 $ 57 $ 56 $ 57 $230 $330 $236 $236
SHORT TERM DEBT OUTSTANDING $123 $ 81 $111 $133 $174 $106 $111 $ 16 $ 27 $ 38
* NO ASSUMPTION IS MADE FOR GROWTH IN DIVIDENDS
<PAGE>
Exhibit H
Page 2 of 4
JERSEY CENTRAL POWER & LIGHT
FORECASTED SOURCE AND APPLICATION OF FUNDS
($ Millions)
<CAPTION>
1994 1995
3Q 4Q 1Q 2Q 3Q 4Q 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
APPLICATION OF FUNDS
CONSTRUCTION $ 73 $ 88 $ 57 $ 58 $ 51 $ 61 $271 $209 $215 $220
REFINANCING 40 20 - - - 47 36 86 37 13
COMMON DIVIDEND TO GPU 30 30 5 15 - 90 155 140 140 140
TOTAL APPLICATION $143 $138 $ 62 $ 73 $ 51 $198 $462 $435 $392 $373
SOURCE OF FUNDS
INTERNAL $134 $115 $155 $(99) $153 $145 $322 $382 $385 $390
PREFERRED STOCK/MIPS - - 100 - - - - - - -
FIRST MORTGAGE BONDS - - - - - - - - 100 50
EQUITY CONTRIBUTION
FROM PARENT - 70 - - - - - - - -
SHORT TERM DEBT 9 (47) (117) 96 (102) 47 140 53 (93) (67)
TEMPORARY INVESTMENTS - - (76) 76 - 6 - - - -
TOTAL SOURCES $143 $138 $ 62 $ 73 $ 51 $198 $462 $435 $392 $373
SHORT TERM DEBT OUTSTANDING $164 $117 $(76) $ 96 $ (6) $ 47 $187 $240 $147 $ 80
<PAGE>
Exhibit H
Page 3 of 4
METROPOLITAN EDISON COMPANY
FORECASTED SOURCE AND APPLICATION OF FUNDS
($ Millions)
<CAPTION>
1994 1995
3Q 4Q 1Q 2Q 3Q 4Q 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
APPLICATION OF FUNDS
CONSTRUCTION $ 45 $ 45 $ 24 $ 24 $ 34 $ 34 $159 $124 $129 $130
REFINANCING - 35 - - 41 - 15 40 - 30
COMMON DIVIDEND TO GPU 15 15 10 10 5 5 20 100 40 40
TOTAL APPLICATION $ 60 $ 95 $ 34 $ 34 $ 80 $ 39 $194 $264 $169 $200
SOURCE OF FUNDS
INTERNAL $ 17 $ 60 $ 34 $ 51 $ 26 $ 33 $111 $140 $163 $178
PREFERRED STOCK/MIPS 100 - - - - - - - - -
FIRST MORTGAGE BONDS - - - - - - 25 80 30 30
EQUITY CONTRIBUTION
FROM PARENT - 20 - - - - - 60 - -
SHORT TERM DEBT (34) - - - 29 6 58 (16) (24) (8)
TEMPORARY INVESTMENTS (23) 15 - (17) 25 - - - - -
TOTAL SOURCES $ 60 $ 95 $ 34 $ 34 $ 80 $ 39 $194 $264 $169 $200
SHORT TERM DEBT OUTSTANDING $(23) $ (8) $ (8) $(25) $ 29 $ 35 $ 93 $ 77 $ 53 $ 45
<PAGE>
Exhibit H
Page 4 of 4
PENNSYLVANIA ELECTRIC COMPANY
FORECASTED SOURCE AND APPLICATION OF FUNDS
($ Millions)
<CAPTION>
1994 1995
3Q 4Q 1Q 2Q 3Q 4Q 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
APPLICATION OF FUNDS
CONSTRUCTION $ 50 $ 53 $ 35 $ 36 $ 40 $ 43 $151 $138 $141 $145
REFINANCING - 55 - - - - 75 26 - 30
COMMON DIVIDEND TO GPU 5 5 10 10 10 30 50 85 45 45
TOTAL APPLICATION $ 55 $113 $ 45 $ 46 $ 50 $ 73 $276 $249 $186 $220
SOURCE OF FUNDS
INTERNAL $ 29 $ 79 $ 25 $ 45 $ 27 $ 71 $156 $174 $182 $185
PREFERRED STOCK/MIPS 105 - - - - - - - - -
FIRST MORTGAGE BONDS - - 20 - - - 75 50 50 50
EQUITY CONTRIBUTION
FROM PARENT - - - - - - - 40 - -
SHORT TERM DEBT (79) 34 - 1 23 2 45 (15) (46) (15)
TEMPORARY INVESTMENTS - - - - - - - - - -
TOTAL SOURCES $ 55 $113 $ 45 $ 46 $ 50 $ 73 $276 $249 $186 $220
SHORT TERM DEBT OUTSTANDING $ 11 $ 45 $ 45 $ 46 $ 69 $ 71 $116 $101 $ 55 $ 40
<PAGE>
</TABLE>
EXHIBIT I
General Public Utilities Corporation (70-7926)
General Public Utilities Corporation ("GPU"), 100 Interpace
Parkway, Parsippany, New Jersey 07054, a registered holding
company, and its public-utility subsidiary companies, Jersey
Central Power & Light Company ("JCP&L"), 300 Madison Avenue,
Morristown, New Jersey 07960, Metropolitan Edison Company ("Met-
Ed"), 2800 Pottsville Pike, Reading, Pennsylvania 19640 and
Pennsylvania Electric Company ("Penelec"), 1001 Broad Street,
Johnstown, Pennsylvania 15907 (collectively, the "GPU Companies"),
have filed a post-effective amendment under Sections 6(a) and 7 of
the Act to their Declaration on Form U-1.
The GPU Companies request authority from time to time through
December 31, 1999 to: (1) issue, sell and renew unsecured promis-
sory notes ("Notes") in amounts up to $250 million outstanding at
any one time and maturing not more than six months from the date of
issue, to certain banks ("Banks") under the terms of a new
revolving credit agreement or an amendment to the existing
agreement ("Agreement") with Citibank, N.A. and Chemical Bank as
co-agents and Chemical Bank as the administrative agent; (2) issue,
sell and renew their unsecured promissory notes, maturing not more
than nine months from the date of issue, pursuant to loan partici-
pation arrangements and lines of credit ("Lines of Credit") in
amounts up to the limitations on short-term indebtedness contained
in their respective charters but, in the case of GPU, $200 million;
(3) incur other short-term unsecured debt from time to time in
amounts up to the limits permitted by their respective charters
1
<PAGE>
but, in the case of GPU, $200 million; and (4) in the case of
JCP&L, Met-Ed and Penelec, issue and sell their respective
unsecured promissory notes as commercial paper ("Commercial Paper")
in amounts up to their respective charter limits. In no event,
however, would the total amount of such unsecured debt of any GPU
Company outstanding at any one time exceed the limitations on such
indebtedness imposed by such company's charter but, in the case of
GPU, $200 million. As of June 30, 1994, the charter limits of
JCP&L, Met-Ed and Penelec would have permitted them to have maximum
short-term indebtedness outstanding at any one time of $275
million, $122 million and $137 million, respectively.
The annual interest rate on each borrowing under the Agreement
would be either: (a) the Alternate Base Rate (defined below), as in
effect from time to time; (b) the CD Rate (defined below), as in
effect from time to time, plus an amount ranging from .375% to
.625%; or (c) the Eurodollar Rate (defined below), as in effect
from time to time, plus an amount ranging from .25% to .50%. The
Alternate Base Rate is the greater of: (i) Chemical Bank's prime
rate in effect from time to time; or (ii) the federal funds rate
then in effect for such day plus 1/2 of 1%. The CD Rate is the
domestic money market bid rate for certificates of deposit of
various maturities issued by the reference banks, as specified in
the Agreement, adjusted for certain reserve requirements and
assessments. The Eurodollar Rate is the average annual rate at
which deposits in U.S. dollars are offered by the principal offices
of the reference banks in London to prime banks in the London
interbank market from time to time, plus additional costs for
reserves, if applicable. The GPU Companies propose to pay to the
2
<PAGE>
banks an annual facility fee on the total commitment ranging from
.125% to .375% per annum and an agency fee of $25,000 to each of
the co-agents. They would also pay an annual administrative agent
fee of $15,000.
The GPU Companies may also invite competitive bids from the
banks for loans with requested maturities of up to six months in
such principal amounts as a GPU Company may request, subject to the
$250 million limit of the Credit Agreement. The GPU Companies
would pay the banks a competitive bid fee of $2,500 for each
request for a competitive bid.
The GPU Companies further request authorization through
December 31, 1999 to issue, sell and renew their respective
unsecured promissory notes, maturing not more than nine months
after issue, to: (1) various commercial banks pursuant to Lines of
Credit; and (2) lenders such as commercial banks, insurance
companies or similar institutions, in an amount which, when added
to such GPU Company's total principal amount of Notes then
outstanding, would not exceed the amount of short-term indebtedness
permitted by such GPU Company's charter but, in the case of GPU,
$200 million. Each such note will: (A) bear interest at a rate
(after giving effect to any fees and compensating balance require-
ments) not exceeding 125% of the greater of (i) the lending bank's
or other recognized prime rate for commercial borrowing in effect
from time to time (ii) the federal funds rate plus 1/2 of 1%; (B)
be prepayable to the extent provided therein, without premium; and
(C) not be issued as part of a public offering.
Interested persons wishing to comment or request a hearing on
the post-effective amendment should submit their views in writing
3
<PAGE>
by ____________, 1994 to the Secretary, Securities and Exchange
Commission, Washington, D.C. 20549, and serve a copy on the
declarants at the addresses specified below. Proof of service (by
affidavit or, in case of an attorney at law, by certificate) should
be filed with the request. Any request for hearing shall identify
specifically the issues of fact or law that are disputed. A person
who so requests will be notified of any hearing, if ordered, and
will receive a copy of any notice or order issued in the matter.
