UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 1-3141
Jersey Central Power & Light Company
(Exact name of registrant as specified in its charter)
New Jersey 21-0485010
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification No.)
300 Madison Avenue
Morristown, New Jersey 07962-1911
(Address of principal executive offices) (Zip Code)
(201) 455-8200
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
The number of shares outstanding of each of the issuer's classes of
common stock, as of July 31, 1994, was as follows:
Common stock, par value $10 per share: 15,371,270 shares
outstanding.
<PAGE>
Jersey Central Power & Light Company
Quarterly Report on Form 10-Q
June 30, 1994
Table of Contents
Page
PART I - Financial Information
Financial Statements:
Balance Sheets 3
Statements of Income 5
Statements of Cash Flows 6
Notes to Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 19
PART II - Other Information 25
Signatures 26
_________________________________
The financial statements (not examined by independent accountants)
reflect all adjustments (which consist of only normal recurring
accruals) which are, in the opinion of management, necessary for a
fair statement of the results for the interim periods presented,
subject to the ultimate resolution of the various matters as
discussed in Note 1 to the Financial Statements.
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<TABLE>
JERSEY CENTRAL POWER & LIGHT COMPANY
Balance Sheets
<CAPTION>
In Thousands
June 30, December 31,
1994 1993
(Unaudited)
<S> <C> <C>
ASSETS
Utility Plant:
In service, at original cost $4 006 196 $3 938 700
Less, accumulated depreciation 1 450 714 1 380 540
Net utility plant in service 2 555 482 2 558 160
Construction work in progress 117 838 102 178
Other, net 128 982 116 751
Net utility plant 2 802 302 2 777 089
Current Assets:
Cash and temporary cash investments 2 981 17 301
Special deposits 7 384 7 124
Accounts receivable:
Customers, net 134 860 133 407
Other 12 192 31 912
Unbilled revenues 68 298 57 943
Materials and supplies, at average cost or less:
Construction and maintenance 104 115 102 659
Fuel 19 332 11 886
Deferred income taxes 6 606 28 650
Prepayments 196 614 58 057
Total current assets 552 382 448 939
Deferred Debits and Other Assets:
Three Mile Island Unit 2 deferred costs 141 153 146 284
Unamortized property losses 106 697 109 478
Deferred income taxes 129 314 110 794
Income taxes recoverable through
future rates 123 431 121 509
Decommissioning funds 158 248 139 279
Special deposits 83 150 82 103
Other 338 025 333 680
Total deferred debits and other assets 1 080 018 1 043 127
Total Assets $4 434 702 $4 269 155
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
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<PAGE>
JERSEY CENTRAL POWER & LIGHT COMPANY
Balance Sheets
<CAPTION>
In Thousands
June 30, December 31,
1994 1993
(Unaudited)
<S> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 153 713 $ 153 713
Capital surplus 435 715 435 715
Retained earnings 705 068 724 194
Total common stockholder's equity 1 294 496 1 313 622
Cumulative preferred stock:
With mandatory redemption 150 000 150 000
Without mandatory redemption 37 741 37 741
Long-term debt 1 215 779 1 215 674
Total capitalization 2 698 016 2 717 037
Current Liabilities:
Debt due within one year 60 008 60 008
Notes payable 155 387
Obligations under capital leases 102 276 89 631
Accounts payable:
Affiliates 37 384 34 538
Other 109 702 95 509
Taxes accrued 79 342 119 337
Deferred energy credits 12 733 23 633
Interest accrued 35 944 33 804
Other 58 518 50 950
Total current liabilities 651 294 507 410
Deferred Credits and Other Liabilities:
Deferred income taxes 574 982 569 966
Unamortized investment tax credits 75 605 79 902
Three Mile Island Unit 2 future costs 84 828 79 967
Other 349 977 314 873
Total deferred credits and other liabilities 1 085 392 1 044 708
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $4 434 702 $4 269 155
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
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<PAGE>
JERSEY CENTRAL POWER & LIGHT COMPANY
Statements of Income
(Unaudited)
<CAPTION>
In Thousands
Three Months Six Months
Ended June 30, Ended June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Operating Revenues $458 897 $463 354 $945 807 $911 988
Operating Expenses:
Fuel 24 322 18 784 54 647 40 173
