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, 1995
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 1-446
Metropolitan Edison Company
(Exact name of registrant as specified in its charter)
Pennsylvania 23-0870160
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification No.)
2800 Pottsville Pike
Reading, Pennsylvania 19640-0001
(Address of principal executive offices) (Zip Code)
(610) 929-3601
(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
voting stock, as of July 31, 1995, was as follows:
Common stock, no par value: 859,500 shares outstanding.
<PAGE>
Metropolitan Edison Company
Quarterly Report on Form 10-Q
June 30, 1995
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 18
PART II - Other Information 24
Signatures 25
_________________________________
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 Consolidated Financial Statements.
-2-
<PAGE>
<TABLE>
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets
<CAPTION>
In Thousands
June 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
ASSETS
Utility Plant:
In service, at original cost $2 198 808 $2 137 996
Less, accumulated depreciation 738 017 700 746
Net utility plant in service 1 460 791 1 437 250
Construction work in progress 90 729 105 035
Other, net 44 792 37 275
Net utility plant 1 596 312 1 579 560
Other Property and Investments:
Nuclear decommissioning trusts 78 901 65 100
Other, net 9 613 9 567
Total other property and investments 88 514 74 667
Current Assets:
Cash and temporary cash investments 5 398 9 246
Special deposits 1 204 1 896
Accounts receivable:
Customers, net 51 293 53 421
Other 23 266 16 736
Unbilled revenues 23 987 25 112
Materials and supplies, at average cost or less:
Construction and maintenance 41 909 39 365
Fuel 13 232 16 843
Deferred income taxes 5 764 4 720
Prepayments 21 876 7 522
Total current assets 187 929 174 861
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 5 314 5 534
Income taxes recoverable through future rates 211 959 201 679
Other 45 199 41 668
Total regulatory assets 262 472 248 881
Deferred income taxes 149 824 149 892
Other 13 636 8 418
Total deferred debits and other assets 425 932 407 191
Total Assets $2 298 687 $2 236 279
The accompanying notes are an integral part of the consolidated financial statements.
-3-
<PAGE>
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets
<CAPTION>
In Thousands
June 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 66 273 $ 66 273
Capital surplus 355 200 341 616
Retained earnings 172 088 190 742
Total common stockholder's equity 593 561 598 631
Cumulative preferred stock 23 598 23 598
Company-obligated mandatorily redeemable
preferred securities 100 000 100 000
Long-term debt 603 284 529 783
Total capitalization 1 320 443 1 252 012
Current Liabilities:
Securities due within one year 27 018 40 517
Notes payable 15 973 -
Obligations under capital leases 42 090 33 810
Accounts payable:
Affiliates 8 795 14 571
Other 87 718 96 061
Taxes accrued 7 915 40 435
Deferred energy credits 3 686 1 950
Interest accrued 19 669 19 006
Other 25 113 21 636
Total current liabilities 237 977 267 986
Deferred Credits and Other Liabilities:
Deferred income taxes 389 904 371 841
Unamortized investment tax credits 34 577 35 470
Three Mile Island Unit 2 future costs 173 718 170 593
Nuclear fuel disposal fee 26 610 25 836
Regulatory liabilities 31 856 37 534
Other 83 602 75 007
Total deferred credits and other liabilities 740 267 716 281
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $2 298 687 $2 236 279
The accompanying notes are an integral part of the consolidated financial statements.
