SEC File No. 70
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM U-1
DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
JERSEY CENTRAL POWER & LIGHT COMPANY ("JCP&L")
METROPOLITAN EDISON COMPANY ("MET-ED")
PENNSYLVANIA ELECTRIC COMPANY ("PENELEC")
2800 Pottsville Pike
Reading, Pennsylvania 19605
(Names of companies filing this statement and
addresses of principal executive offices)
GPU, INC. ("GPU")
(Name of top registered holding company parent of applicants)
Scott L. Guibord
Secretary
Jersey Central Power & Light Company
Metropolitan Edison Company
Pennsylvania Electric Company
2800 Pottsville Pike
Reading, Pennsylvania 19605
M.A. Nalewako, Secretary
Michael J. Connolly, Esq., Assistant
General Counsel
GPU Service, Inc.
100 Interpace Parkway
Parsippany, New Jersey 07054
Douglas E. Davidson, Esq.
Berlack, Israels & Liberman LLP
120 West 45th Street
New York, New York 10036
(Names and addresses of agents for service)
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Item 1. Description of Proposed Transactions.
A. JCP&L, Met-Ed, and Penelec (collectively, the "Operating
Companies") are electric utility subsidiaries of GPU, a registered
holding company.
B. The Operating Companies maintain insurance policies that
provide coverage for workers compensation claims, as required by
state law. The policies also provide liability insurance coverage
for employee claims made directly against the Operating Companies.
Prior to 1993, in the case of Met-Ed and Penelec, and 1994, in the
case of JCP&L, the policies required the insurance company to pay
all claims without a deductible and to pay all expenses and costs,
including legal fees, incurred in connection with the
investigation, defense or settlement of claims.
C. In order to reduce premium costs, commencing in 1993 for
Met-Ed and Penelec and in 1994 for JCP&L, the Operating Companies
modified the policies to provide for the payment of a deductible
for each claim, up to a specified maximum amount for all claims in
the calendar year, and to pay the expenses attributable to all
claims. While the insurance company continues to administer and
pay all claims and expenses as they arise, the Operating Companies
reimburse the insurance company for the amount of each claim paid
up to the deductible and all expenses paid in such month.
D. The insurance companies required, as a condition to
permitting the policies to be modified to provide for the payment
of the deductible, that the Operating Companies deliver an
irrevocable bank letter of credit ("L/C") as security for the
Operating Company's obligation to pay the deductible. Accordingly,
by Order dated April 14, 1993 (HCAR No. 35-25793) ("1993 Order"),
Met-Ed and Penelec were authorized, among other things, to enter
into L/C reimbursement agreements with banks and to deliver to
their insurance company irrevocable bank L/Cs from time to time
through December 31, 1998. The aggregate face amount of the L/Cs
delivered by Met-Ed and Penelec would not exceed $20 million,
provided that the L/Cs delivered on behalf of Met-Ed or Penelec
individually would not exceed $15 million. In addition, by Order
dated March 15, 1994 (HCAR No. 35-26003) ("1994 Order"), JCP&L was
authorized, among other things, to enter into L/C reimbursement
agreements with banks and to deliver to its insurance company
irrevocable bank L/Cs in an aggregate face amount of up to $15
million from time to time through December 31, 1998.
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E. The Operating Companies now propose to extend to December
31, 2006 the period during which they may enter into L/C
reimbursement agreements from time to time and deliver the related
L/Cs to their insurance companies. Each such L/C would have a term
not exceeding three years. Drawings on the L/C would bear interest
at not more than 5% above the issuing bank's prime rate as in
effect from time to time. In addition, as stated in the prior
orders, the aggregate face amount of L/Cs which may be outstanding
at any time for each Operating Company will not exceed $15 million,
provided that the aggregate face amount of L/Cs delivered by Met-Ed
and Penelec would not exceed $20 million in the aggregate.
F. The 1993 Order stated that no Operating Company would be
liable for draws on an L/C delivered by another Operating Company.
The Operating Companies now anticipate, however, that it might be
more efficient to obtain two insurance policies to provide coverage
for their employees (instead of three as is currently the case).
One such insurance policy would provide coverage for all of their
employees based in Pennsylvania, and a second policy would provide
coverage for all of their employees based in New Jersey. The
Pennsylvania and New Jersey policies would also cover the
Pennsylvania and New Jersey employees, respectively, of GPU
Service, Inc., GPU Nuclear, Inc., and GPU Generation, Inc., which
are subsidiary service companies of GPU. If the policies are
obtained in this manner, it is anticipated that JCP&L would enter
into the L/C reimbursement agreement for the New Jersey policy, and
Penelec and/or Met-Ed would enter into the L/C reimbursement
agreement for the Pennsylvania policy. However, regardless of which
Operating Company is obligated on the L/C reimbursement agreement,
the fees of each L/C and any draws thereon would be allocated among
the Operating Companies and such service companies on whose behalf
the L/C was issued based on loss exposure (determined generally by
payroll) in the applicable state.
