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): July 20, 1998
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
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1-6047 GPU, Inc. 13-5516989
(a Pennsylvania corporation)
300 Madison Avenue
Morristown, New Jersey 07962-1911
Telephone (973) 455-8200
1-446 Metropolitan Edison Company 23-0870160
(a Pennsylvania corporation)
2800 Pottsville Pike
Reading, Pennsylvania 19605
Telephone (610) 929-3601
1-3522 Pennsylvania Electric Company 25-0718085
(a Pennsylvania corporation)
2800 Pottsville Pike
Reading, Pennsylvania 19605
Telephone (610) 929-3601
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ITEM 5. OTHER EVENTS.
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As previously reported, on June 30, 1998 the Pennsylvania Public Utility
Commission ("PaPUC") entered final orders ("Restructuring Orders") on the
restructuring plans filed by Metropolitan Edition Company ("Met-Ed") and
Pennsylvania Electric Company ("Penelec") in accordance with Pennsylvania's
Electricity Generation Customer Choice Act ("Customer Choice Act"). In the
Restructuring Orders, the PaPUC, among other things, established a Competitive
Transition Charge ("CTC") which (a) would not ensure Met-Ed and Penelec full
recovery of the costs under their contracts with Non-Utility Generators ("NUGs")
as required by state and federal law; (b) disallowed certain stranded cost
claims by Met-Ed and Penelec; (c) reduced annual transmission and distribution
("T & D") rates for Met-Ed and Penelec; and (d) advanced the phase-in for retail
choice to January 2, 2000. Following issuance of the Restructuring Orders, GPU
stated that it would vigorously pursue all available remedies to challenge the
Restructuring Orders.
On July 20, 1998, Met-Ed and Penelec filed complaints against the
Restructuring Orders and the PaPUC in the Commonwealth Court and the U.S.
District Court for the Eastern District of Pennsylvania. In the Commonwealth
Court complaint, Met-Ed and Penelec have appealed the Restructuring Orders
alleging that the PaPUC committed more than 40 errors of law. The Federal
lawsuit seeks both declaratory and injunctive relief challenging the PaPUC's
refusal in the Restructuring Orders to ensure full recovery of the costs of NUG
contracts, as required by state and federal law.
In addition, on July 20, 1998 Met-Ed and Penelec filed Alternative
Restructuring Plans with the PaPUC based on the provision in the Customer Choice
Act that enables a utility to file an alternate plan if the PaPUC rejects the
utility's initial plan. Met-Ed and Penelec believe that in the Restructuring
Orders, the PaPUC has objected to essentially the entirety of their original
restructuring plans and has therefore rejected these plans. Under the Customer
Choice Act, the PaPUC is required to review and act upon the Alternative Plans
within 45 days.
The major elements of the Alternative Plans are as follows:
- Met-Ed and Penelec have eliminated, modified or postponed until
Phase II(1) certain stranded cost
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(1) The Restructuring Orders established an initial CTC level for the stranded
costs associated with owned generation plants based on an administrative market
line. The Restructuring Orders contemplate a Phase II proceeding where the CTC
level would be adjusted to reflect the impact of the generation plant sale
proceeds.
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claims. This action has reduced the stranded cost claims by $130
million for Met-Ed and $150 million for Penelec.
- A rate mechanism to recover the costs of operating NUG projects over
their contract lives that fully reconciles to actual market prices.
- T & D rates of 2.50 and 2.51 cents/kwh for Met-Ed and Penelec,
respectively. Met-Ed's and Penelec's T & D rate has been modified
from their previous position of 2.73 cents/kwh. The Restructuring
Orders reflected a 2.26 cents/kwh rate for Met-Ed and a 2.01
cents/kwh rate for Penelec.
- CTC rates have been requested which allow full stranded cost
recovery (other than NUGs and nuclear decommissioning, which are
recovered over the lives of the contracts or related plants) over a
seven year period for Met-Ed and a two year period for Penelec.
- The generation tariffs (or shopping credits) have been established
to allow overall savings to shopping customers of 2.5% for Met-Ed
and 5% for Penelec.
