SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of
earliest event reported): May 19, 1999
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
- ----------- ---------------------------- ------------------
1-6047 GPU, Inc. 13-5516989
(a Pennsylvania corporation)
300 Madison Avenue
Morristown, New Jersey 07962-1911
Telephone (973) 455-8200
1-3141 Jersey Central Power & Light Company 21-0485010
(a New Jersey corporation)
2800 Pottsville Pike
Reading, Pennsylvania 19640-0001
Telephone (610) 929-3601
<PAGE>
ITEM 5. OTHER EVENTS.
As previously reported, on April 14, 1999, GPU Inc.'s subsidiary, Jersey
Central Power & Light Company (doing business as "GPU Energy"), entered into a
Stipulation of Settlement ("Settlement") with various parties to its
restructuring proceedings pending before the New Jersey Board of Public
Utilities ("NJBPU"). On May 19, 1999, the NJBPU approved the Settlement with
certain modifications and clarifications including the following:
1. GPU Energy's distribution rate was reduced to 3.35(cent)/kwh from the
3.45(cent)/kwh set forth in the Settlement as filed.
2. The NJBPU ordered that GPU Energy phase-in an 11% rate reduction on a
more accelerated basis than the 10% rate reduction GPU Energy had agreed to in
the Settlement.
3. The NJBPU raised the initial residential "shopping credit" for
customers who choose an alternative electric supplier by 6 mills so that it will
begin at 5.65(cent) in 1999 and increase to 5.82(cent) in 2003.
On May 24, 1999, the NJBPU issued a Summary Order memorializing the action
it took on May 19, 1999. The NJPBU stated that it will subsequently issue a more
detailed Decision and Order.
Copies of GPU Energy's related news release and the NJBPU's Summary Order
are annexed as exhibits.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
1. GPU Energy News Release, dated May 19, 1999.
2. NJBPU Summary Order, dated May 24, 1999.
<PAGE>
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.
JERSEY CENTRAL POWER & LIGHT COMPANY
By: /s/ T. G. Howson
--------------------------------
T. G. Howson, Vice President
and Treasurer
Date: May 26, 1999
EXHIBITS TO BE FILED BY EDGAR
-----------------------------
(c) 1 GPU Energy News Release, dated May 19, 1999.
(c) 2 NJBPU Summary Order, dated May 24, 1999.
Exhibit (c) 1
GPU Energy News Release
May 19, 1999
GPU Energy: NJBPU Decision to Have Lasting Impact
MORRISTOWN, N.J. - May 19, 1999 - GPU Energy President and Chief Operating
Officer Dennis Baldassari said the decision today by the New Jersey Board of
Public Utilities (NJBPU) concerning the Company's stranded cost and unbundling
plans for restructuring is fair and balances the needs of all parties. "There's
no denying that today's ruling benefits customers and encourages competition in
New Jersey. It certainly benefits the State of New Jersey.
"Reaching consensus with as many parties as were involved in all the
negotiating that took place the past several years is difficult at best.
Throughout the process we made a concerted effort to implement restructuring in
a fair and balanced manner and to create a structure to promote competition."
The verbal NJBPU decision for Jersey Central Power & Light Company (doing
business as GPU Energy) was rendered in a special NJBPU agenda meeting conducted
this morning in Trenton.
Specifically, Baldassari said the NJBPU had established shopping credits
higher than those in the settlement agreement that the company had reached with
several parties and filed on April 14, 1999. "We believe the shopping credits
announced in our case are among the highest in the country," he said.
The average shopping credits in the NJBPU decision are 5.13 cents per
kilowatt hour effective August 1, 1999, 5.27 cents in 2000, 5.31 cents in 2001,
5.36 cents in 2002 and 5.40 cents in 2003.
The amount of rate reductions for customers was also raised by the NJBPU
an additional one percent from 10 percent to 11 percent in total. Baldassari
noted that in addition to the five percent rate reduction effective August 1,
1999, customers will now receive additional reductions of one percent in 2000,
two percent in 2001 and three percent in 2002. "With these reductions an average
residential customer in 2002 will be paying less for electricity than in 1984,"
he said.