Power purchased and interchanged:
Affiliates 2 292 6 096 5 126 10 415
Others 134 849 133 199 279 563 283 816
Deferral of energy and capacity
costs, net (266) 18 766 (9 043) 25 089
Other operation and maintenance 167 850 116 016 285 986 219 311
Depreciation and amortization 46 402 47 226 94 161 91 776
Taxes, other than income taxes 54 064 53 939 113 208 108 956
Total operating expenses 429 513 394 026 823 648 779 536
Operating Income Before Income Taxes 29 384 69 328 122 159 132 452
Income taxes 114 12 275 21 368 23 988
Operating Income 29 270 57 053 100 791 108 464
Other Income and Deductions:
Allowance for other funds used
during construction 52 508 109 1 246
Other income, net 4 163 3 282 19 597 7 778
Income taxes (1 670) (1 180) (7 207) (2 969)
Total other income
and deductions 2 545 2 610 12 499 6 055
Income Before Interest Charges 31 815 59 663 113 290 114 519
Interest Charges:
Interest on long-term debt 23 687 27 075 47 402 51 009
Other interest 3 558 1 606 8 871 2 524
Allowance for borrowed funds used
during construction (605) (569) (1 255) (1 395)
Total interest charges 26 640 28 112 55 018 52 138
Net Income 5 175 31 551 58 272 62 381
Preferred stock dividends 3 699 4 706 7 398 9 412
Earnings Available for Common Stock $ 1 476 $ 26 845 $ 50 874 $ 52 969
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
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<PAGE>
JERSEY CENTRAL POWER & LIGHT COMPANY
Statements of Cash Flows
(Unaudited)
<CAPTION>
In Thousands
Six Months
Ended June 30,
1994 1993
<S> <C> <C>
Operating Activities:
Income before preferred dividends $ 58 272 $ 62 381
Adjustments to reconcile income to cash provided:
Depreciation and amortization 103 898 98 170
Amortization of property under capital leases 16 510 17 243
Voluntary enhanced retirement program 46 862 -
Nuclear outage maintenance costs, net 10 683 (6 484)
Deferred income taxes and investment tax
credits, net 4 088 17 578
Deferred energy and capacity costs, net (8 931) 25 235
Accretion income (6 772) (7 252)
Allowance for other funds used during construction (109) (1 246)
Changes in working capital:
Receivables 7 924 (44 158)
Materials and supplies (8 903) 571
Special deposits and prepayments (138 816) (20 785)
Payables and accrued liabilities (41 543) (208 036)
Other, net (13 736) (17 801)
Net cash provided (required) by operating
activities 29 427 (84 584)
Investing Activities:
Cash construction expenditures (92 425) (95 721)
Contributions to decommissioning trust (8 205) (9 041)
Other, net (5 964) (8 644)
Net cash used for investing activities (106 594) (113 406)
Financing Activities:
Issuance of long-term debt - 401 036
Increase in notes payable, net 155 400 95 300
Retirement of long term debt - (246 703)
Capital lease principal payments (15 155) (10 172)
Dividends paid on common stock (70 000) (30 000)
Dividends paid on preferred stock (7 398) (9 412)
Net cash provided by financing activities 62 847 200 049
Net (decrease) increase in cash and temporary
cash investments from above activities (14 320) 2 059
Cash and temporary cash investments,
beginning of year 17 301 140
Cash and temporary cash investments, end of period $ 2 981 $ 2 199
Supplemental Disclosure:
Interest paid (net of amount capitalized) $ 52 889 $ 62 940
Income taxes paid $ 9 417 $ 22 550
New capital lease obligations incurred $ 27 808 $ 9 465
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
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<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Jersey Central Power & Light Company (the Company), which was
incorporated under the laws of New Jersey in 1925, is a wholly owned
subsidiary of General Public Utilities Corporation (GPU), a holding company
registered under the Public Utility Holding Company Act of 1935. The Company
is affiliated with Metropolitan Edison Company (Met-Ed) and Pennsylvania
Electric Company (Penelec). The Company, Met-Ed and Penelec are referred to
herein as the "Company and its affiliates." The Company is also associated
with GPU Service Corporation (GPUSC), a service company; GPU Nuclear
Corporation (GPUN), which operates and maintains the nuclear units of the
Company and its affiliates; 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 the
Company's affiliates are wholly owned subsidiaries of GPU. The Company and
its affiliates, GPUSC, GPUN and EI are referred to as the "GPU System."