-4-<PAGE>
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
Consolidated Statements of Income
(Unaudited)
<CAPTION>
In Thousands
Three Months Six Months
Ended June 30, Ended June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Operating Revenues $190 342 $196 674 $396 091 $409 833
Operating Expenses:
Fuel 20 401 23 324 42 793 50 288
Power purchased and interchanged:
Affiliates 4 942 3 041 13 900 7 901
Others 37 963 38 678 81 477 84 155
Deferral of energy costs, net 2 837 (3 037) 1 732 (11 438)
Other operation and maintenance 55 200 92 917 107 841 146 754
Depreciation and amortization 21 761 22 029 44 431 43 563
Taxes, other than income taxes 13 071 13 022 26 730 27 989
Total operating expenses 156 175 189 974 318 904 349 212
Operating Income Before Income Taxes 34 167 6 700 77 187 60 621
Income taxes 5 832 (2 108) 17 697 11 899
Operating Income 28 335 8 808 59 490 48 722
Other Income and Deductions:
Allowance for other funds used during
construction 404 192 859 366
Other income/(expense), net (1 951) (129 069) (4 112) (98 875)
Income taxes 838 55 470 1 629 42 798
Total other income and deductions (709) (73 407) (1 624) (55 711)
Income/(Loss) Before Interest Charges and 27 626 (64 599) 57 866 (6 989)
Dividends on Preferred Securities
Interest Charges and Dividends on
Preferred Securities:
Interest on long-term debt 11 522 10 693 22 534 21 411
Other interest 1 584 277 2 573 9 773
Allowance for borrowed funds used during
construction (347) (460) (742) (866)
Dividends on company-obligated mandatorily
redeemable preferred securities 2 250 - 4 500 -
Total interest charges and dividends
on preferred securities 15 009 10 510 28 865 30 318
Net Income/(Loss) 12 617 (75 109) 29 001 (37 307)
Preferred stock dividends 236 908 472 1 816
Earnings/(Loss) Available for Common Stock $ 12 381 $(76 017) $28 529 $(39 123)
The accompanying notes are an integral part of the consolidated financial statements.
-5-<PAGE>
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
In Thousands
Six Months
Ended June 30,
1995 1994
<S> <C> <C>
Operating Activities:
Net income/(loss) $ 29 001 $(37 307)
Adjustments to reconcile income/(loss) to cash provided:
Depreciation and amortization 38 538 40 621
Amortization of property under capital leases 7 599 7 016
Three Mile Island Unit 2 costs - 127 640
Voluntary enhanced retirement programs - 35 246
Nuclear outage maintenance costs, net 2 432 3 075
Deferred income taxes and investment
tax credits, net (3 179) (56 564)
Deferred energy costs, net 1 732 (11 438)
Accretion income - (669)
Allowance for other funds used
during construction (859) (366)
Changes in working capital:
Receivables (3 278) 1 110
Materials and supplies 1 067 9 707
Special deposits and prepayments (14,442) (15 386)
Payables and accrued liabilities (27 956) 67
Other, net 5 927 (3 992)
Net cash provided by operating activities 36 582 98 760
Investing Activities:
Cash construction expenditures (63 057) (61 095)
Contributions to decommissioning trusts (4 955) (5 488)
Other, net 18 60
Net cash used for investing activities (67 994) (66 523)
Financing Activities:
Issuance of long-term debt 59 625 49 687
Increase/(Decrease) in notes payable, net 15 973 (47 300)
Retirement of long-term debt - (26 000)
Capital lease principal payments (7 562) (6 579)
Contributions from parent corporation 10 000 -
Dividends paid on common stock (50 000) -
Dividends paid on preferred stock (472) (1 816)
Net cash provided/(required) by financing
activities 27 564 (32 008)
Net increase/(decrease) in cash and temporary cash
investments from above activities (3 848) 229
Cash and temporary cash investments, beginning of year 9 246 938
Cash and temporary cash investments, end of period $ 5 398 $ 1 167
Supplemental Disclosure:
Interest paid $ 27 913 $ 26 444
Income taxes paid $ 46 730 $ 4 142
New capital lease obligations incurred $ 15 261 $ 2 781
The accompanying notes are an integral part of the consolidated financial statements.
-6-</TABLE>
<PAGE>
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Metropolitan Edison Company (the Company), a Pennsylvania
corporation incorporated in 1922, 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 owns all of the
common stock of York Haven Power Company, the owner of a small hydroelectric
generating station, and Met-Ed Preferred Capital, Inc., which is the general
partner of Met-Ed Capital L.P., a special purpose finance subsidiary. The
Company's business is the generation, transmission, distribution and sale of
electricity. The Company is affiliated with Jersey Central Power & Light
Company (JCP&L) and Pennsylvania Electric Company (Penelec). The Company,
JCP&L and Penelec are referred to herein as "the Company and its affiliates."