Baldassari said it is clear that a great deal has been accomplished to
stimulate competition. "This historical event will fundamentally change the way
in which business is conducted by all New Jersey electric utilities. The real
challenge as we go forward will be to continue to be the best delivery company
that we can in this new environment."
<PAGE>
Baldassari said he would withhold further comment on the NJBPU decision
pending receipt of the written NJBPU order.
GPU, Inc., headquartered in Morristown, New Jersey is a registered utility
holding company. GPU's three domestic electric utility subsidiaries -- Jersey
Central Power & Light Company, Metropolitan Edison Company and Pennsylvania
Electric Company -- do business under the trade name of GPU Energy and serve
approximately two million customers in a service area encompassing about half
the land areas in New Jersey and Pennsylvania. GPU's other subsidiaries include:
GPU Advanced Resources, Inc.; GPU International, Inc.; GPU Generation, Inc.; GPU
Nuclear, Inc.; GPU Service, Inc.; and GPU Telcom Services, Inc.
-XX-
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Contact:
Ron T. Morano, 973/644-4297
(http://www.gpu.com)
Exhibit (c) 2
Agenda Date: 5/19/99
STATE OF NEW JERSEY
Board of Public Utilities
Two Gateway Center
Newark, NJ 07102
ENERGY
IN THE MATTER OF JERSEY CENTRAL ) SUMMARY ORDER
POWER & LIGHT COMPANY d/b/a GPU ) -------------
ENERGY - RATE UNBUNDLING, )
STRANDED COST AND RESTRUCTURING ) BPU DOCKET NOS. EO97070458,
FILINGS ) EO97070459, AND EO97070460
(SERVICE LIST ATTACHED)
BY THE BOARD:
This Summary Order memorializes in summary fashion the action taken by the
Board of Public Utilities ("Board") in these matters at its May 19, 1999 public
agenda meeting with respect to the unbundling, stranded cost and restructuring
filings of Jersey Central Power and Light Company d/b/a GPU Energy ("GPU" or
"Company"). The Board will issue a more detailed Decision and Order in these
matters, which will provide a full discussion of the issues as well as the
reasoning for the Board's determinations.
These matters come before the Board on a record developed in hearings
before Administrative Law Judge ("ALJ") Diana Sukovich, who issued an Initial
Decision ("ID") on September 4, 1998, and in hearings conducted before
Commissioner Carmen J. Armenti from April 27, 1998 through May 28, 1998.
Subsequent to the ALJ's ID and the hearings before Commissioner Armenti, the
Legislature passed and Governor Whitman signed into law on February 9, 1999 the
Electric Discount and Energy Competition Act ("the Act").
Settlement negotiations were conducted among the parties during the latter
part of March and the first half of April 1999. A comprehensive settlement was
not reached, but on April 14, 1999, a Stipulation was filed by GPU on behalf of
a number of parties to the proceedings ("GPU Stipulation"). By letter dated
April 20, 1999, an alternative proposed Stipulation of Settlement was submitted
by the Ratepayer Advocate ("RPA") on behalf of itself and a number of other
parties to the proceedings ("RPA Stipulation"). The Board determined to solicit
and consider comments on both settlement proposals, and established a comment
deadline of April 26, 1999, for comments addressing the GPU Stipulation and a
deadline of April 28, 1999, for comments addressing the RPA Stipulation.
<PAGE>
Based on our review of the extensive record in these proceedings, as well
as the comments submitted, the Board is not fully satisfied that either proposal
in its entirety represents an appropriate resolution of these proceedings.
However, the Board finds the April 14, 1999 Stipulation sponsored by GPU and
others to be overall more financially prudent and consistent with the Act's
requirements, consistent with the record and, with the modifications and
clarifications set forth herein below, provides the framework for a reasonable
resolution of these matters based upon the record before us. However, the
proponents of the RPA Stipulation and other parties have raised a number of
legitimate concerns regarding the GPU Stipulation which merit serious
consideration and which, where appropriate, have been addressed by the
modifications and clarifications set forth below.