After said date, the post-effective amendment, as filed or as
amended, may be permitted to become effective.
4
<PAGE>
<TABLE>
Financial Statements
Item 6(b) 1-A(a)
Page 1 of 39
GENERAL PUBLIC UTILITIES CORPORATION
BALANCE SHEETS
ACTUAL AND PRO FORMA
AT JUNE 30, 1994
(IN THOUSANDS)
<CAPTION>
Actual Adjustments
(Unaudited) (See page 3-4) Pro Forma
<S> <C> <C> <C>
ASSETS
Investments:
Investments in subsidiaries $2 658 248 $ (36 098) $2 622 150
Other investments 3 424 - 3 424
Total investments 2 661 672 (36 098) 2 625 574
Current Assets:
Cash and temporary cash investments 21 995 77 030 99 025
Accounts receivable, net 880 - 880
Prepayments 196 - 196
Total current assets 23 071 77 030 100 101
Total Assets $2 684 743 $ 40 932 $2 725 675
LIABILITIES AND CAPITAL
Common Stock and Surplus:
Common stock $ 314 458 $ - $ 314 458
Capital surplus 668 928 - 668 928
Retained earnings 1 709 750 (39 346) 1 670 404
Total 2 693 136 (39 346) 2 653 790
Less: reacquired common stock, at cost 183 326 - 183 326
Total common stockholders's equity 2 509 810 (39 346) 2 470 464
Current Liabilities:
Notes payable 118 400 82 000 200 400
Accounts payable 95 - 95
Taxes accrued 8 (1 722) (1 714)
Interest accrued 1 063 - 1 063
Other 54 426 - 54 426
Total current liabilities 173 992 80 278 254 270
Deferred credits and other liabilities 941 - 941
Total Liabilities and Capital $2 684 743 $ 40 932 $2 725 675
The accompanying notes are an integral part of the financial statements.
<PAGE>
Financial Statements
Item 6(b) 1A-(a)
Page 2 of 39
GENERAL PUBLIC UTILITIES CORPORATION
STATEMENTS OF INCOME AND RETAINED EARNINGS
ACTUAL AND PRO FORMA
FOR THE TWELVE MONTHS ENDED JUNE 30, 1994
(IN THOUSANDS)
<CAPTION>
Actual Adjustments
(Unaudited) (See page 3-4) Pro Forma
<S> <C> <C> <C>
Income:
Equity in earnings of subsidiaries $ 161 459 $(36 148) $ 125 311
Other income, net 209 - 209
Total 161 668 (36 148) 125 520
Expense, Taxes and Interest:
General expenses 3 790 3 790
Income tax expense - (1 722) (1 722)
Interest expense 2 538 4 920 7 458
Total 6 328 3 198 9 526
Net Income $ 155 340 $(39 346) $ 115 994
Retained Earnings:
Balance at beginning of period $1 762 645 $ - $1 762 645
Add - Net income 155 340 (39 346) 115 994
Deduct - Cash dividends on common stock 201 256 - 201 256
Other adjustments 6 979 - 6 979
Balance at end of period $1 709 750 $(39 346) $1 670 404
The accompanying notes are an integral part of the financial statements.
<PAGE>
Financial Statements
Item 6(b) 1A-(a)
Page 3 of 39
GENERAL PUBLIC UTILITIES CORPORATION
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1994
(IN THOUSANDS)
(1)
<S> <C> <C>
Cash and temporary cash investments $ 82 000
Notes payable $ 82 000
To reflect the proposed issuance of
$82 million of borrowings under the new Revolving
Credit Agreement up to the charter limit.
(2)
Other interest $ 4 920
Cash and temporary cash investments $ 4 920
To reflect annual interest expense resulting
from the proposed issuance of $82 million of
borrowings under the new Revolving Credit Agreement
at an assumed interest rate of 6%.
(3)
Equity in earnings of subsidiaries $ 36 148
Investments in subsidiaries $ 36 148
To reflect the anticipated net income
effect from the (1) proposed issuance of borrowings
under the new Revolving Credit Agreement and
(2) issuance of monthly income preferred shares
by Met-Ed (SEC File No. 70-8401) and (3)leasing
of excess fiber optic system capacity (SEC File
No. 70-7850) and (4) the New Letters of Credit
(SEC File No. 70-8141 and SEC File No. 70-8323).
(4)
Investment in subsidiaries $ 50
Cash and temporary cash investments $ 50
To reflect the acquisition of
all the common stock of GPU Generation
Corporation, a corporation to be formed for
$50,000.
<PAGE>
Financial Statements
Item 6(b) 1A-(a)
Page 4 of 39
GENERAL PUBLIC UTILITIES CORPORATION
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1994
(IN THOUSANDS)
(5)
Taxes accrued $ 1 722
Income taxes $ 1 722
To reflect the net decrease in the provision
for federal income taxes attributable to the increase
in interest expense from the proposed issuance of
short-term debt under the new Revolving Credit
Agreement.
<PAGE>
Financial Statements
Item 6 (b) 1-B(a)
Page 5 of 39
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT JUNE 30, 1994
(IN THOUSANDS)
<CAPTION>
Actual Adjustments
(Unaudited) (See pages 8-11) Pro Forma
<S> <C> <C> <C>
ASSETS
Utility Plant:
In Service, at original cost $8 592 187 $ - $8 592 187
Less, accumulated depreciation 3 047 231 - 3 047 231
Net utility plant in service 5 544 956 - 5 544 956
Construction work in progress 307 760 - 307 760
Other, net 214 950 - 214 950
Net utility plant 6 067 666 - 6 067 666
Current Assets:
Cash and temporary cash investments 30 333 428 744 459 077
Special deposits 11 570 - 11 570
Accounts receivable:
Customers, net 261 721 - 261 721
Other 51 252 - 51 252
Unbilled revenues 121 718 - 121 718
Materials and supplies, at average cost or less:
Construction and maintenance 189 465 - 189 465
Fuel 50 324 - 50 324
Deferred energy costs 4 899 - 4 899
Deferred income taxes 9 601 - 9 601
Prepayments 238 535 - 238 535
Total current assets 969 418 428 744 1 398 162
Deferred Debits and Other Assets:
Three Mile Island Unit 2 deferred costs 162 328 - 162 328
Unamortized property losses 110 795 - 110 795
Deferred income taxes 427 255 - 427 255
Income taxes recoverable through future rates 560 728 - 560 728
Decommissioning funds 247 037 - 247 037
Other 633 901 4 096 637 997
Total deferred debits and other assets 2 142 044 4 096 2 146 140
Total Assets $9 179 128 $ 432 840 $9 611 968
The accompanying notes are an integral part of the consolidated financial statements.
<PAGE>
Financial Statements
Item 6 (b) 1-B(a)
Page 6 of 39
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT JUNE 30, 1994
(IN THOUSANDS)
Actual Adjustments
(Unaudited) (See pages 8-11) Pro Forma
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 314 458 $ - $ 314 458
Capital surplus 668 928 - 668 928
Retained earnings 1 715 678 (39 346) 1 676 332
Total 2 699 064 (39 346) 2 659 718
Less, reacquired common stock, at cost 183 326 - 183 326
Total common stockholders' equity 2 515 738 (39 346) 2 476 392
Cumulative preferred stock:
With mandatory redemption 150 000 - 150 000
Without mandatory redemption 158 242 125 000 283 242
Long-term debt 2 433 260 - 2 433 260
Total capitalization 5 257 240 85 654 5 342 894
Current Liabilities:
Debt due within one year 93 232 - 93 232
Notes payable 396 646 373 000 769 646
Obligations under capital leases 168 326 - 168 326
Accounts payable 261 848 - 261 848
Taxes accrued 115 638 (25 814) 89 824
Interest accrued 76 450 - 76 450
Other 193 031 - 193 031
Total current liabilities 1 305 171 347 186 1 652 357
Deferred Credits and Other Liabilities:
Deferred income taxes 1 415 125 - 1 415 125
Unamortized investment tax credits 160 573 - 160 573
Three Mile Island Unit 2 future costs 339 310 - 339 310
Other 701 709 - 701 709
Total deferred credits and other liabilities 2 616 717 - 2 616 717
Total Liabilities and Capital $9 179 128 $ 432 840 $9 611 968
The accompanying notes are an integral part of the consolidated financial statements.
<PAGE>
Financial Statements
Item 6 (b) 1-B(a)
Page 7 of 39
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
ACTUAL AND PRO FORMA
FOR THE TWELVE MONTHS ENDED JUNE 30, 1994
(IN THOUSANDS)
<CAPTION>
Actual Adjustments
(Unaudited) (See pages 8-11) Pro Forma
<S> <C> <C> <C>
Operating Revenues $3 662 442 $ 4 000 $3 666 442
Operating Expenses:
Fuel 382 321 - 382 321
Power purchased and interchanged 912 876 - 912 876
Deferral of energy costs, net (63 988) - (63 988)
Other operation and maintenance 1 083 593 38 425 1 122 018
Depreciation and amortization 357 436 - 357 436
Taxes, other than income taxes 351 180 - 351 180
Total operating expenses 3 023 418 38 425 3 061 843
Operating Income Before Income Taxes 639 024 (34 425) 604 599
Income taxes 159 821 (25 814) 134 007
Operating income 479 203 (8 611) 470 592
Other Income and Deductions:
Allowance for other funds used during
construction 3 931 - 3 931
Other income, net (158 227) - (158 227)
Income taxes 69 840 - 69 840
Total other income and deductions (84 456) - (84 456)
Income Before Interest Charges and
Preferred Dividends 394 747 (8 611) 386 136
Interest Charges and Preferred Dividends:
Interest on long-term debt 185 277 - 185 277
Other interest 37 027 20 422 57 449
Allowance for borrowed funds used during
construction (5 297) - (5 297)
Preferred stock dividends of subsidiaries 22 400 10 313 32 713
Total interest charges and preferred
dividends 239 407 30 735 270 142
Net Income $ 155 340 $(39 346) $ 115 994
Retained Earnings:
Balance at beginning of period $1 762 645 $ - $1 762 645
Add - Net income 155 340 (39 346) 115 994
Deduct - Cash dividends on common stock 201 256 - 201 256
Other adjustments 1 051 - 1 051
Balance at end of period $1 715 678 $(39 346) $1 676 332
The accompanying notes are an integral part of the consolidated financial statements.