These notes should be read in conjunction with the notes to financial
statements included in the 1993 Annual Report on Form 10-K. The year-end
condensed balance sheet data contained in the attached financial statements
were derived from audited financial statements. For disclosures required by
generally accepted accounting principles, see the 1993 Annual Report on Form
10-K.
1. COMMITMENTS AND CONTINGENCIES
NUCLEAR FACILITIES
The Company has 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 Company's net investment in
TMI-1 and Oyster Creek, including nuclear fuel, was $167 million and
$796 million, respectively. TMI-1 and TMI-2 are jointly owned by the Company,
Met-Ed and Penelec in the percentages of 25%, 50% and 25%, respectively.
Oyster Creek is owned by the Company.
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 Company and its
affiliates may also incur costs and experience reduced output at their 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
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<PAGE>
1. COMMITMENTS AND CONTINGENCIES (continued)
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.
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 GPU, the
Company and its affiliates 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 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 Company.
At the time of the TMI-2 accident, as provided for in the Price-Anderson
Act, the Company and its affiliates 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 had been providing a defense against all TMI-2
accident related claims against GPU, the Company and its affiliates 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.
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<PAGE>
1. COMMITMENTS AND CONTINGENCIES (continued)
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.
In an Order issued in April 1994, the Court: (1) noted that the
plaintiffs have agreed to seek punitive damages only against GPU and the
Company and its affiliates; 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 Company and its affiliates 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 Company and its affiliates 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 target (in 1994 dollars) for
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<PAGE>
1. COMMITMENTS AND CONTINGENCIES (continued)
TMI-1 is $157 million, of which the Company's share is $39 million, and for
Oyster Creek is $189 million. Based on NRC studies, a comparable funding
target for TMI-2 (in 1994 dollars), which takes into account the accident, is
$250 million, of which the Company's share is $63 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, of which the Company's share is $56
to $77 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, of which the Company's share is $19 million, and $48 million,
respectively (adjusted to 1994 dollars).
The ultimate cost of retiring the Company and its affiliates' 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 absence to date of significant experience in
decommissioning such facilities and (e) the technology available at the time
of decommissioning. The Company charges to expense and contributes to
external trusts amounts collected from customers for nuclear plant
decommissioning and nonradiological costs. In addition, in 1990 the Company
contributed to an external trust an amount not recoverable from customers for
nuclear plant decommissioning.
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<PAGE>
1. COMMITMENTS AND CONTINGENCIES (continued)
TMI-1 AND OYSTER CREEK:
The Company is collecting revenues for decommissioning, which are
expected to result in the accumulation of its share of the NRC funding target
for each plant. The Company is also collecting revenues, based on estimates,
for the cost of removal of nonradiological structures and materials at each
plant based on its share ($3.83 million) of an estimated $15.3 million for
TMI-1 and $31.6 million for Oyster Creek. 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 $16 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 Company and its affiliates have recorded a liability, amounting to
$250 million, of which the Company's share is approximately $63 million as of
June 30, 1994, for the radiological decommissioning of TMI-2, reflecting the
NRC funding target. The Company and its affiliates record escalations, when
applicable, in the liability based upon changes in the NRC funding target.
The Company and its affiliates have also recorded a liability in the amount of
$20 million, of which the Company's share is $5 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 Company and its affiliates had recorded a liability in the
amount of $71 million, of which the Company's share was approximately
$17.5 million, for nonradiological cost of removal. Expenditures for such
costs through June 1994 have reduced the liability to $69 million, of which
the Company's share is approximately $17.3 million. The Company's share of
the above amounts for retirement costs and monitored storage are reflected as
Three Mile Island Unit 2 future costs on the balance sheet. The Company has
also expensed and made a nonrecoverable contribution of $15 million to an
external decommissioning trust. 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 the Company decommissioning
revenues for the remainder of the NRC funding target and allowances for the
cost of removal of nonradiological structures and materials. The Company
intends to seek recovery for any increases in TMI-2 retirement costs, but
recognizes that recovery cannot be assured.
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<PAGE>
1. COMMITMENTS AND CONTINGENCIES (continued)
As a result of TMI-2's entering long-term monitored storage, in late
1993, the Company and its affiliates began incurring incremental annual
storage costs of approximately $1 million, of which the Company's share is
$.25 million. The Company and its affiliates estimate that incremental
monitored storage costs will total $20 million, of which the Company's share
is $5 million, through 2014, the expected retirement date of TMI-1. The
Company's 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 Company.