G. The Applicants submit that all of the criteria of Rules
53 and 54 under the Act with respect to the proposed transactions
are satisfied:
(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, 1995 and Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1996, June 30, 1996 and
September 30, 1996, as filed under the Securities Exchange Act
of 1934, was approximately $2.07 billion. As of September 30,
1996, GPU had invested, or committed to invest, directly or
indirectly, an aggregate of approximately $244 million in
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exempt wholesale generators ("EWGs") and $679 million in
foreign utility companies ("FUCOs"). GPU's aggregate
investment in EWGs and FUCOs, including amounts invested
pursuant to all outstanding or pending authorizations to make
investments in EWGs or FUCOs, will not at any time exceed the
"safe harbor" limitation imposed by Rule 53 without prior
Commission authorization.(1)
(ii) GPU maintains books and records to identify
investments in, and earnings from, each EWG and FUCO 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 directly or 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 FUCO or 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
(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.
_______________
(1) GPU has filed with the Commission a Post-Effective Amendment
to its Application on Form U-1 in Docket No. 70-8593
requesting authorization to increase this limitation to 100%
of GPU's "consolidated retained earnings".
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(C) For each FUCO or 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 entity to maintain books and records in
accordance with GAAP;
(2) the financial statements of such entity 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,
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 entity'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 subparagraphs
(a) (2) (iii) (A) and (a) (2) (iii) (B) of Rule 53.
(iii) No more than 2% of GPU's domestic public utility
subsidiary employees will render any services, directly or
indirectly, to any EWG or FUCO in which GPU directly or
indirectly holds an interest.
(iv) Copies of this Application are being provided to the
New Jersey Board of Public Utilities and the Pennsylvania
Public Utility Commission, the only federal, state or local
regulatory agencies having jurisdiction over the retail rates
of GPU's electric utility subsidiaries.(2) In addition, GPU
will submit to each such commission copies of any Rule 24
certificates required hereunder, as well as a copy of Item 9
of GPU's Form U5S and Exhibits H and I thereof (commencing
with the Form U5S to be filed for the calendar year in which
the authorization herein requested is granted).
______________
(2) Penelec is also subject to retail rate regulation by the New
York Public Service Commission with respect to retail service
to approximately 11,300 customers in Waverly, New York served
by Waverly Electric Power & Light Company, a Penelec
subsidiary. Waverly Electric's revenues are inmaterial,
accounting for less than 1% of Penelec's total operating
revenues.
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(v) 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 $2.07 billion)
represented an increase of approximately $200 million (or
approximately 10%) in the average consolidated retained earnings
for the previous four quarterly periods (approximately $1.87
billion).
(C) GPU did not incur operating losses from direct or
indirect investments in EWGs and FUCOs in 1995 in excess of 5% of
GPU's consolidated retained earnings.
(iv) In accordance with Rule 54, the requirements of Rule
53(a), (b) and (c) are fulfilled.
Item 2. Fees, Commissions and Expenses.
The estimated fees, commissions and expenses to be
incurred in connection herewith will be filed by amendment.
Item 3. Applicable Statutory Provisions.
Sections 6(a), 7 and 12 of the Act and Rules 45, 53 and
54 are applicable to the proposed transactions.
Item 4. Regulatory Approval.
No state or federal commission (other than your
Commission) has jurisdiction over the proposed transactions.
Item 5. Procedure.
It is requested that the Commission issue an order with
respect to the transactions proposed herein at the earliest
practicable date but, in any event, not later than January 15,
1997. It is further requested that (i) there not be a recommended
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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.
Item 6. Exhibits and Financial Statements.
(a) Exhibits:
A-1 Form of Letter of Credit - incorporated
by reference to Exhibit A-1 (SEC File No.
70-8323).
A-2 Form of Reimbursement Agreement -
incorporated by reference to Exhibit A-2
(SEC File No. 70-8323).
B Form of Endorsement to Insurance Policy -
incorporated by reference to Exhibit B
(SEC File No. 70-8323).
C Not applicable.
D Not applicable.
E Not applicable.
F-1 Opinion of Berlack, Israels & Liberman
LLP -- to be filed by amendment.
F-2 Opinion of Michael J. Connolly, Esq. --
to be filed by amendment.
G Proposed form of public notice.
(b) Financial Statements:
1 Financial statements of the Operating
Companies have been omitted since the
proposed transaction will not have a
material effect thereon.
2 None
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Note: GPU Corporate and Consolidated actual and
pro forma financial statements are
omitted since they are not deemed to be
material or relevant or necessary for a
proper disposition of the proposed
transactions.
3 None.
4 None.
Item 7. Information as to Environmental Effects.
The issuance of an order by your Commission with respect
to the subject transactions 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 subject
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.
JERSEY CENTRAL POWER & LIGHT COMPANY
METROPOLITAN EDISON COMPANY
PENNSYLVANIA ELECTRIC COMPANY
By:
T. G. Howson
Vice President and Treasurer
Date: November 21, 1996
<PAGE>
EXHIBIT TO BE FILED BY EDGAR
Exhibit:
G - Proposed form of public notice.