<PAGE>
Financial Statements
Item 6 (b) 1-B(a)
Page 8 of 39
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1994
(IN THOUSANDS)
(1)
<S> <C> <C>
Cash and temporary cash investments $338 000
Notes payable $338 000
To reflect the proposed issuance of
$338 million of borrowings under the new
Revolving Credit Agreement up to the charter
limits.
(2)
Other interest $ 20 280
Cash and temporary cash investments $ 20 280
To reflect annual interest expense resulting
from the proposed issuance of $338 million of
borrowings under the new Revolving Credit Agreement
at an assumed interest rate of 6%.
(3)
Cash and temporary cash investments $125 000
Preferred stock $125 000
To reflect the issuance of $25 per share
stated value of monthly income preferred shares
from time to time through June 30, 1996 by Met-Ed
Capital. The preferred shares plus dividend payments
are to be unconditionally guaranteed by Met-Ed (SEC
File No. 70-8401).
(4)
Other deferred debits $ 4 238
Cash and temporary cash investments $ 4 238
To reflect the underwriters' compensation and
offering expenses paid in accordance with the
Underwriting Agreements for Met-Ed Capital (SEC
File No. 70-8401).
<PAGE>
Financial Statements
Item 6 (b) 1-B(a)
Page 9 of 39
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1994
(IN THOUSANDS)
(5)
Other interest $ 142
Other deferred debits $ 142
To reflect the annual amortization of the
deferred underwriters compensation and offering
expenses being amortized over the 30-year loan
period for the loan by Met-Ed Capital to Met-Ed
(SEC File No. 70-8401).
(6)
Other operation and maintenance $ 125
Cash and temporary cash investments $ 125
To reflect the annual expenses for the
distribution of IRS Form K-1 to preferred
stockholders (SEC File No. 70-8401).
(7)
Preferred stock dividends of subsidiaries $ 10 313
Cash and temporary cash investments $ 10 313
To reflect the annual dividends paid on the
monthly income preferred shares of Met-Ed Capital
(8.25%) (SEC File No. 70-8401).
<PAGE>
Financial Statements
Item 6 (b) 1-B(a)
Page 10 of 39
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1994
(IN THOUSANDS)
(8)
Other operation and maintenance $ 35 000
Notes payable $ 35 000
To reflect the increase in the Company's
operation and maintenance expense for the maximum
amount of costs of potential non-performance under
New Letters of Credit (SEC File No. 70-8141 and
SEC File No. 70-8323).
(9)
Other operation and maintenance $ 3 100
Cash and temporary cash investments $ 3 100
To reflect the (1) New Letters of Credit
fees for up to $20 million at 1% annually of
face value through December 31, 2003 (SEC File
No. 70-8141) and (2) New Letters of Credit fees
for up to $15 million at 1% annually of face
value through December 31, 1999 (SEC File
No. 70-8323).
(10)
Cash and temporary cash investments $ 4 000
Operating revenues $ 4 000
To reflect the anticipated annual revenues
and cash derived from the leasing of excess fiber
optic system capacity to nonaffiliates (SEC File
No. 70-7850).
(11)
Other operation and maintenance $ 200
Cash and temporary cash investments $ 200
To reflect the anticipated annual administrative
costs associated with entering into the leasing of
excess fiber optic system capacity to nonaffiliates
(SEC File No. 70-7850).
<PAGE>
Financial Statements
Item 6 (b) 1-B(a)
Page 11 of 39
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1994
(IN THOUSANDS)
(12)
Taxes accrued $ 25 814
Income taxes $ 25 814
To reflect the net decrease in the provision
for federal and state income taxes attributable to
the (1) increase in interest expense from the proposed
issuance of short-term debt under the new Revolving Credit
Agreements (2) issuance of monthly income preferred
stock (SEC File No. 70-8401) (3) increase in Operating
Income Before Income Taxes derived from the leasing of
excess fiber optic system capacity (SEC File No. 70-7850)
and (4) increase in costs resulting from the New Letters
of Credit (SEC File No. 70-8141 and SEC File No. 70-8323).
<PAGE>
Financial Statements
Item 6(b) 1-C(a)
Page 12 of 39
JERSEY CENTRAL POWER & LIGHT COMPANY
BALANCE SHEETS
ACTUAL AND PRO FORMA
AT JUNE 30, 1994
(IN THOUSANDS)
<CAPTION>
Adjustments Pro
Actual (See pages 15-16) Forma
<S> <C> <C> <C>
ASSETS
Utility Plant:
In service, at original cost $4 006 196 $4 006 196
Less, accumulated depreciation 1 450 714 1 450 714
Net utility plant in service 2 555 482 2 555 482
Construction work in progress 117 838 117 838
Other, net 128 982 128 982
Net utility plant 2 802 302 2 802 302
Current Assets:
Cash and temporary cash investments 2 981 $112 554 115 535
Special deposits 7 384 7 384
Accounts receivable:
Customers, net 134 860 134 860
Other 12 192 12 192
Unbilled revenues 68 298 68 298
Materials and supplies, at
average cost or less:
Construction and maintenance 104 115 104 115
Fuel 19 332 19 332
Deferred income taxes 6 606 6 606
Prepayments 196 614 196 614
Total current assets 552 382 112 554 664 936
Deferred Debits and Other Assets:
Three Mile Island Unit 2 deferred costs 141 153 141 153
Unamortized property losses 106 697 106 697
Deferred income taxes 129 314 129 314
Income taxes recoverable through
future rates 123 431 123 431
Decommissioning funds 158 248 158 248
Special deposits 83 150 83 150
Other 338 025 338 025
Total deferred debits and
other assets 1 080 018 1 080 018
Total Assets $4 434 702 $112 554 $4 547 256
The accompanying notes are an integral part of the financial statements.
<PAGE>
Financial Statements
Item 6(b) 1-C(a)
Page 13 of 39
JERSEY CENTRAL POWER & LIGHT COMPANY
BALANCE SHEETS
ACTUAL AND PRO FORMA
AT JUNE 30, 1994
(IN THOUSANDS)
<CAPTION>
Adjustments Pro
Actual (See pages 15-16) Forma
<S> <C> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 153 713 $ 153 713
Capital surplus 435 715 435 715
Retained earnings 705 068 $(14 590) 690 478
Total common stockholder's equity 1 294 496 (14 590) 1 279 906
Cumulative preferred stock:
With mandatory redemption 150 000 150 000
Without mandatory redemption 37 741 37 741
Long-term debt 1 215 779 - 1 215 779
Total capitalization 2 698 016 (14 590) 2 683 426
Current Liabilities:
Debt due within one year 60 008 60 008
Notes payable 155 387 135 000 290 387
Obligations under capital leases 102 276 102 276
Accounts payable:
Affiliates 37 384 37 384
Other 109 702 109 702
Taxes accrued 79 342 (7 856) 71 486
Deferred energy credits 12 733 12 733
Interest accrued 35 944 35 944
Other 58 518 58 518
Total current liabilities 651 294 127 144 778 438
Deferred Credits and Other Liabilities:
Deferred income taxes 574 982 574 982
Unamortized investment tax credits 75 605 75 605
Three Mile Island Unit 2 future costs 84 828 84 828
Other 349 977 349 977
Total deferred credits and
other liabilities 1 085 392 1 085 392
Total Liabilities and Capital $4 434 702 $112 554 $4 547 256
The accompanying notes are an integral part of the financial statements.
<PAGE>
Financial Statements
Item 6(b) 1-C(a)
Page 14 of 39
JERSEY CENTRAL POWER & LIGHT COMPANY
STATEMENTS OF INCOME AND RETAINED EARNINGS
ACTUAL AND PRO FORMA
FOR THE TWELVE MONTHS ENDED JUNE 30, 1994
(IN THOUSANDS)
<CAPTION>
Adjustments Pro
Actual (See pages 15-16) Forma
<S> <C> <C> <C>
Operating Revenues $1 969 728 $ 688 $1 970 416
Operating Expenses:
Fuel 113 157 113 157
Power purchased and interchanged 592 270 592 270
Deferral of energy and capacity
costs, net (5 406) (5 406)
Other operation and maintenance 526 803 15 934 542 737
Depreciation and amortization 185 330 185 330
Taxes, other than income taxes 232 942 232 942
Total operating expenses 1 645 096 15 934 1 661 030
Operating Income Before Income Taxes 324 632 (15 246) 309 386
Income taxes 75 375 (7 856) 67 519
Operating Income 249 257 (7 390) 241 867
Other Income and Deductions:
Allowance for other funds used during
construction 1 334 1 334
Other income, net 18 100 18 100
Income taxes (7 085) (7 085)
Total other income and deductions 12 349 12 349
Income Before Interest Charges 261 606 (7 390) 254 216
Interest Charges:
Interest on long-term debt 96 639 96 639
Other interest 12 877 7 200 20 077
Allowance for borrowed funds used during
construction (2 145) (2 145)
Total interest charges 107 371 7 200 114 571
Net Income 154 235 (14 590) 139 645
Preferred stock dividends 14 796 14 796
Earnings Available for Common Stock $ 139 439 $(14 590) $ 124 849
Retained Earnings:
Balance, beginning of period $ 667 868 $ 667 868
Add, net income 154 235 $(14 590) 139 645
Deduct, dividends on cumulative
preferred stock 14 796 14 796
Deduct, dividends on common stock 100 000 100 000
Deduct, other adjustments 2 239 2 239
Balance, end of period $ 705 068 $(14 590) $ 690 478
The accompanying notes are an integral part of the financial statements.