- In the event major elements of the Alternative Plans are rejected,
Met-Ed and Penelec plan to retain for shareholders any net proceeds
above book value for generating plants sold through the divestiture
program, rather than the previous proposal which would apply the net
proceeds to offset other stranded costs.
There can be no assurance as to the outcome of these proceedings.
A copy of GPU Energy's related news release is annexed as an exhibit.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
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(c) Exhibits.
1. GPU Energy News Release, dated July 20, 1998.
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SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THE REGISTRANTS HAVE DULY CAUSED THIS REPORT TO BE SIGNED ON THEIR BEHALF BY
THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
GPU, INC.
METROPOLITAN EDISON COMPANY
PENNSYLVANIA ELECTRIC COMPANY
By: /s/ T. G. Howson
-----------------------------
T. G. Howson, Vice President
and Treasurer
Date: July 21, 1998
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EXHIBIT TO BE FILED BY EDGAR
(c) 1. GPU Energy News Release, dated July 20, 1998.
Exhibit (c) 1
GPU Energy News Release
July 20, 1998
GPU Energy Compromise Plans Would Avoid Delay in Electric Choice
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Note: GPU Energy President Dennis Baldassari will conduct a news conference
via telephone at 1 p.m. EDT today. To participate, call 888-369-7004.
READING, Pa.--July 20, 1998-- GPU Energy today is filing two legal actions that
could delay the start of electric generation choice in Pennsylvania. At the same
time, the company filed new plans with the Pennsylvania Public Utility
Commission (PUC) that would put electric choice "back on track" and avoid a
decline in the quality of electric service.
Today's actions are in response to the PUC's decisions on June 26 to reject GPU
Energy's restructuring plans. In its decisions, the PUC cut funding for
maintaining the electric distribution system. GPU Energy said such drastic cuts
ultimately could lead to more frequent and longer outages.
"Unfortunately, the PUC has forced these legal actions which introduce great
uncertainty into the process for customers, suppliers and for GPU Energy and
which could delay the start of customer choice," said Dennis Baldassari, GPU
Energy president and chief operating officer. "In addition, the PUC's decisions
raise questions about the ability to maintain dependable electric service.
"Although GPU Energy supports electric choice, we won't sacrifice reliable
electric service."
GPU Energy today also filed compromise restructuring plans with the PUC.
"Our compromise plans address objections the commission raised when it
rejected our original plans," Baldassari said. "Our compromise can avoid
delays in electric competition. The PUC can quickly put the transition to
customer choice back on track."
Pennsylvania's Electricity Generation Customer Choice Act provides for a utility
to file an alternative plan if the commission rejects the original plan. The
commission has 45 days to act on a revised plan.
GPU Energy is filing appeals with Pennsylvania's Commonwealth Court challenging
the PUC's decisions. The appeals claim more than 40 errors of law in the PUC's
restructuring decisions for GPU Energy.
It is filing a complaint in U.S. District Court for Eastern Pennsylvania
challenging the PUC's refusal to ensure full recovery of the costs of contracts
with non-utility generators (NUGs). In previous decisions the PUC had assured
GPU Energy that it would recover these costs. Federal law requires utilities to
buy electricity from NUGs, and both federal and state law entitles utilities to
recover the costs. The PUC sets the price utilities must pay for NUG
electricity. Utilities earn no profit from selling it.
Uncertainty over timing, prices and rules of implementation effectively could
delay electric generation competition, GPU Energy said.
"We recognize that both customers and electricity marketers could be reluctant
to proceed under the great uncertainty resulting from the commission's vote and
our legal actions," Baldassari said. "No effective competitive market can emerge
with uncertainty about the rules and pricing. That's one reason we have proposed
a compromise."
He also said that the PUC's decisions jeopardize GPU Energy's ability to support
community and economic development.
The three domestic utility subsidiaries of GPU, Inc. (Metropolitan Edison
Company, Pennsylvania Electric Company and Jersey Central Power & Light
Company) do business as GPU Energy.
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Contact:
Ray Dotter, 610-921-6814
Lori Hixon, 610-921-6019