Accordingly, except as specifically noted below, and as will be further
explained in a detailed order which shall be issued we hereby incorporate by
reference as if completely set forth herein, as a fair resolution of the issues
in these proceedings, the elements of the GPU Stipulation, and to the extent the
Initial Decision is inconsistent herewith, it is modified to conform herewith.
The modifications and clarifications to the Stipulation which we HEREBY
ORDER are summarized as follows:
Paragraph 1: This paragraph provides for a 5% aggregate rate reduction
from April 30, 1997 rates effective August 1, 1999, and an additional 5%
rate refund effective for the period from August 1, 2002 through July 31,
2003. We hereby modify this paragraph to provide for a 5% rate reduction
effective August 1, 1999, an additional 1% rate reduction (to 6% total)
effective August 1, 2000, a further 2% rate reduction (to 8% total)
effective August 1, 2001, and a further 3% rate reduction (to 11%)
effective August 1, 2002, to be provided via application of the 5% rate
refund provided via the Stipulation offset by a 2% increase via an
increase in the Market Transition Charge. This will result in an aggregate
rate reduction totaling 11% from April 30, 1997 rates for the period from
August 1, 2002 through July 31, 2003. We further modify the Stipulation to
decrease the average distribution rate for GPU from 3.45 cents per kwh to
3.35 cents per kwh. Finally, the language of the Stipulation appears to
condition the 5% rate reduction and the rate refund in August 2002 on
various provisions elsewhere in the Stipulation, including the Oyster
Creek securitization and the mechanisms for potential securitization of
deferred "Non-Utility Generator" costs. The Board considers the rate
reductions provided herein to be compliant with the Act and therefore,
will not condition the ordered rate reductions or rate refund on other
provisions in the GPU Stipulation.
Paragraph 4: The residential service ("RS") shopping credits shall be
increased from the proposed levels of 5.05 cents in 1999 to 5.22 cents in
2003, by 6 mills per kwh for each year, resulting in a range of shopping
credits of from 5.65 cents in 1999 to 5.82 cents in 2003.
DOCKET NOS. EO970720458
EO97070459,EO97070460
2
<PAGE>
The residential time-of-day ("RT") rate class shopping credits shall be
increased to 5.05 cents for 1999, and then remain at their proposed levels
(5.10 to 5.22) for 2000-03, based upon the flatter load profile and
associated lower cost to serve relative to the RS class.
Paragraph 8: The Board hereby modifies this paragraph to impose the one
year BGS commitment provisions only on non-residential customers.
Paragraph 9: The Board hereby clarifies that our approval of the continued
recovery of the Freehold Buyout Costs via the Market Transition Charge,
does not alter the current interim nature of such Freehold Buyout Cost
recovery, pending the Board's final decision in BPU Docket No. ER95120633.
Paragraph 11: The Board hereby clarifies that the inclusion in the
Societal Benefits Charge ("SBC") of $34.4 million in annual Oyster Creek
decommissioning recovery is based upon the assumption of the early
retirement of Oyster Creek, and that in the event that the Oyster Creek
unit is sold or is not shut down in 2000, this amount of recovery may be
revisited and is, in any event, subject to true-up. It is further
clarified that any adjustment to the SBC based upon such revisitation
during the Transition Period will not alter the aggregate level of rates,
but will be reflected as an adjustment to the residual MTC recovery under
the price cap.
Paragraph 13: The Board hereby modifies this paragraph such that, while
the SBC is to be set at a level to recover the same level of "Demand Side
Management" program costs as is currently being collected in GPU bundled
rates, DSM generation-related lost revenue created subsequent to August 1,
1999 will no longer be reflected in the calculation of costs eligible for
"Demand Side Management" recovery and deferral.