<PAGE>
Financial Statements
Item 6 (b) 1-C(a)
Page 15 of 39
JERSEY CENTRAL POWER & LIGHT COMPANY
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1994
(IN THOUSANDS)
(1)
<S> <C> <C>
Cash and temporary cash investments $120 000
Notes payable $120 000
To reflect the proposed issuance of
$120 million of borrowings under the new
Revolving Credit Agreement up to the charter
limit.
(2)
Other interest $ 7 200
Cash and temporary cash investments $ 7 200
To reflect annual interest expense resulting
from the proposed issuance of $120 million of
borrowings under the new Revolving Credit Agreement
at an assumed interest rate of 6%.
(3)
Other operation and maintenance $ 15 000
Notes payable $ 15 000
To reflect the increase in the Company's
operation and maintenance expense for the maximum
amount of costs of potential non-performance under
the Letters of Credit (The requested authority of
the U-1 filing is for a maximum amount of $15
million. For the purpose of reflecting pro forma
adjustments, the maximum exposure has been reflected).
(SEC File No. 70-8323).
(4)
Other operation and maintenance $ 900
Cash and temporary cash investments $ 900
To reflect the New Letters of Credit
fees at 1% annually of the maximum face amount
($15 million) through December 31, 1999. (SEC
File No. 70-8323).
<PAGE>
Financial Statements
Item 6 (b) 1-C(a)
Page 16 of 39
JERSEY CENTRAL POWER & LIGHT COMPANY
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1994
(IN THOUSANDS)
(5)
Cash and temporary cash investments $ 688
Operating revenues $ 688
To reflect the Company's 17.2% share of
anticipated annual revenues and cash derived
from the leasing of excess fiber optic system
capacity to nonaffiliates. (SEC File No. 70-7850).
(6)
Other operation and maintenance $ 34
Cash and temporary cash investments $ 34
To reflect the Company's 17.2% share of
anticipated annual administrative costs associated
with entering into the leases of excess fiber optic
system capacity with nonaffiliates (SEC File
No. 70-7850).
(7)
Taxes accrued $ 7 856
Income taxes $ 7 856
To reflect the net decrease in the provision
for federal income taxes attributable to
the (1) increase in interest expense from the proposed
issuance of short-term debt under the new Revolving Credit
Agreement (2) increase in Operating Income Before
Income Taxes derived from the leasing of excess
fiber optic system capacity (SEC File No. 70-7850)
and (4) increase in costs resulting from the New Letters
of Credit (SEC File No. 70-8323).
<PAGE>
Financial Statements
Item 6(b) 1-D(a)
Page 17 of 39
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANY
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT JUNE 30, 1994
(IN THOUSANDS)
<CAPTION>
Actual Adjustments Pro
(Unaudited) (See pages 20-23) Forma
<S> <C> <C> <C>
ASSETS
Utility Plant:
In service, at original cost $2 040 690 $ - $2 040 690
Less, accumulated depreciation 672 278 - 672 278
Net utility plant in service 1 368 412 - 1 368 412
Construction work in progress 96 721 - 96 721
Other, net 45 092 - 45 092
Net utility plant 1 510 225 - 1 510 225
Current Assets:
Cash and temporary cash investments 1 167 193 089 194 256
Special deposits 1 117 - 1 117
Accounts receivable:
Customers, net 56 064 - 56 064
Other 13 428 - 13 428
Unbilled revenues 30 165 - 30 165
Materials and supplies, at average cost or less:
Construction and maintenance 38 668 - 38 668
Fuel 8 778 - 8 778
Deferred income taxes 7 764 - 7 764
Prepayments 18 314 - 18 314
Total current assets 175 465 193 089 368 554
Deferred Debits and Other Assets:
Three Mile Island Unit 2 deferred costs 7 783 - 7 783
Deferred income taxes 146 297 - 146 297
Income taxes recoverable through future rates 199 925 - 199 925
Decommissioning funds 61 116 - 61 116
Other 55 748 4 096 59 844
Total deferred debits and other assets 470 869 4 096 474 965
Total Assets $2 156 559 $197 185 $2 353 744
The accompanying notes are an integral part of the consolidated financial statements.
<PAGE>
Financial Statements
Item 6(b) 1-D(a)
Page 18 of 39
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANY
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT JUNE 30, 1994
(IN THOUSANDS)
Actual Adjustments Pro
(Unaudited) (See pages 20-23) Forma
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 66 273 $ - $ 66 273
Capital surplus 345 200 - 345 200
Retained earnings 190 403 (17 577) 172 826
Total common stockholder's equity 601 876 (17 577) 584 299
Cumulative preferred stock 58 659 125 000 183 659
Long-term debt 570 299 - 570 299
Total capitalization 1 230 834 107 423 1 338 257
Current Liabilities:
Debt due within one year 16 - 16
Notes payable 34 300 103 000 137 300
Obligations under capital leases 40 644 - 40 644
Accounts payable:
Affiliates 15 129 - 15 129
Other 54 383 - 54 383
Taxes accrued 19 583 (13 238) 6 345
Deferred energy credits 3 953 - 3 953
Interest accrued 22 964 - 22 964
Other 22 056 - 22 056
Total current liabilities 213 028 89 762 302 790
Deferred Credits and Other Liabilities:
Deferred income taxes 363 272 - 363 272
Unamortized investment tax credits 35 962 - 35 962
Three Mile Island Unit 2 future costs 169 655 - 169 655
Nuclear fuel disposal fee 25 235 - 25 235
Other 118 573 - 118 573
Total deferred credits and other
liabilities 712 697 - 712 697
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $2 156 559 $197 185 $2 353 744
The accompanying notes are an integral part of the consolidated financial statements.
<PAGE>
Financial Statements
Item 6(b) 1-D(a)
Page 19 of 39
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
ACTUAL AND PRO FORMA
FOR THE TWELVE MONTHS ENDED JUNE 30, 1994
(IN THOUSANDS)
<CAPTION>
Actual Adjustments Pro
(Unaudited) (See pages 20-23) Forma
<S> <C> <C> <C>
Operating Revenues $807 148 $ 1 784 $808 932
Operating Expenses:
Fuel 89 792 - 89 792
Power purchased and interchanged 203 497 - 203 497
Deferral of energy costs, net (30 186) - (30 186)
Other operation and maintenance 259 925 16 864 276 789
Depreciation and amortization 85 565 - 85 565
Taxes, other than income taxes 54 595 - 54 595
Total operating expenses 663 188 16 864 680 052
Operating Income Before Income Taxes 143 960 (15 080) 128 880
Income taxes 34 391 (13 238) 21 153
Operating Income 109 569 (1 842) 107 727
Other Income and Deductions:
Allowance for other funds used during
construction 877 - 877
Other income, net (105 240) - (105 240)
Income taxes 45 624 - 45 624
Total other income and deductions (58 739) - (58 739)
Income Before Interest Charges 50 830 (1 842) 48 988
Interest Charges:
Interest on long-term debt 42 727 - 42 727
Other interest 13 557 5 422 18 979
Allowance for borrowed funds used during
construction (1 579) - (1 579)
Total interest charges 54 705 5 422 60 127
Net Income (3 875) (7 264) (11 139)
Preferred stock dividends 3 632 10 313 13 945
Earnings available for common stock $ (7 507) $(17 577) $(25 084)
Retained Earnings:
Balance at beginning of period $201 868 $ - $201 868
Add - Net income (3 875) (7 264) (11 139)
Deduct - Dividends on cumulative
preferred stock 3 632 10 313 13 945
Dividends on common stock - - -
Other adjustments 3 958 - 3 958
Balance at end of period $190 403 $(17 577) $172 826
The accompanying notes are an integral part of the consolidated financial statements.
<PAGE>
Financial Statements
Item 6 (b) 1-D(a)
Page 20 of 39
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANY
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1994
(IN THOUSANDS)
(1)
<S> <C> <C>
Cash and temporary cash investments $ 88 000
Notes payable $ 88 000
To reflect the proposed issuance of
$88 million of borrowings under the new Revolving
Credit Agreement up to the charter limit.
(2)
Other interest $ 5 280
Cash and temporary cash investments $ 5 280
To reflect annual interest expense resulting
from the proposed issuance of $88 million of
borrowings under the new Revolving Credit Agreement
at an assumed interest rate of 6%.
(3)
Cash and temporary cash investments $125 000
Preferred stock $125 000
To reflect the issuance of $25 per share
stated value of monthly income preferred shares
from time to time through June 30, 1996 by Met-Ed
Capital. The preferred shares plus dividend payments
are to be unconditionally guaranteed by the
Company (SEC File No. 70-8401).
(4)
Other deferred debits $ 4 238
Cash and temporary cash investments $ 4 238
To reflect the underwriters' compensation and
offering expenses paid in accordance with the
Underwriting Agreements for Met-Ed Capital (SEC
File No. 70-8401).
<PAGE>
Financial Statements
Item 6 (b) 1-D(a)
Page 21 of 39
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANY
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1994
(IN THOUSANDS)
(5)
Other interest $ 142
Other deferred debits $ 142
To reflect the annual amortization of the
deferred underwriters compensation and offering
expenses being amortized over the 30-year loan
period for the loan by Met-Ed Capital to the
Company (SEC File No. 70-8401).
(6)
Other operation and maintenance $ 125
Cash and temporary cash investments $ 125
To reflect the annual expenses for the
distribution of IRS Form K-1 to preferred
stockholders (SEC File No. 70-8401).
(7)
Preferred stock dividends of subsidiary $ 10 313
Cash and temporary cash investments $ 10 313
To reflect the annual dividends paid on the
monthly income preferred shares of Met-Ed Capital
(8.25%) (SEC File No. 70-8401).