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
site. In accordance with NRC regulations, these insurance policies generally
require that proceeds first be used to stabilize 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.
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<PAGE>
1. COMMITMENTS AND CONTINGENCIES (continued)
The Company and its affiliates have insurance coverage for incremental
replacement power costs resulting from an accident-related outage at their
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 their insurance policies applicable to nuclear operations and
facilities, the Company and its affiliates are subject to retrospective
premium assessments of up to $51 million in any one year, of which the
Company's share is $31 million, 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 Company 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 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 Company expects to expend up to $58 million for air pollution
control equipment by the year 2000. The Company reduced the estimate from
$145 million to $58 million primarily due to the postponement of a scrubber
installation at the Keystone generating station until after 2000. In
developing its least-cost plan to comply with the Clean Air Act, the Company
will continue to evaluate major capital investments compared to participation
in the emission 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 Company's
affected station should be recoverable through the ratemaking process.
The Company has been notified by the Environmental Protection Agency
(EPA) and a state environmental authority that it is 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 six hazardous
and/or toxic waste sites. In addition, the Company has been requested to
supply information to the EPA and state environmental authorities on several
other sites for which it has not yet been named as a PRP. The ultimate cost
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<PAGE>
1. COMMITMENTS AND CONTINGENCIES (continued)
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 Company.
The Company has entered into agreements with the New Jersey Department of
Environmental Protection, formerly the New Jersey Department of Environmental
Protection and Energy, for the investigation and remediation of 17 formerly
owned manufactured gas plant sites. One of these sites has been repurchased
by the Company. The Company has also entered into various cost sharing
agreements with other utilities for some of the sites. At June 30, 1994, the
Company 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,
the Company 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 the Company 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
the Company 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 the Company'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. At June 30, 1994, the Company has
collected from customers $4.0 million in excess of expenditures of
$13.9 million. The Company is awaiting a final NJBPU order. The Company 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 Company is 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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<PAGE>
1. COMMITMENTS AND CONTINGENCIES (continued)
OTHER COMMITMENTS AND CONTINGENCIES
During the second quarter, GPU 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, GPU 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, of which the Company's share was $47 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, the Company 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 the Company 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 LEAC periods 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
Company'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:
- 15 -
<PAGE>
1. COMMITMENTS AND CONTINGENCIES (continued)
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.
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 certain
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 Company'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 Company no longer qualifies
for FAS 71 accounting treatment, a material adverse effect on its results of
operations and financial position may result.
The Company has 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 Company to purchase all of the power produced
up to the contract limits. The agreements have been approved by the
NJBPU and permit the Company to recover energy and demand costs from customers
through its energy clause. These agreements provide for the sale of
approximately 1,197 MW of capacity and energy to the Company by the mid-to-
late 1990s. As of June 30, 1994, facilities covered by these agreements
having 664 MW of capacity were in service, with another 215 MW scheduled to
commence operation in 1994. Payments pursuant to agreements with nonutility
generators are estimated to aggregate $325 million for 1994. 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
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<PAGE>
2. COMMITMENTS AND CONTINGENCIES (continued)
agreements are substantially in excess of current market prices. While the
Company has been granted full recovery of these costs from customers by the
NJBPU, there can be no assurance that the Company will continue to be able to
recover these costs throughout the terms of the related contracts. The
emerging competitive market has created additional uncertainty regarding the
forecasting of the GPU System's energy supply needs which, in turn, has caused
the Company and its affiliates to change their supply strategy to seek shorter
term agreements offering more flexibility. At the same time, the Company and
its affiliates 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 Company and its affiliates may be able to do so, however,
or recover associated costs through rates, is uncertain. Moreover, these
efforts have led to disputes before the NJBPU, as well as to litigation, and
may result in claims against the Company for substantial damages. There can
be no assurance as to the outcome of these matters.
The Company'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 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.
During the normal course of the operation of its business, in addition to
the matters described above, the Company is from time to time involved in
disputes, claims and, in some cases, as a defendant in litigation in which
compensatory and punitive damages are sought by customers, contractors,
vendors and other suppliers of equipment and services and by both current and
former employees alleging unlawful employment practices. It is not expected
that the outcome of these matters will have a material effect on the Company'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 Company and its affiliates recorded net income tax refunds
aggregating $17 million, of which the Company's share is $4 million, based on
the retirement of TMI-2 for tax purposes. The Company 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.
