SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of
earliest event reported): January 26, 1998
GPU, Inc.
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(Exact name of registrant as specified in charter)
Pennsylvania 1-6047 13-5516989
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(State or other (Commission (IRS employer
jurisdiction of file number) identification no.)
incorporation)
300 Madison Avenue, Morristown, New Jersey 07962-1911
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 455-8200
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ITEM 5. OTHER EVENTS
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1. New Jersey Restructuring Proceedings
As previously reported, numerous parties have intervened in Jersey
Central Power & Light Company's ("JCP&L") stranded cost, rate unbundling and
restructuring proceedings which JCP&L commenced in July 1997 pursuant to New
Jersey's Energy Master Plan directives and are presently pending before the New
Jersey Board of Public Utilities ("NJBPU"). The NJBPU Staff, Division of
Ratepayer Advocate ("Advocate") and certain intervenors are actively contesting,
among other things, recovery by JCP&L of plant capital additions since JCP&L's
last base rate case in 1992, projections of future electricity prices on which
stranded cost recovery calculations are based, the appropriate level of return,
and the appropriateness of earning a return on stranded investment.
Consultants retained by the NJBPU Staff, the Advocate and other
parties have proposed that JCP&L's stranded cost recoveries should be
substantially lower than the levels JCP&L is seeking.
On February 4, 1998, the NJBPU in an oral decision upheld an
interim ruling by the Administrative Law Judge in the proceeding denying JCP&L's
request to recover distribution revenue requirements based on post-1992 capital
additions and increased expenses as not consistent with the Energy Master Plan.
The NJBPU stated, however, that JCP&L could seek to recover these costs, which
are being collected in its current bundled rates, in a base rate case.
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The NJBPU has not yet issued a written order reflecting its
February 4th decision, which contains certain ambiguities, and JCP&L is not yet
certain of the ultimate impact of the decision. Management presently estimates,
however, that if a final NJBPU order were generally to exclude any consideration
of post-1992 capital additions and such increased expenses, the effect of that
order, if upheld, would be to reduce JCP&L's proposed unbundled distribution
charge by approximately $150 million annually. JCP&L had proposed revenue
reductions pursuant to the Energy Master Plan totalling approximately $185
million annually. A portion of these amounts may duplicate the approximately
$150 million of revenue reductions which would result from the February 4th
order, and other revenue reductions would, in JCP&L's opinion, no longer be
appropriate or needed to attain the Energy Master Plan's 5% to 10% rate
reduction goal.
JCP&L believes that if the NJBPU issues a final order consistent
with its February 4th decision, it would be contrary to the intent of the Energy
Master Plan and not consistent with applicable law. JCP&L intends to contest the
NJBPU's action and, unless it is reversed or appropriately clarified in a final
written order, JCP&L will seek to modify its $185 million rate reduction
proposal to reflect the NJBPU's decision and, to the extent necessary, would
file a base rate case.
If the NJBPU were to accept the positions of various parties or
their consultants as described above or were ultimately to apply the principles
described in its February 4, 1998 decision, it would have a material adverse
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impact on JCP&L's stranded cost recovery, restructuring proceeding and future
earnings.
There can be no assurance as to the outcome of this matter.
2. Pennsylvania Restructuring Proceedings
As has been previously reported, pursuant to legislation
enacted in 1996, in July 1997 Met-Ed and Penelec filed proposed restructuring
plans with the Pennsylvania Public Utility Commission ("PaPUC"). The plans
requested, among other things, recovery of $1.4 billion and $1.3 billion,
respectively, of stranded costs and provided for unbundling of rates.
In December 1997, the PaPUC rejected PECO Energy Company's
("PECO") restructuring settlement and approved an alternate plan for PECO based
on its findings in that case. Among other things, the alternate plan accelerates
the pace of retail competition and reduces the amount of PECO's recoverable
stranded costs. PECO has appealed the PaPUC's decision. On January 26, 1998,
PECO announced a fourth quarter pre-tax charge to income of $3.1 billion
"reflecting the effects of the PaPUC order."
Met-Ed and Penelec believe that the PaPUC's decision in the PECO
case was based on the specific facts and circumstances of that proceeding.
Met-Ed and Penelec further believe that they have demonstrated in their
restructuring proceedings ample evidence to distinguish sufficiently their cases
from PECO's and that the PaPUC should not, therefore, apply its findings in the
PECO case to their pending restructuring plans. If, however, the PaPUC were to
apply these findings, it would have a material adverse impact on Met-Ed's
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and Penelec's stranded cost recovery, restructuring proceedings and
future earnings. There can be no assurance as to the outcome of
this matter.
3. Solaris Power Sale
As previously reported, in January 1998 the GPU International
Group completed its sale of Solaris Power to The Australian Gas Light Company
for US$135.2 million and a 10.36% interest (valued at approximately US$9.5
million) in Allgas Energy Limited, an Australian gas distribution company.
The Company initially reported that the sale resulted in a gain
(after tax) of approximately US$12.6 million; a recalculation of certain foreign
currency translations, however, has resulted in adjusting the gain to US$18.3
million.
4. 1997 Results of Operations
The gain on the Solaris Power sale will be recorded in the
first quarter of 1998 and will not, therefore, affect the Company's 1997 results
of operations. As previously reported, the Company's 1997 earnings were $335.1
million, or $2.77 per share, as compared to $298.4 million, or $2.47 per share,
for 1996. The 1997 earnings increase was mainly due to increased earnings
(excluding the previously reported non-recurring charges in both years) from the
GPU International Group; reduced operations and maintenance expenses; increased
kilowatt hour sales to domestic utility customers; and certain operating revenue
increases at Metropolitan Edison Company and Pennsylvania Electric Company.
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SIGNATURE
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PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
GPU, INC.
By:______________________________
T.G. Howson, Vice President
and Treasurer
Date: February 6, 1998