<PAGE>
Financial Statements
Item 6 (b) 1-D(a)
Page 22 of 39
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANY
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1994
(IN THOUSANDS)
(8)
Other operation and maintenance $ 15 000
Notes payable $ 15 000
To reflect the increase in the Company's
operation and maintenance expense for the maximum
amount of costs of potential non-performance under
the proposed New Letters of Credit. (The requested
authority of this U-1 filing is for a maximum amount
of $20 million in the aggregate for GPU not to exceed
$15 million for Met-Ed and Penelec. For the purpose of
reflecting pro forma adjustments, the maximum exposure
for both Met-Ed and Penelec has been reflected (SEC
File No. 70-8141).
(9)
Other operation and maintenance $ 1 650
Cash and temporary cash investments $ 1 650
To reflect the New Letters of Credit
fees at 1% annually of the maximum face value ($15.0
million) through December 31, 2003 (SEC File
No. 70-8141).
(10)
Cash and temporary cash investments $ 1 784
Operating revenues $ 1 784
To reflect the Company's 44.6% share of the
anticipated annual revenues and cash derived from
the leasing of excess fiber optic system capacity
to nonaffiliates (SEC File No. 70-7850).
(11)
Other operation and maintenance $ 89
Cash and temporary cash investments $ 89
To reflect the Company's 44.6% share of the
anticipated annual administrative costs associated
with entering into the leasing of excess fiber optic
system capacity to nonaffiliates (SEC File
No. 70-7850).
<PAGE>
Financial Statements
Item 6 (b) 1-D(a)
Page 23 of 39
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANY
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1994
(IN THOUSANDS)
(12)
Taxes accrued $ 13 238
Income taxes $ 13 238
To reflect the net decrease in the provision
for federal and state income taxes attributable to
the (1) increase in interest expense from the proposed
issuance of short-term debt under the new Revolving Credit
Agreement (2) issuance of monthly income preferred
shares (SEC File No. 70-8401) (3) increase in Operating
Income Before Income Taxes derived from the leasing of
excess fiber optic system capacity (SEC File No. 70-7850)
and (4) increase in costs resulting from the New Letters
of Credit (SEC File No. 70-8141).
<PAGE>
Financial Statements
Item 6(b) 1-E(a)
Page 24 of 39
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT JUNE 30, 1994
(In Thousands)
<CAPTION>
Adjustments Pro
Actual (See pages 27-28) Forma
<S> <C> <C> <C>
ASSETS
Utility Plant:
In service, at original cost $2 475 460 $ - $2 475 460
Less, accumulated depreciation 904 699 - 904 699
Net utility plant in service 1 570 761 - 1 570 761
Construction work in progress 93 201 - 93 201
Other, net 32 193 - 32 193
Net utility plant 1 696 155 - 1 696 155
Current Assets:
Cash and temporary cash investments 1 235 45 071 46 306
Special deposits 2 606 - 2 606
Accounts receivable:
Customers, net 70 797 - 70 797
Other 21 276 - 21 276
Unbilled revenues 23 255 - 23 255
Materials and supplies, at average cost or less:
Construction and maintenance 46 682 - 46 682
Fuel 22 214 - 22 214
Deferred energy costs 21 585 - 21 585
Deferred income taxes 811 - 811
Prepayments 21 055 - 21 055
Total current assets 231 516 45 071 276 587
Deferred Debits and Other Assets:
Three Mile Island Unit 2 deferred costs 13 392 - 13 392
Deferred income taxes 117 193 - 117 193
Income taxes recoverable through future rates 237 372 - 237 372
Decommissioning funds 27 673 - 27 673
Nuclear fuel disposal fee 270 - 270
Other 45 374 - 45 374
Total deferred debits and other assets 441 274 - 441 274
Total Assets $2 368 945 $ 45 071 $2 414 016
The accompanying notes are an integral part of the consolidated financial statements.
<PAGE>
Financial Statements
Item 6(b) 1-E(a)
Page 25 of 39
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT JUNE 30, 1994
(In Thousands)
Adjustments Pro
Actual (See pages 27-28) Forma
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 105 812 $ - $ 105 812
Capital surplus 265 486 265 486
Retained earnings 298 455 (10 227) 288 228
Total common stockholder's equity 669 753 (10 227) 659 526
Cumulative preferred stock 61 842 - 61 842
Long-term debt 616 482 - 616 482
Total capitalization 1 348 077 (10 227) 1 337 850
Current Liabilities:
Debt due within one year 30 008 - 30 008
Notes payable 88 559 63 000 151 559
Obligations under capital leases 21 532 - 21 532
Accounts payable:
Affiliates 9 915 - 9 915
Others 62 364 - 62 364
Taxes accrued 13 762 (7 702) 6 060
Interest accrued 15 815 - 15 815
Vacations accrued 12 791 - 12 791
Other 14 756 - 14 756
Total current liabilities 269 502 55 298 324 800
Deferred Credits and Other Liabilities:
Deferred income taxes 463 864 - 463 864
Unamortized investment tax credits 49 006 - 49 006
Three Mile Island Unit 2 future costs 84 827 - 84 827
Nuclear fuel disposal fee 12 618 - 12 618
Other 141 051 - 141 051
Total deferred credits and other liabilities 751 366 - 751 366
Total Liabilities and Capital $2 368 945 $ 45 071 $2 414 016
The accompanying notes are an integral part of the consolidated financial statements.
<PAGE>
Financial Statements
Item 6(b) 1-E(a)
Page 26 of 39
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
ACTUAL AND PRO FORMA
FOR THE TWELVE MONTHS ENDED JUNE 30, 1994
(In Thousands)
<CAPTION>
Adjustments Pro
Actual (See pages 27-28) Forma
<S> <C> <C> <C>
Operating Revenues $932 202 $ 1 528 $933 730
Operating Expenses:
Fuel 179 372 - 179 372
Power purchased and interchanged 157 355 - 157 355
Deferral of energy costs, net (28 396) - (28 396)
Other operation and maintenance 299 465 16 577 316 042
Depreciation and amortization 86 541 - 86 541
Taxes, other than income taxes 63 643 - 63 643
Total operating expenses 757 980 16 577 774 557
Operating Income Before Income Taxes 174 222 (15 049) 159 173
Income taxes 50 055 (7 702) 42 353
Operating Income 124 167 (7 347) 116 820
Other Income and Deductions:
Allowance for other funds used during
construction 1 720 - 1 720
Other income, net (69 745) - (69 745)
Income taxes 30 815 - 30 815
Total other income and deductions (37 210) - (37 210)
Income Before Interest Charges 86 957 (7 347) 79 610
Interest Charges:
Interest on long-term debt 45 911 - 45 911
Other interest 8 055 2 880 10 935
Allowance for borrowed funds used
during construction (1 573) - (1 573)
Total interest charges 52 393 2 880 55 273
Net Income 34 564 (10 227) 24 337
Preferred Stock Dividends 3 972 - 3 972
Earnings Available for Common Stock $ 30 592 $(10 227) $ 20 365
Retained Earnings:
Balance, beginning of period $289 108 $ - $289 108
Add, net income 34 564 (10 227) 24 337
Deduct, cash dividends on cumulative
preferred stock 3 972 - 3 972
Deduct, cash dividend on common stock 20 000 - 20 000
Deduct, other adjustments 1 245 - 1 245
Balance, end of period $298 455 $(10 227) $288 228
The accompanying notes are an integral part of the consolidated financial statements.
<PAGE>
Financial Statements
Item 6(b) 1-E(a)
Page 27 of 39
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1994
(IN THOUSANDS)
(1)
<S> <C> <C>
Cash and temporary cash investments $ 48 000
Notes payable $ 48 000
To reflect the proposed issuance of
$48 million of borrowings under the new Revolving
Credit Agreement up to the charter limit.
(2)
Other interest $ 2 880
Cash and temporary cash investments $ 2 880
To reflect annual interest expense resulting
from the proposed issuance of $48 million of
borrowings under the new Revolving Credit Agreement
at an assumed interest rate of 6%.
(3)
Other operation and maintenance $ 15 000
Notes payable $ 15 000
To reflect an increase in the Company's
operation and maintenance expense for the
maximum amount of costs of potential
non-performance under Letters of
Credit (The requested authority of the
U-1 filing was for a maximum amount
of $20 million in the aggregate for GPU not
to exceed $15 million per Penelec or Met-Ed.
For the purpose of reflecting pro forma
adjustments, the maximum exposure for both
Penelec and Met-Ed has been reflected
(SEC File No. 70-8141).
(4)
Other operation and maintenance $ 1 500
Cash and temporary cash investments $ 1 500
To reflect the Letters of Credit
fees for up to $15 million at 1% annually
of face value through December 31, 2003
(SEC File No. 70-8141).
<PAGE>
Financial Statements
Item 6(b) 1-E(a)
Page 28 of 39
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1994
(IN THOUSANDS)
(5)
Cash and temporary cash investments $ 1 528
Operating revenues $ 1 528
To reflect the Company's 38.2% share
of the anticipated annual revenues and cash
derived from the leasing of excess fiber
optic system capacity to nonaffiliates
(SEC File No. 70-7850).
(6)
Other operation and maintenance $ 77
Cash and temporary cash investments $ 77
To reflect the Company's 38.2% share
of the anticipated annual administrative
costs associated with entering into the
leases of excess fiber optic system
capacity to nonaffiliates
(SEC File No. 70-7850).
(7)
Taxes accrued $ 7 702
Income taxes $ 7 702
To reflect the net decrease in the provision
for federal and state income taxes attributable to
the (1) increase in interest expense from the proposed
issuance of short-term debt under the new Revolving Credit
Agreement (2) increase in Operating Income Before
Income Taxes derived from the leasing of excess
fiber optic system capacity (SEC File No. 70-7850)
and (3) increase in costs resulting from the New Letters
of Credit (SEC File No. 70-8141).