- 17 -
<PAGE>
2. INCOME TAXES (continued)
At the same time, the Company and its affiliates also recorded a total of
$46 million of net interest income, of which the Company's share is
$11.5 million, representing net interest receivable from the Internal Revenue
Service associated with this refund settlement.
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<PAGE>
Jersey Central Power & Light Company
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following is management's discussion of significant factors that
affected the Company's interim financial condition and results of operations.
This should be read in conjunction with Management's Discussion and Analysis
of Financial Condition and Results of Operations included in the Company's
1993 Annual Report on Form 10-K.
RESULTS OF OPERATIONS
Earnings available for common stock for the three months ended June 30,
1994 were $1.5 million compared with $26.8 million for the three months ended
June 30, 1993. For the six months ended June 30, 1994, earnings available for
common stock decreased to $50.9 million from $53.0 million for the comparable
period in 1993.
Earnings for the three months ended June 30, 1994 were negatively
affected by a second quarter charge of $46.9 million ($30.3 million after
taxes) for costs related to the voluntary enhanced retirement programs. The
same factor that affected the quarterly results also affected results for the
six-month period.
Earnings for the six months ended June 30, 1994 were positively affected
by nonrecurring net interest income resulting from refunds of previously paid
federal income taxes related to the tax retirement of Three Mile Island Unit 2
(TMI-2), increased sales due primarily to the colder-than-normal winter
weather as compared with last year's, increased revenues resulting from the
continued positive effects of a February 1993 retail base rate increase, and a
performance award of $7.8 million for the operation of the Company's nuclear
generating stations. Increased other operation and maintenance expense, which
included emergency and winter storm repair costs, more than offset the
increases detailed above, resulting in an earnings decrease in the six month
period.
OPERATING REVENUES:
Total revenues of $458.9 million for the three months ended June 30, 1994
were lower by 1.0% compared with the three months ended June 30, 1993. Total
revenues for the six months ended June 30, 1994 increased 3.7% to
$945.8 million compared with the same period in 1993. The components of the
changes are as follows:
(In Millions)
Three Months Six Months
Ended Ended
June 30, 1994 June 30, 1994
Kilowatt-hour (KWh) revenues
(excluding energy portion) $ 5.2 $21.5
Rate increase - 20.8
Energy revenues (11.1) (13.1)
Other revenues 1.4 4.6
(Decrease)/Increase in revenues $(4.5) $33.8
- 19 -
<PAGE>
Kilowatt-hour revenues
KWh revenues increased in the three and six months ended June 30, 1994
primarily due to increased sales resulting from seasonal weather effects,
particularly the colder-than-normal winter as compared with last year, and an
increase in new customers. These increases were partially offset by decreased
nonweather-related usage.
Energy revenues
Changes in energy revenues do not affect earnings as they reflect
corresponding changes in the energy cost rates billed to customers and
expensed. Energy revenues decreased in each period as a result of a January
1994 decrease in the energy cost rates in effect, decreased sales to other
utilities and the loss of wholesale customers. For the six month period,
these decreases were partially offset by increased sales to ultimate
customers.
Other revenues
Generally, changes in other revenues do not affect net income as they are
offset by corresponding changes in expense, such as taxes other than income
taxes.
OPERATING EXPENSES:
Power purchased and interchanged
Generally, changes in the energy component of power purchased and
interchanged expense do not significantly affect earnings as it is
substantially recovered through the Company's energy clause. However,
earnings for the three and six months ended June 30, 1994 were favorably
impacted by a reduction in reserve capacity expense primarily resulting from
the replacement at lower rates of expiring utility purchase contracts.
Other operation and maintenance
The increase in other operation and maintenance expense for the three and
six months ended June 30, 1994 is largely attributable to a $46.9 million
charge for costs related to the voluntary enhanced retirement programs. Other
operation and maintenance expense also increased in the six-month period due
to emergency and winter storm repairs.
For more information concerning charges for the voluntary enhanced
retirement programs and their effect on the GPU System, see Competition in the
Liquidity and Capital Resources section below.
Taxes, other than income taxes
Generally, changes in taxes other than income taxes do not significantly
affect earnings as they are substantially recovered in revenues.
- 20 -
<PAGE>
OTHER INCOME AND DEDUCTIONS:
Other income, net
The increase in the six-month period is principally due to nonrecurring
interest income resulting from refunds of previously paid federal income taxes
related to the tax retirement of TMI-2.