<PAGE>
EXHIBIT G
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35-_____; 70-______)
JERSEY CENTRAL POWER & LIGHT COMPANY ("JCP&L"), METROPOLITAN
EDISON COMPANY ("Met-Ed") and PENNSYLVANIA ELECTRIC COMPANY
("Penelec"), each of 2800 Pottsville Pike, Reading, Pennsylvania
19605 and an electric utility subsidiary of GPU, Inc., a registered
holding company ("GPU"), has filed a Declaration pursuant to
Sections 6(a), 7 and 12 of the Public Utility Holding Company Act
of 1935 (the "Act") and Rules 45, 53 and 54 thereunder.
JCP&L, Met-Ed and Penelec maintain insurance policies that
provide coverage for workers compensation claims, as required by
state law. The policies also provide liability insurance coverage
for employee claims made directly against the Operating Companies.
Prior to 1993, in the case of Met-Ed and Penelec, and 1994, in the
case of JCP&L, the policies required the insurance company to pay
all claims without a deductible and to pay all expenses and costs,
including legal fees, incurred in connection with the
investigation, defense or settlement of claims.
In order to reduce premium costs, commencing in 1993 for Met-Ed
and Penelec and in 1994 for JCP&L, the Operating Companies
modified the policies to provide for the payment of a deductible
for each claim, up to a specified maximum amount for all claims in
the calendar year, and to pay the expenses attributable to all
claims. While the insurance company continues to administer and
pay all claims and expenses as they arise, the Operating Companies
reimburse the insurance company for the amount of each claim paid
up to the deductible and all expenses paid in such month.
The insurance companies required, as a condition to permitting
the policies to be modified to provide for the payment of the
deductible, that the Operating Companies deliver an irrevocable
bank letter of credit ("L/C") as security for the Operating
Company's obligation to pay the deductible. Accordingly, by Order
dated April 14, 1993 (HCAR No. 35-25793) ("1993 Order"), Met-Ed and
Penelec were authorized, among other things, to enter into L/C
reimbursement agreements with banks and to deliver to their
insurance company irrevocable bank L/Cs from time to time through
December 31, 1998. The aggregate face amount of the L/Cs delivered
by Met-Ed and Penelec would not exceed $20 million, provided that
the L/Cs delivered on behalf of Met-Ed or Penelec individually
<PAGE>
would not exceed $15 million. In addition, by Order dated March
15, 1994 (HCAR No. 35-26003) ("1994 Order"), JCP&L was authorized,
among other things, to enter into L/C reimbursement agreements with
banks and to deliver to its insurance company irrevocable bank L/Cs
in an aggregate face amount of up to $15 million from time to time
through December 31, 1998.
The Operating Companies now propose to extend to December 31,
2006 the period during which they may enter into L/C reimbursement
agreements from time to time and deliver the related L/Cs to their
insurance companies. Each such L/C would have a term not exceeding
three years. Drawings on the L/C would bear interest at not more
than 5% above the issuing bank's prime rate as in effect from time
to time. In addition, as stated in the prior orders, the aggregate
face amount of L/Cs which may be outstanding at any time for each
Operating Company will not exceed $15 million, provided that the
aggregate face amount of L/Cs delivered by Met-Ed and Penelec would
not exceed $20 million in the aggregate.
The 1993 Order stated that no Operating Company would be
liable for draws on an L/C delivered by another Operating Company.
The Operating Companies now anticipate, however, that it might be
more efficient to obtain two insurance policies to provide coverage
for their employees (instead of three as is currently the case).
One such insurance policy would provide coverage for all of their
employees based in Pennsylvania, and a second policy would provide
coverage for all of their employees based in New Jersey. The
Pennsylvania and New Jersey policies would also cover the
Pennsylvania and New Jersey employees, respectively, of GPU
Service, Inc., GPU Nuclear, Inc., and GPU Generation, Inc., which
are subsidiary service companies of GPU. If the policies are
obtained in this manner, it is anticipated that JCP&L would enter
into the L/C reimbursement agreement for the New Jersey policy, and
Penelec and/or Met-Ed would enter into the L/C reimbursement
agreement for the Pennsylvania policy. However, regardless of which
Operating Company is obligated on the L/C reimbursement agreement,
the fees of each L/C and any draws thereon would be allocated among
the Operating Companies and such service companies on whose behalf
the L/C was issued based on loss exposure (determined generally by
payroll) in the applicable state.
The Applicants submit that all of the criteria of Rules 53 and
54 under the Act with respect to the proposed transactions are
satisfied.
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The Declaration and any amendments thereto are available for
public inspection through the Commission's Office of Public
Reference. Interested persons wishing to comment or request a
hearing should submit their views in writing by __________, 1996,
to the Secretary, Securities and Exchange Commission, Washington,
D.C. 20549, and serve a copy on the applicants at the address
above. Proof of service (by affidavit, or in case of an attorney
at law, by certificate) should be filed with the request. Any
request for a 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 this matter. After said date, the
Declaration, as it may be amended, may be permitted to become
effective.
Jonathan G. Katz
Secretary
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