</TABLE>
<PAGE>
Financial Statements
Item 6(b)
Page 29 of 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
General Public Utilities Corporation (the Corporation) is a holding
company registered under the Public Utility Holding Company Act of 1935. The
Corporation does not directly operate any utility properties, but owns all
the outstanding common stock of three electric utilities -- Jersey Central
Power & Light Company (JCP&L), Metropolitan Edison Company (Met-Ed) and
Pennsylvania Electric Company (Penelec) (the Subsidiaries). The Corporation
also owns all the common stock of GPU Service Corporation (GPUSC), a service
company; GPU Nuclear Corporation (GPUN), which operates and maintains the
nuclear units of the Subsidiaries; and Energy Initiatives, Inc. (EI). In
April 1994, General Portfolios Corporation (GPC) merged into its then
subsidiary EI. EI develops, owns and operates nonutility generating
facilities. All of these companies considered together with their
subsidiaries are referred to as the "GPU System."
These notes should be read in conjunction with the notes to consolidated
financial statements included in the 1993 Annual Report on Form 10-K. For
disclosures required by generally accepted accounting principles, see the 1993
Annual Report on Form 10-K.
1. COMMITMENTS AND CONTINGENCIES
NUCLEAR FACILITIES
The Subsidiaries have made investments in three major nuclear projects -
- Three Mile Island Unit 1 (TMI-1) and Oyster Creek, both of which are
operational generating facilities, and Three Mile Island Unit 2 (TMI-2), which
was damaged during a 1979 accident. At June 30, 1994, the Subsidiaries' net
investment in TMI-1 and Oyster Creek, including nuclear fuel, was $648 million
and $796 million, respectively. TMI-1 and TMI-2 are jointly owned by JCP&L,
Met-Ed and Penelec in the percentages of 25%, 50% and 25%, respectively.
Oyster Creek is owned by JCP&L.
Costs associated with the operation, maintenance and retirement of
nuclear plants continue to be significant and less predictable than costs
associated with other sources of generation, in large part due to changing
regulatory requirements, safety standards and experience gained in the
construction and operation of nuclear facilities. The GPU System may also
incur costs and experience reduced output at its nuclear plants because of the
prevailing design criteria at the time of construction and the age of the
plants' systems and equipment. In addition, for economic or other reasons,
operation of these plants for the full term of their now assumed lives cannot
be assured. Also, not all risks associated with the ownership or operation of
nuclear facilities may be adequately insured or insurable. Consequently, the
ability of electric utilities to obtain adequate and timely recovery of costs
associated with nuclear projects, including replacement power, any unamortized
investment at the end of each plant's useful life (whether scheduled or
premature), the carrying costs of that investment and retirement costs, is not
assured. Management intends, in general, to seek recovery of any such costs
described above through the ratemaking process, but recognizes that recovery
is not assured.
<PAGE>
Financial Statements
Item 6(b)
Page 30 of 39
TMI-2: The 1979 TMI-2 accident resulted in significant damage to, and
contamination of, the plant and a release of radioactivity to the environment.
The cleanup program was completed in 1990. After receiving Nuclear Regulatory
Commission (NRC) approval, TMI-2 entered into long-term monitored storage in
December 1993.
As a result of the accident and its aftermath, approximately 2,100
individual claims for alleged personal injury (including claims for punitive
damages), which are material in amount, have been asserted against the
Corporation and the Subsidiaries and the suppliers of equipment and services
to TMI-2, and are pending in the United States District Court for the Middle
District of Pennsylvania. Some of such claims also seek recovery on the basis
of alleged emissions of radioactivity before, during and after the accident.
If, notwithstanding the developments noted below, punitive damages are
not covered by insurance and are not subject to the liability limitations of
the federal Price-Anderson Act ($560 million at the time of the accident),
punitive damage awards could have a material adverse effect on the financial
position of the GPU System.
At the time of the TMI-2 accident, as provided for in the Price-Anderson
Act, the Subsidiaries had (a) primary financial protection in the form of
insurance policies with groups of insurance companies providing an aggregate
of $140 million of primary coverage, (b) secondary financial protection in the
form of private liability insurance under an industry retrospective rating
plan providing for premium charges deferred in whole or in major part under
such plan, and (c) an indemnity agreement with the NRC, bringing their total
primary and secondary insurance financial protection and indemnity agreement
with the NRC up to an aggregate of $560 million.
The insurers of TMI-2 have been providing a defense against all TMI-2
accident related claims against the Corporation and the Subsidiaries and their
suppliers under a reservation of rights with respect to any award of punitive
damages. However, the defendants in the TMI-2 litigation and the insurers
agreed, on March 30, 1994, that the insurers would withdraw their reservation
of rights.
In June 1993, the Court agreed to permit pre-trial discovery on the
punitive damage claims to proceed. A trial of twelve allegedly representative
cases is now scheduled to begin in April 1995. In February 1994, the Court
held that the plaintiffs' claims for punitive damages are not barred by the
Price-Anderson Act to the extent that the funds to pay punitive damages do not
come out of the U.S. Treasury. The Court also denied in February 1994, the
defendants' motion seeking a dismissal of all cases on the grounds that the
defendants complied with applicable federal safety standards regarding
permissible radiation releases from TMI-2 and that, as a matter of law, the
defendants therefore did not breach any duty that they may have owed
to the individual plaintiffs. The Court stated that a dispute about what
radiation and emissions were released cannot be resolved on a motion for
summary judgment. On July 13, 1994, however, the Court granted defendant's
motion for interlocutory appeal of its February 1994 order, stating that the
punitive damage claims and the duty owed by the defendants raise questions of
law that contain substantial grounds for differences of opinion.
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In an Order issued in April 1994, the Court: (1) noted that the
plaintiffs have agreed to seek punitive damages only against the Corporation
and the Subsidiaries; and (2) stated in part that the Court is of the opinion
that any punitive damages owed must be paid out of and limited to the amount
of primary and secondary insurance under the Price-Anderson Act and,
accordingly, evidence of the defendants' net worth is not relevant in the
pending proceeding.
NUCLEAR PLANT RETIREMENT COSTS
Retirement costs for nuclear plants include decommissioning the
radiological portions of the plants and the cost of removal of nonradiological
structures and materials. The disposal of spent nuclear fuel is covered
separately by contracts with the U.S. Department of Energy.
In 1990, the Subsidiaries submitted a report, in compliance with NRC
regulations, setting forth a funding plan (employing the external sinking fund
method) for the decommissioning of their nuclear reactors. Under this plan,
the Subsidiaries intend to complete the funding for Oyster Creek and TMI-1 by
the end of the plants' license terms, 2009 and 2014, respectively. The TMI-2
funding completion date is 2014, consistent with TMI-2 remaining in long-term
storage and being decommissioned at the same time as TMI-1. Under the NRC
regulations, the funding targets (in 1994 dollars) for TMI-1 and Oyster Creek
are $157 million and $189 million, respectively. Based on NRC studies, a
comparable funding target for TMI-2 (in 1994 dollars), which takes into
account the accident, is $250 million. The NRC continues to study the levels
of these funding targets. Management cannot predict the effect that the
results of this review will have on the funding targets. NRC regulations and
a regulatory guide provide mechanisms, including exemptions, to adjust the
funding targets over their collection periods to reflect increases or
decreases due to inflation and changes in technology and regulatory
requirements. The funding targets, while not actual cost estimates, are
reference levels designed to assure that licensees demonstrate adequate
financial responsibility for decommissioning. While the regulations address
activities related to the removal of the radiological portions of the plants,
they do not establish residual radioactivity limits nor do they address costs
related to the removal of nonradiological structures and materials.
In 1988, a consultant to GPUN performed site-specific studies of TMI-1
and Oyster Creek that considered various decommissioning plans and estimated
the cost of decommissioning the radiological portions of each plant to range
from approximately $225 to $309 million and $239 to $350 million, respectively
(adjusted to 1994 dollars). In addition, the studies estimated the cost of
removal of nonradiological structures and materials for TMI-1 and Oyster Creek
at $74 million and $48 million, respectively (adjusted to 1994 dollars).
The ultimate cost of retiring the GPU System's nuclear facilities may be
materially different from the funding targets and the cost estimates contained
in the site-specific studies and cannot now be more reasonably estimated than
the level of the NRC funding target because such costs are subject to (a) the
type of decommissioning plan selected, (b) the escalation of various cost
elements (including, but not limited to, general inflation), (c) the further
development of regulatory requirements governing decommissioning, (d) the
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Financial Statements
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absence to date of significant experience in decommissioning such facilities
and (e) the technology available at the time of decommissioning. The
Subsidiaries charge to expense and contribute to external trusts amounts
collected from customers for nuclear plant decommissioning and non-
radiological costs. In addition, the Subsidiaries have contributed to
external trusts amounts written off for TMI-2 nuclear plant decommissioning in
1990 and 1991 and expect to make further contributions beginning in 1995 for
amounts written off in 1994 described below.
TMI-1 and Oyster Creek:
JCP&L is collecting revenues for decommissioning, which are expected to
result in the accumulation of its share of the NRC funding target for each
plant. JCP&L is also collecting revenues, based on estimates, for the cost of
removal of nonradiological structures and materials at each plant based on its
share of an estimated $15.3 million for TMI-1 and $31.6 million for Oyster
Creek. In 1993, the Pennsylvania Public Utility Commission (PaPUC) granted
Met-Ed revenues for decommissioning costs of TMI-1 based on its share of the
NRC funding target and nonradiological cost of removal as estimated in the
site-specific study. Also in 1993, the PaPUC approved a rate change for
Penelec which increased the collection of revenues for decommissioning costs
for TMI-1 to a basis equivalent to that granted Met-Ed. Collections from
customers for retirement expenditures are deposited in external trusts and are
classified as Decommissioning Funds on the balance sheet, which includes the
interest earned on these funds. Provision for the future expenditures of
these funds has been made in accumulated depreciation, amounting to
$38 million for TMI-1 and $93 million for Oyster Creek at June 30, 1994.