INTEREST CHARGES:
Interest on long-term debt decreased for both periods as a result of
lower interest rates associated with the refinancing of higher cost debt. For
the three month period, interest on long-term debt also decreased as a result
of a reduction in long-term debt outstanding.
Other interest increased in the six-month period primarily due to the tax
retirement of TMI-2, which resulted in an increase in interest expense on
additional amounts owed for tax years in which depreciation deductions with
respect to TMI-2 had been taken.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL NEEDS:
The Company's capital needs were $92 million for cash construction
expenditures in the six months ended June 30, 1994. The GPU System's
construction expenditures for the year were originally forecasted to be
$663 million, of which the Company's share was $275 million, and for the
1994/1995 period totaled $1.3 billion. In conjunction with the GPU System's
plans to enhance its competitive position, the 1994/1995 construction forecast
had been reduced to $1.2 billion. As a result of the adverse Pennsylvania
rate treatment of TMI-2 retirement costs, the GPU System's goal is to further
reduce its construction spending by $100 million, bringing the 1994/1995
construction forecast to $1.1 billion. The GPU System's latest construction
forecast for 1994 reflects a reduced spending level of $586 million, of which
the Company's share is $249 million. In addition, the Company's affiliates,
Met-Ed and Penelec, plan to begin making nonrecoverable funding contributions
to external trusts in the second half of 1995 to fund their share of the TMI-2
retirement costs. Expenditures for maturing debt are expected to be
$60 million for 1994. Management estimates that approximately one-half of the
1994 capital needs will be satisfied through internally generated funds.
FINANCING:
The Company has regulatory authority to issue and sell first mortgage
bonds, which may be issued as secured medium-term notes, and preferred stock
through June 1995. Under existing authorization, the Company may issue senior
securities in the amount of $275 million, of which $100 million may consist of
preferred stock. The Company currently has the ability to issue $258 million
of first mortgage bonds on the basis of previously issued and retired bonds,
and has interest and dividend coverage ratios currently well in excess of
indenture and charter restrictions. The Company also has regulatory authority
to issue short-term debt, a portion of which may be commercial paper.
- 21 -
<PAGE>
The Company's ability to obtain external financing is reflected in its
security ratings, which are periodically reviewed by the three major credit
rating agencies. In June 1994, Standard & Poor's (S&P) and Duff & Phelps
(D&P) lowered the security ratings of the Company, citing relatively high
customer rates and a perceived credit risk associated with large purchase
power commitments. As a result of these actions, S&P and D&P assigned the
Company's first mortgage bonds a BBB+ rating, preferred stock a BBB rating,
and commercial paper a Duff 2 rating.
The S&P rating outlook, which is a financial benchmarking standard for
rating the debt of electric utilities to reflect the changing risk profiles
resulting primarily from the intensifying competitive pressures in the
industry, was also revised for the Company. The Company was revised to
"stable" from "negative" since S&P thought the newly assigned BBB+ bond rating
should be sustainable going forward without further decline anticipated in the
near term.
Following a review that was prompted by the Pennsylvania Court's order
denying recovery of TMI-2 future costs, Moody's downgraded the Company's and
its affiliates' credit ratings in August 1994 citing the Company's affiliates'
weakened financial flexibility and constraints on GPU's plans to strengthen
the Company's and its affiliates' financial profiles to meet competitive
challenges. Moody's now assigns the Company's first mortgage bonds an
equivalent BBB+ rating, preferred stock an equivalent BBB rating and
commercial paper a Prime 2 rating. Though unaffected by the Court's order,
the Company's credit ratings were reduced for similar System and industry
reasons. S&P determined that the Company's rating outlook will be unaffected
by the Court order. Although credit quality has been reduced, the Company's
credit ratings remain above investment grade.
In June 1994, Moody's announced that it developed a new method to
calculate the minimum price an electric utility must charge its customers in
order to recover all of its generation costs. Moody's believes that an
assessment of relative cost position will become increasingly critical to the
credit analysis of electric utilities in a competitive marketplace. However,
specific rating actions are not anticipated until the pace and implications of
utility market deregulation are more certain.