Paragraphs 14,16, 17 and 21: The Board hereby modifies these paragraphs
such that neither this Summary Order nor the Board's more detailed
Decision and Order in this matter will constitute final approval of the
Divestiture Petitions concerning the sale of the non-nuclear generating
assets and the Three Mile Island -1 nuclear generating facility; these
Divestiture Petitions will continue to be subject to review and
ultimately, separate approval by the Board. We further modify paragraph 21
such that the last sentence thereof is not incorporated by the Board as
part of its decision in this matter. However, we find it appropriate at
this time to issue certain guidelines and parameters for the conduct of
such review of those Petitions, as follows. For the Divestiture Petition
concerning the non-nuclear generating units, a sale in a process which is
ultimately deemed by the Board to comport with the auction standards
adopted by the Board in April 1998 would be deemed proper and merit
approval, subject to true-up of actual proceeds and actual
reasonably-incurred expenses. For Three Mile Island -1, given the unique
nature of the market for nuclear assets the absence of a formal auction
process should not be viewed as inappropriate, assuming reasonable efforts
were made to identify potential bidders. Moreover, in light of the fact
that the sale of the non-nuclear assets has reduced
DOCKET NOS. EO970720458
EO97070459,EO97070460
3
<PAGE>
stranded costs as compared to the administrative estimate contained in the
Company's filing, it would be unreasonable to refuse to recognize the
actual stranded costs resulting from the sale of TMI-1, simply on the
basis that such level may be higher than the administratively-determined
level reflected in the Company's filing.
Paragraph 22: The Board hereby clarifies that GPU has an ongoing
obligation to take all reasonable measures to mitigate the stranded costs
associated with non-utility generator and Utility Purchase Power
Agreements, including optimizing the market revenues received for the sale
of power and other marketable services derived from the Purchase Power
Agreements on the open market, or for use of Non-Utility Generator and
Utility Purchase Power Agreement power to offset purchases of energy and
capacity or other services otherwise necessary to serve Basic Generation
Service customers, and using its best efforts to pursue beneficial
buyouts, buydowns or restructuring of NUG PPAs.
Paragraph 23: The Board hereby modifies this paragraph to limit the
issuance of transition bonds attributable to Oyster Creek to approximately
$400 million (not including transaction costs), the actual amount to
reflect the projected level of Oyster Creek net investment (gross plant,
less accumulated depreciation, less accumulated deferred income taxes,
including the additional deferred income taxes that will result upon the
unit's retirement) as of September 2000. The Company will be permitted to
recover the "gross-up" for income taxes associated with the recovery of
the net plant investment, but this component of the recovery shall be
reflected in the MTC, rather than the Transition Bond Charge ("TBC"). The
net result will be total recovery associated with Oyster Creek
approximately equal to that provided in the GPU Stipulation proposal to
securitize $525 million, although with a lower resultant TBC and higher
resultant MTC recovery.
Paragraph 24: The Board hereby clarifies that the referenced "selling
price" for Oyster Creek shall be the selling price as determined by the
Board.
Paragraph 25: The Board hereby clarifies that the securitization proceeds
will be utilized to refinance or retire debt and/or equity in a manner
which does not substantially alter the Company's overall capital
structure.
Paragraph 26: We hereby modify this paragraph to change $525 million to
$400 million, consistent with modifications to paragraph 23 above.
Paragraph 29: The Board hereby modifies the interest rate applicable to
the Deferred Balance from the proposed 10.28% to the applicable interest
rate on medium term single A rated bonds.
Paragraph 31: The Board hereby clarifies that this paragraph provides for
an audit to be conducted by Board Staff and approved by the Board for
purposes of establishing the amount of the Deferred Balance. We further
modify this paragraph to provide that the Board will conduct an
DOCKET NOS. EO970720458
EO97070459,EO97070460
4
<PAGE>
annual review and assessment, including the opportunity for public comment
and the provision for a hearing, of the reasonableness and prudency of the
costs incurred by the Company in the procurement of energy and capacity
needed to serve BGS load after the purchase of NUG PPAs and Utility PPAs,
as contemplated by paragraph 7 of the GPU Stipulation, as well as the
reasonableness and prudency of the NUG PPA and Utility PPA stranded costs,
consistent with the requirements of paragraph 22 as clarified by the Board
herein, reflected in the Deferred Balance.