Oyster Creek and TMI-1 retirement costs are accrued and charged to
depreciation expense over the expected service life of each nuclear plant.
Management believes that any TMI-1 and Oyster Creek retirement costs, in
excess of those currently recognized for ratemaking purposes, should be
recoverable through the ratemaking process.
TMI-2:
The Corporation and its Subsidiaries have recorded a liability amounting
to $250 million as of June 30, 1994, for the radiological decommissioning of
TMI-2, reflecting the NRC funding target. The Subsidiaries record
escalations, when applicable, in the liability based upon changes in the NRC
funding target. The Subsidiaries have also recorded a liability in the amount
of $20 million for incremental costs specifically attributable to monitored
storage. Such costs are expected to be incurred between 1994 and 2014, when
decommissioning is forecast to begin. In addition, the Subsidiaries had
recorded a liability in the amount of $71 million for nonradiological cost of
removal. Expenditures for such costs through June 1994 have reduced the
liability to $69 million. The above amounts for retirement costs and
monitored storage are reflected as Three Mile Island Unit 2 Future Costs on
the balance sheet.
In March 1993, a PaPUC rate order for Met-Ed allowed for the future
recovery of certain TMI-2 retirement costs. The recovery of these TMI-2
retirement costs was to begin when the amortization of the TMI-2 investment
ended in 1994. In May 1993, the Pennsylvania Office of Consumer Advocate filed
a petition for review with the Pennsylvania Commonwealth Court seeking to set
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aside the PaPUC's 1993 rate order. On July 11, 1994, the Commonwealth Court
reversed the PaPUC order. Met-Ed plans to petition the Pennsylvania Supreme
Court to review the decision. As a consequence of the Commonwealth Court
decision, Met-Ed recorded pre-tax charges totaling $127.6 million. Penelec,
because it is also subject to PaPUC regulation, recorded pre-tax charges of
$56.3 million for its share of such costs applicable to its retail customers.
These charges appear in the Other Income and Deductions section of the Income
Statement and are composed of $121.0 million for radiological decommissioning
costs, $48.2 million for the nonradiological cost of removal and $14.7 million
for incremental monitored storage costs. Met-Ed and Penelec plan to begin
making nonrecoverable funding contributions to external trusts for these costs
in the second half of 1995 to fund their share of these costs. The
Pennsylvania Subsidiaries will be similarly required to charge to expense
their share of future increases (described above) in the estimate of the costs
of retiring TMI-2. Future earnings on trust fund deposits for Met-Ed and
Penelec will be recorded as income. Prior to the Commonwealth Court's
decision, Met-Ed and Penelec expensed and contributed $40 million and
$20 million respectively, to external trusts relating to their nonrecoverable
shares of the accident-related portion of the decommissioning liability.
JCP&L has also expensed and made a nonrecoverable contribution of $15 million
to an external decommissioning trust. JCP&L's share of earnings on trust fund
deposits are offset against amounts shown on the balance sheet under Three
Mile Island Unit-2 Deferred Costs as collectible from customers.
The New Jersey Board of Public Utilities (NJBPU), formerly the New
Jersey Board of Regulatory Commissioners, has granted decommissioning revenues
for JCP&L's share of the remainder of the NRC funding target and allowances
for the cost of removal of nonradiological structures and materials. JCP&L,
which is not affected by the Commonwealth Court's ruling, intends to seek
recovery for any increases in TMI-2 retirement costs, but recognizes that
recovery cannot be assured.
As a result of TMI-2's entering long-term monitored storage, in late
1993, the Subsidiaries began incurring incremental annual storage costs of
approximately $1 million. The Subsidiaries estimate that incremental
monitored storage costs will total $20 million through 2014, the expected
retirement date of TMI-1. JCP&L's $5 million share of these costs has been
recognized in rates by the NJBPU.
INSURANCE
The GPU System has insurance (subject to retentions and deductibles) for
its operations and facilities including coverage for property damage,
liability to employees and third parties, and loss of use and occupancy
(primarily incremental replacement power costs). There is no assurance that
the GPU System will maintain all existing insurance coverages. Losses or
liabilities that are not completely insured, unless allowed to be recovered
through ratemaking, could have a material adverse effect on the financial
position of the GPU System.
The decontamination liability, premature decommissioning and property
damage insurance coverage for the TMI station (TMI-1 and TMI-2 are considered
one site for insurance purposes) and for Oyster Creek totals $2.7 billion per
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Financial Statements
Item 6(b)
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site. In accordance with NRC regulations, these insurance policies generally
require that proceeds first be used for stabilization of the reactors and then
to pay for decontamination and debris removal expenses. Any remaining amounts
available under the policies may then be used for repair and restoration costs
and decommissioning costs. Consequently, there can be no assurance that in
the event of a nuclear incident, property damage insurance proceeds would be
available for the repair and restoration of that station.
The Price-Anderson Act limits the GPU System's liability to third
parties for a nuclear incident at one of its sites to approximately
$9.1 billion. Coverage for the first $200 million of such liability is
provided by private insurance. The remaining coverage, or secondary
protection, is provided by retrospective premiums payable by all nuclear
reactor owners. Under secondary protection, a nuclear incident at any
licensed nuclear power reactor in the country, including those owned by the
GPU System, could result in assessments of up to $79 million per incident for
each of the GPU System's two operating reactors, subject to an annual maximum
payment of $10 million per incident per reactor. In July 1994, GPUN received
an exemption from the NRC to eliminate the secondary protection requirements
for TMI-2.
The GPU System has insurance coverage for incremental replacement power
costs resulting from an accident-related outage at its nuclear plants.
Coverage commences after the first 21 weeks of the outage and continues for
three years at decreasing levels beginning at $1.8 million for Oyster Creek
and $2.6 million for TMI-1, per week.
Under its insurance policies applicable to nuclear operations and
facilities, the GPU System is subject to retrospective premium assessments of
up to $51 million in any one year, in addition to those payable under the
Price-Anderson Act.
ENVIRONMENTAL MATTERS
As a result of existing and proposed legislation and regulations, and
ongoing legal proceedings dealing with environmental matters, including but
not limited to acid rain, water quality, air quality, global warming,
electromagnetic fields, and storage and disposal of hazardous and/or toxic
wastes, the GPU System may be required to incur substantial additional costs
to construct new equipment, modify or replace existing and proposed equipment,
remediate or clean up waste disposal and other sites currently or formerly
used by it, including formerly-owned manufactured gas plants and mine refuse
piles, and with regard to electromagnetic fields, postpone or cancel the
installation of, or replace or modify, utility plant, the costs of which could
be material. Management intends to seek recovery through the ratemaking
process for any additional costs, but recognizes that recovery cannot be
assured.
To comply with the federal Clean Air Act Amendments (Clean Air Act) of
1990, the GPU System expects to expend up to $380 million for air pollution
control equipment by the year 2000. The GPU System has reduced its previous
estimate from $590 million to $380 million primarily due to the postponement
of two scrubber installations until after 2000. In developing its least-cost
plan to comply with the Clean Air Act, the GPU System will continue to
evaluate major capital investments compared to participation in the emission
<PAGE>
Financial Statements
Item 6(b)
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allowance market and the use of low-sulfur fuel or retirement of facilities.
Management believes that costs associated with the capital invested in this
equipment and the increased operating costs of the affected stations should be
recoverable through the ratemaking process.
The GPU System companies have been notified by the Environmental
Protection Agency (EPA) and state environmental authorities that they are
among the potentially responsible parties (PRPs) who may be jointly and
severally liable to pay for the costs associated with the investigation and
remediation at ten hazardous and/or toxic waste sites. In addition, the GPU
System companies have been requested to supply information to the EPA and
state environmental authorities on several other sites for which they have not
yet been named as PRPs. The Subsidiaries have also been named in lawsuits
requesting damages for hazardous and/or toxic substances allegedly released
into the environment. The ultimate cost of remediation will depend upon
changing circumstances as site investigations continue, including (a) the
existing technology required for site cleanup, (b) the remedial action plan
chosen and (c) the extent of site contamination and the portion attributed to
the GPU System companies.
JCP&L has entered into agreements with the New Jersey Department of
Environmental Protection for the investigation and remediation of 17 formerly-
owned manufactured gas plant sites. One of these sites has been repurchased
by JCP&L. JCP&L has also entered into various cost sharing agreements with
other utilities for some of the sites. At June 30, 1994, JCP&L has an
estimated environmental liability of $35 million recorded on its balance
sheet relating to these sites. The estimated liability is based upon ongoing
site investigations and remediation efforts, including capping the sites and
pumping and treatment of ground water. If the periods over which the
remediation is currently expected to be performed are lengthened, JCP&L
believes that it is reasonably possible that the ultimate costs may range as
high as $60 million. Estimates of these costs are subject to significant
uncertainties as JCP&L does not presently own or control most of these sites;
the environmental standards have changed in the past and are subject to future
change; the accepted technologies are subject to further development; and the
related costs for these technologies are uncertain. If JCP&L is required to
utilize different remediation methods, the costs could be materially in excess
of $60 million.
In 1993, the NJBPU approved a mechanism similar to JCP&L's Levelized
Energy Adjustment Clause (LEAC) for the recovery of future manufactured gas
plant remediation costs when expenditures exceed prior collections. The NJBPU
decision provides for interest to be credited to customers until the
overrecovery is eliminated and for future costs to be amortized over seven
years with interest. JCP&L is awaiting a final NJBPU order. JCP&L is pursuing
reimbursement of the above costs from its insurance carriers, and will seek to
recover costs to the extent not covered by insurance through this mechanism.