GPU GENERATION CORPORATION:
In March 1994, the Company and its affiliates filed applications seeking
regulatory approval to enter into operating agreements with GPU Generation
Corporation (GPUGC) pursuant to GPU's reorganization plan announced in
February 1994. If the applications are approved, GPUGC would undertake
responsibility for the operation, maintenance and rehabilitation of all
nonnuclear generation facilities owned and operated by the Company and its
affiliates as well as the responsibility for the design, construction, start-
up and tests of any new nonnuclear generation facilities that the Company and
its affiliates may need in the future. The Company's and its affiliates'
applications are pending before the New Jersey Board of Public Utilities
(NJBPU, formerly the New Jersey Board of Regulatory Commissioners), the
Pennsylvania Public Utility Commission and the Securities and Exchange
Commission (SEC). One of Penelec's municipal wholesale customers has
requested that the SEC hold an evidentiary hearing on the Company and its
affiliates' application.
- 22 -
<PAGE>
COMPETITION:
In April 1994, GPU announced that it offered voluntary enhanced
retirement programs to certain bargaining and nonbargaining employees as part
of a corporate realignment plan designed to reduce costs and enhance GPU's
future competitive position in the changing electric utility industry.
Results for the three months ended June 30, 1994 reflect the acceptance by
approximately 1,350 employees, representing about 11% of the GPU System work
force. The future annual payroll savings expected from the retirement
program are estimated to be $59 million. The early retirement costs will be
paid from pension and postretirement benefit plan trusts. Savings from the
programs reflect limiting the replacement of employees to 10%, and are
expected to begin in the third quarter of 1994.
In May 1994, the NJBPU approved the Company's request to enter into
individual contracts to provide electric service to large commercial and
industrial customers.
In June 1994, the Federal Energy Regulatory Commission (FERC) issued a
Notice of Proposed Rulemaking regarding the recovery by utilities of
legitimate and verifiable stranded costs. Among other things, the FERC has
proposed that utilities be allowed to recover such stranded costs associated
with existing wholesale requirements contracts but not under new wholesale
contracts unless expressly provided for in the contracts. With respect to so-
called retail stranded costs, while the FERC stated a "strong" policy
preference that state regulatory agencies address recovery of these costs, the
FERC also set forth alternative proposals for how it would address the matter
if the states failed to do so. Subsequent to the FERC's Notice of Proposed
Rulemaking, however, the U.S. Court of Appeals for the District of Columbia in
an unrelated case questioned the FERC's authority to permit utilities to
recover stranded costs. The Court directed that the FERC conduct an
evidentiary hearing in the case to determine whether permitting stranded cost
recovery was so inherently anticompetitive as to violate antitrust laws.
MEETING ENERGY DEMANDS:
In 1993, the NJBPU asked all electric utilities in the state to assess
the economics of their purchase power contracts with nonutility generators to
determine whether there are any candidates for potential buy-out or other
remedial measures. The Company identified a 100-megawatt (MW) project now
under development that it believes is economically undesirable based on
current cost projections. In November 1993, the NJBPU directed the Company
and the developer to attempt to negotiate contract repricing to a level more
consistent with the Company's current avoided cost projections or a contract
buy-out. The Company and the developer were unable to reach an agreement, and
pursuant to an NJBPU order, hearings on this matter are being held. The
developer has contested the NJBPU's authority in this matter in the federal
courts. In March 1994, the U.S. District Court granted the Company's motion
to dismiss the developer's complaint, holding that the federal courts did not
have jurisdiction. The developer has appealed the decision to the U.S. Court
of Appeals.
- 23 -
<PAGE>
In January 1994, the NJBPU issued an order granting two nonutility
generators, having a total of 200 MW under contract with the Company, an
extension in the in-service date for projects originally scheduled to be
operational in 1997. The Company appealed the NJBPU's decision to the
Appellate Division of the New Jersey Superior Court in June 1994. The NJBPU
order extends the in-service date for one year plus the period until the
Company's appeals are decided.
In January 1994, the Company issued an all source solicitation for the
short-term supply of energy and/or capacity to determine and evaluate the
availability of competitively priced power supply options. The Company is
seeking proposals from utility and nonutility generation suppliers, for
periods of one to eight years in length, that are capable of delivering
electric power beginning in 1996. This solicitation is expected to fulfill a
significant part of the uncommitted sources identified in the Company's supply
plan. The Company received bids and is continuing the evaluation process,
which is expected to be completed during the third quarter of 1994.