Paragraph 33: The Board hereby modifies this paragraph that,
notwithstanding the language in this paragraph and in view of the
substantial transaction costs associated with the issuance of securitized
transition bonds, the Company shall not be permitted to issue such bonds
in increments of less than $100 million.
Paragraph 36: The Board hereby modifies the Stipulation such that the
accrual of the specified aggregate level of Deferred Balance shall not, in
and of itself, constitute prima facie evidence of the impairment of the
Company's financial integrity. However, recognizing the potential impact
of a large Deferred Balance on the financial integrity of the Company, the
Board shall permit the Company, should such specified Deferred Balance
levels be reached, to request a finding by the Board of financial
impairment, and to petition the Board for appropriate relief under section
13.h of the Act ,as envisioned in this paragraph.
Paragraph 38: The Board hereby clarifies that the Deferred Balance
accounting provided in the Stipulation shall result in any "retail
margin," that is, the difference between the BGS charges and BGS costs
associated with non-shopping customers, being credited against the
Deferred Balance. The Board also modifies this paragraph so as to ensure
that the amounts to be securitized, if any, shall be only comprised of
amounts deferred with respect to the above-market costs associated with
Utility PPAs and NUG PPAs, and shall not include costs associated with the
provision of BGS.
Paragraph 46: The Board hereby modifies this paragraph to provide that the
All-Electric Discount applicable to the winter tail block rate for the RS
and RT Service Classifications shall be maintained in full for the period
through July 31, 2000; effective on August 1, 2000, the All-Electric
Discount shall be reduced by one-third; effective August 1, 2001 the
All-Electric Discount shall be reduced by two-thirds; effective August 1,
2002 the All-Electric Discount shall be completely eliminated. For the
entire period from August 1, 1999 through July 31, 2002, during which the
All-Electric Discount is maintained in whole or in part, such discount
shall only be applicable for customers taking BGS.
Paragraph 48: This paragraph which provides that GPU is reserving all of
its rights to challenge the Act on confiscatory or constitutional grounds,
is not incorporated by the Board as a part of its decision in this matter.
DOCKET NOS. EO970720458
EO97070459,EO97070460
5
<PAGE>
Paragraph 53: We hereby clarify that the termination of the Global
Settlement Earnings Effect provision shall take effect on August 1, 1999.
By way of a brief summary, GPU shall implement the following aggregate
rate reductions, consistent with the provisions of this Summary Order:
August 1, 1999 5%
August 1, 2000 6%
August 1, 2001 8%
August 1, 2002 11%
In addition, the Company shall implement the following shopping credits:
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
RT 5.05 5.10 5.15 5.20 5.22
RS 5.65 5.70 5.75 5.80 5.82
GS 5.11 5.38 5.44 5.51 5.55
GST 4.78 4.95 5.00 5.10 5.15
GP 4.53 4.66 4.67 4.69 4.70
GT 4.32 4.32 4.32 4.32 4.43
Overall 5.14 5.27 5.31 5.36 5.40
Within five (5) business days of the date of this Order, the Company is
HEREBY DIRECTED to submit to the Board a tariff compliance filing addressing the
provisions of this Summary Order. The Company shall consult with Staff to assure
the adequacy of the required submissions.
DATED: 5/24/99 BOARD OF PUBLIC UTILITIES
BY:
/s/ Herbert H. Tate
-------------------------
HERBERT H. TATE
PRESIDENT
/s/ Carmen J. Armenti
-------------------------
CARMEN J. ARMENTI
COMMISSIONER
/s/ Frederick F. Butler
-------------------------
FREDERICK F. BUTLER
COMMISSIONER
ATTEST: /s/ Mark W. Musser
-------------------------
MARK W. MUSSER
SECRETARY
DOCKET NOS. EO970720458
EO97070459,EO97070460
6