The GPU System companies are unable to estimate the extent of possible
remediation and associated costs of additional environmental matters. Also
unknown are the consequences of environmental issues, which could cause the
postponement or cancellation of either the installation or replacement of
utility plant. Management believes the costs described above should be
recoverable through the ratemaking process.
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Financial Statements
Item 6(b)
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OTHER COMMITMENTS AND CONTINGENCIES
During the second quarter, the Corporation announced it was offering
voluntary enhanced retirement programs to certain employees. The enhanced
retirement programs are part of a corporate realignment announced in February
1994. At that time, the Corporation said that its goal was to achieve $80
million in annual cost savings by the end of 1996. Approximately 82% of
eligible employees have accepted the retirement programs, resulting in a pre-
tax charge to earnings of $127 million. These charges are included as Other
operation and maintenance expense on the Income Statement.
The NJBPU has instituted a generic proceeding to address the appropriate
recovery of capacity costs associated with electric utility power purchases
from nonutility generation projects. The proceeding was initiated, in part,
to respond to contentions of the Office of the Ratepayer Advocate (Ratepayer
Advocate), that by permitting utilities to recover such costs through the
LEAC, an excess or "double recovery" may result when combined with the
recovery of the utilities' embedded capacity costs through their base rates.
In 1993, JCP&L and the other New Jersey electric utilities filed motions for
summary judgment with the NJBPU requesting that the NJBPU dismiss contentions
being made by Ratepayer Advocate that adjustments for alleged "double
recovery" in prior periods are warranted. Ratepayer Advocate has filed a
brief in opposition to the utilities' summary judgment motions including a
statement from its consultant that in his view, the "double-recovery" for
JCP&L for the 1988-92 LEAC periods would be approximately $102 million. In
February 1994, the NJBPU ruled that the 1991 LEAC period was considered closed
but subsequent LEACs remain open for further investigation. It is anticipated
that the proceeding will be transmitted to the Office of Administrative Law
for further action. Management estimates that the potential exposure for LEAC
periods subsequent to 1991 is approximately $28 million through February 1995,
the end of the current LEAC period. Management is unable to estimate the
outcome of this proceeding.
As a result of the Energy Policy Act of 1992 and actions of regulatory
commissions, the electric utility industry appears to be moving toward a
combination of competition and a modified regulatory environment. In
accordance with Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation" (FAS 71), the GPU
System's financial statements reflect assets and costs based on current cost-
based ratemaking regulations. Continued accounting under FAS 71 requires that
the following criteria be met:
a) A utility's rates for regulated services provided to its customers
are established by, or are subject to approval by, an independent
third-party regulator;
b) The regulated rates are designed to recover specific costs of
providing the regulated services or products; and
c) In view of the demand for the regulated services and the level of
competition, direct and indirect, it is reasonable to assume that
rates set at levels that will recover a utility's costs can be
charged to and collected from customers. This criteria requires
consideration of anticipated changes in levels of demand or
competition during the recovery period for any capitalized costs.
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Financial Statements
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A utility's operations can cease to meet those criteria for various
reasons, including deregulation, a change in the method of regulation, or a
change in the competitive environment for the utility's regulated services.
Regardless of the reason, a utility whose operations cease to meet those
criteria should discontinue application of FAS 71 and report that
discontinuation by eliminating from its balance sheet the effects of any
actions of regulators that had been recognized as assets and liabilities
pursuant to FAS 71 but which would not have been recognized as assets and
liabilities by enterprises in general.
If a portion of the GPU System's operations continues to be regulated
and meets the above criteria, FAS 71 accounting may only be applied to that
portion. Write-offs of utility plant and regulatory assets may result for
those operations that no longer meet the requirements of FAS 71. In addition,
under deregulation, the uneconomical costs of certain contractual commitments
for purchased power and/or fuel supplies may have to be expensed currently.
Management believes that to the extent that the GPU System no longer qualifies
for FAS 71 accounting treatment, a material adverse effect on its results of
operations and financial position may result.
The Subsidiaries have entered into power purchase agreements with
independently owned power production facilities (nonutility generators) for
the purchase of energy and capacity for periods up to 25 years. The majority
of these agreements are subject to penalties for nonperformance and other
contract limitations. While a few of these facilities are dispatchable, most
are must-run and generally obligate the Subsidiaries to purchase all of the
power produced up to the contract limits. The agreements have been approved
by the state regulatory commissions and permit the Subsidiaries to recover
energy and demand costs from customers through their energy clauses. These
agreements provide for the sale of approximately 2,457 MW of capacity and
energy to the GPU System by the mid-to-late 1990s. As of June 30, 1994,
facilities covered by these agreements having 1,198 MW of capacity were in
service with another 215 MW scheduled to commence operation in 1994. The
estimated cost of these agreements for 1994 is $551 million. The price of the
energy and capacity to be purchased under these agreements is determined by
the terms of the contracts. The rates payable under a number of these
agreements are substantially in excess of current market prices. While the
Subsidiaries have been granted full recovery of these costs from customers by
the state commissions, there can be no assurance that the Subsidiaries will
continue to be able to recover these costs throughout the term of the related
contracts. The emerging competitive market has created additional uncertainty
regarding the forecasting of the System's energy supply needs which, in turn,
has caused the Subsidiaries to change their supply strategy to seek shorter
term agreements offering more flexibility. At the same time, the Subsidiaries
are attempting to renegotiate, and in some cases buy out, high cost long-term
nonutility generation contracts where opportunities arise. The extent to
which the Subsidiaries may be able to do so, however, or recover associated
costs through rates, is uncertain. Moreover, these efforts have led to
disputes before both the NJBPU and the PaPUC, as well as to litigation and may
result in claims against the Subsidiaries for substantial damages. There can
be no assurance as to the outcome of these matters.
JCP&L's two operating nuclear units are subject to the NJBPU's annual
nuclear performance standard. Operation of these units at an aggregate annual
generating capacity factor below 65% or above 75% would trigger a charge or
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Financial Statements
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credit based on replacement energy costs. At current cost levels, the maximum
annual effect on net income of the performance standard charge at a 40%
capacity factor would be approximately $10 million. While a capacity factor
below 40% would generate no specific monetary charge, it would require the
issue to be brought before the NJBPU for review. The annual measurement
period, which begins in March of each year, coincides with that used for the
LEAC. At the request of the PaPUC, Met-Ed and Penelec, as well as the other
Pennsylvania utilities, have supplied the PaPUC with proposals for the
establishment of a nuclear performance standard. Met-Ed and Penelec expect
the PaPUC to adopt a generic nuclear performance standard as a part of their
respective energy cost rate (ECR) clauses during the latter part of 1994 or
early 1995.
During the normal course of the operation of their businesses, in
addition to the matters described above, the GPU System companies are from
time to time involved in disputes, claims and, in some cases, as defendants in
litigation in which compensatory and punitive damages are sought by customers,
contractors, vendors and other suppliers of equipment and services and by
employees alleging unlawful employment practices. It is not expected that the
outcome of these matters will have a material effect on the GPU System's
financial position or results of operations.
2. INCOME TAXES
In March 1994, as a result of a settlement of a federal income tax
refund claim for 1986, the Subsidiaries recorded net income tax refunds
aggregating $17 million based on the retirement of TMI-2 for tax purposes.
Met-Ed and Penelec have requested the PaPUC to approve reduced charges to
customers for their respective shares of the tax refund over the twelve-month
period beginning September 1, 1994. JCP&L intends to refund the tax refund
amounts to its customers by reducing the recovery period for its investment in
TMI-2. Income tax amounts refunded will have no effect on net income.
At the same time, the Subsidiaries also recorded a total of $46 million
of net interest income representing net interest receivable from the Internal
Revenue Service associated with this refund settlement.
3. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In March 1993, the PaPUC issued a generic policy statement permitting
the deferral of incremental expense associated with the adoption by
Pennsylvania utilities of Statement of Financial Accounting Standards No. 106
(FAS 106), "Employers' Accounting for Postretirement Benefits Other Than
Pensions."
Consistent with the PaPUC policy statement, in 1993 Penelec filed a
petition with and the PaPUC issued a declaratory order approving the annual
deferral of such FAS 106 incremental expense until such expense can be
recognized in Penelec's base rates.
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In a proceeding involving an unaffiliated Pennsylvania utility, the
Pennsylvania Office of the Consumer Advocate (OCA) appealed a PaPUC
declaratory order permitting that utility to defer its incremental FAS 106
expense pending its next base rate order. On May 26, 1994, the Pennsylvania
Commonwealth Court reversed the PaPUC's declaratory order stating that FAS 106
expense incurred after January 1, 1993 (the effective date for the FAS 106
accounting change) but prior to its next base rate case could not be deferred
for future recovery as part of a later base rate case order, and that to
assure such future recovery constituted unlawful retroactive ratemaking.
Under these circumstances, management has determined that continued
deferral by Penelec of incremental FAS 106 expense is no longer appropriate.
Therefore, during the second quarter Penelec wrote off $14.6 million of such
expense deferred since January 1, 1993. In addition, $4.0 million of
Penelec's FAS 106 unrecognized transition obligation resulting from employees
who have elected to participate in the voluntary enhanced retirement programs,
was also written off during the second quarter. These charges appear in the
Other Income and Deductions section of the Income Statement. Moreover,
Penelec will annually charge to income approximately $9.6 million for the
incremental FAS 106 expense, currently applicable to retail customers.
The Court's ruling in this case does not affect Met-Ed, which had
earlier received PaPUC authorization as part of a 1993 retail base rate order
to defer incremental FAS 106 expense. In addition, the Court affirmed in June
1994 a PaPUC base rate order granting an unaffiliated water utility recovery
in current rates of its transition obligation resulting from the adoption of
FAS 106, however, the OCA has filed a petition with the Pennsylvania Supreme
Court to review the Commonwealth Court's decision. The NJBPU provided rate
treatment for incremental postretirement benefit costs, pursuant to FAS 106,
in JCP&L's 1993 retail base rate order.
<PAGE>