The Company is contesting before the NJBPU the request of one nonutility
generation developer to unilaterally extend the project's commercial operation
date, and has opposed the request of another potential developer for a long-
term contract to sell the Company 200 MW of energy annually. In June 1994,
the NJBPU denied the first developer's petition. The NJBPU has transmitted
the other developer's petition to the Administrative Law Office as a contested
case for evidentiary hearings.
The Company has contracts and anticipated commitments with nonutility
generation suppliers under which a total of 664 MW of capacity is currently in
service and an additional 533 MW are currently scheduled or anticipated to be
in service by 1999.
- 24 -
<PAGE>
PART II
ITEM 1 - LEGAL PROCEEDINGS
Information concerning the current status of certain legal
proceedings instituted against the Company and its affiliates as
a result of the March 28, 1979 nuclear accident at Unit 2 of the
Three Mile Island nuclear generating station discussed in Part I
of this report in Notes to Financial Statements is incorporated
herein by reference and made a part hereof.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
By Consent of the Sole Stockholder dated May 17, 1994, the
following were elected directors of the Company for the ensuing
year:
R. C. Arnold G. E. Persson
D. Baldassari P. H. Preis
J. G. Graham S. C. Van Ness
J. R. Leva S. B. Wiley
M. P. Morrell
ITEM 5 - OTHER EVENTS
As previously reported, GPUN believes that the Company's Oyster
Creek nuclear station will require additional on-site storage
capacity, beginning in 1996, in order to maintain its full core
reserve margin. Loss of the full core reserve margin would mean
that off-loading the entire core would not be possible to conduct
certain maintenance or repairs, when necessary, in order to
restore operation of the plant. Lacey Township has issued a
construction permit and construction of the estimated $16 million
dry storage facility commenced during July 1994. On May 19,
1994, however, Berkeley Township and other parties appealed the
use variance granted by the Lacey Township Zoning Board. The
appeal, which is pending in the New Jersey Supreme Court, is not
expected to interrupt the construction schedule for the storage
facility.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(12) Statements Showing Computation of Ratio of Earnings to
Fixed Charges and Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.
- 25 -
<PAGE>
Signatures
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.
JERSEY CENTRAL POWER & LIGHT COMPANY
August 9, 1994 By: /s/ D. Baldassari
D. Baldassari, President
August 9, 1994 By: /s/ P. H. Preis
P. H. Preis, Vice President and Comptroller
(Principal Accounting Officer)
- 26 -
<PAGE>
<TABLE>
Exhibit 12
Page 1 of 2
JERSEY CENTRAL POWER & LIGHT COMPANY
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
UNAUDITED
<CAPTION>
Six Months Ended
June 30, 1993 June 30, 1994
<S> <C> <C>
OPERATING REVENUES $911 988 $945 807
OPERATING EXPENSES 779 536 823 648
Interest portion
of rentals (A) 5 265 5 502
Net expense 774 271 818 146
OTHER INCOME:
Allowance for funds
used during
construction 2 641 1 364
Other income, net 7 778 19 597
Total other income 10 419 20 961
EARNINGS AVAILABLE FOR FIXED
CHARGES AND PREFERRED
STOCK DIVIDENDS
(excluding taxes
based on income) $148 136 $148 622
FIXED CHARGES:
Interest on funded
indebtedness $ 51 009 $ 47 402
Other interest 2 524 8 871
Interest portion
of rentals (A) 5 265 5 502
Total fixed charges $ 58 798 $ 61 775
RATIO OF EARNINGS TO
FIXED CHARGES 2.52 2.41
Preferred stock dividend
requirement 9 412 7 398
Ratio of income before
provision for income
taxes to net income (B) 143.2% 149.0%
Preferred stock dividend
requirement on a pretax
basis 13 478 11 023
Fixed charges, as above 58 798 61 775
Total fixed charges
and preferred
stock dividends $ 72 276 $ 72 798
RATIO OF EARNINGS TO
COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS 2.05 2.04
<PAGE>
Exhibit 12
Page 2 of 2
JERSEY CENTRAL POWER & LIGHT COMPANY
STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503
(In Thousands)
UNAUDITED
<FN>
NOTES:
(A) The Company has included the equivalent of the interest portion of all
rentals charged to income as fixed charges for this statement and has
excluded such components from Operating Expenses.
(B) Represents income before provision for income taxes of $86,847 and
$89,338, for the six months ended June 30, 1994 and June 30, 1993,
respectively, divided by net income of $58,272 and $62,381, respectively.
</FN>
</TABLE>
<PAGE>