The Company is also affiliated with GPU Service Corporation (GPUSC), a service
company; GPU Nuclear Corporation (GPUN), which operates and maintains the
nuclear units of the Subsidiaries; and Energy Initiatives, Inc. (EI) and EI
Power, Inc., which develop, own and operate nonutility generating facilities.
All of the Company's affiliates are wholly owned subsidiaries of GPU. The
Company and its affiliates, GPUSC, GPUN, EI and EI Power, Inc. are referred to
as the "GPU System".
These notes should be read in conjunction with the notes to consolidated
financial statements included in the 1994 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 1994 Annual
Report on Form 10-K.
1. COMMITMENTS AND CONTINGENCIES
NUCLEAR FACILITIES
The Company has made investments in two major nuclear projects--Three
Mile Island Unit 1 (TMI-1) which is an operational generating facility, and
Three Mile Island Unit 2 (TMI-2), which was damaged during a 1979 accident.
TMI-1 and TMI-2 are jointly owned by the Company, JCP&L, and Penelec in the
percentages of 50%, 25% and 25%, respectively. At June 30, 1995 and December
31, 1994, the Company's net investment in TMI-1 and TMI-2, including nuclear
fuel, was as follows:
Net Investment (Millions)
TMI-1 TMI-2
June 30, 1995 $316 $6*
December 31, 1994 $311 $6*
*The Company has recovered substantially all of its investment in TMI-2.
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
-7-
<PAGE>
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
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 (see NUCLEAR PLANT RETIREMENT
COSTS). Management intends, in general, to seek recovery of such costs
through the ratemaking process, but recognizes that recovery is not assured
(see COMPETITION AND THE CHANGING REGULATORY ENVIRONMENT).
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, and, 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, individual claims for
alleged personal injury (including claims for punitive damages), which are
material in amount, have been asserted against GPU and the Company and its
affiliates. Approximately 2,100 of such claims are pending in the United
States District Court for the Middle District of Pennsylvania. Some of the
claims also seek recovery for injuries from alleged emissions of radioactivity
before 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 federal 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 GPU System.
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 and the Company and its affiliates and
their suppliers under a reservation of rights with respect to any award of
punitive damages. However, in March 1994, the defendants in the TMI-2
litigation and the insurers agreed that the insurers would withdraw their
reservation of rights with respect to any award of punitive damages.
In June 1993, the Court agreed to permit pre-trial discovery on the
punitive damage claims to proceed. A trial of ten allegedly representative
cases is scheduled to begin in June 1996. In February 1994, the Court held
that the plaintiffs' claims for punitive damages are not barred by the
-8-
<PAGE>
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 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. In July 1994, the Court
granted defendants' motions for interlocutory appeal of these orders, stating
that they raise questions of law that contain substantial grounds for
differences of opinion. The issues are now before the United States Court of
Appeals for the Third Circuit.
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 (DOE).
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 TMI-1 by 2014, the end of the plant's license term. The TMI-2
funding completion date is 2014, consistent with TMI-2's 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 TMI-1 is
$157 million, of which the Company's share is $79 million. Based on NRC
studies, a comparable funding target for TMI-2 has been developed which takes
the accident into account (see TMI-2 Future Costs). 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 considered 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 a site-specific study of TMI-1
that considered various decommissioning plans and estimated the cost of
decommissioning the radiological portions of the plant to range from
-9-
<PAGE>
approximately $225 to $309 million, of which the Company's share would range
from $113 to $155 million (in 1994 dollars). In addition, the study estimated
the cost of removal of nonradiological structures and materials for TMI-1 at
$74 million, of which the Company's share is $37 million (in 1994 dollars).
To date, no site-specific study has been performed for TMI-2.
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. 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 and its affiliates charge to expense and contribute to external
trusts amounts collected from customers for nuclear plant decommissioning and
nonradiological costs. In addition, the Company has contributed amounts
written off for TMI-2 nuclear plant decommissioning in 1991 to TMI-2's
external trust and will await resolution of the case pending before the
Pennsylvania Supreme Court before making any further contributions for amounts
written off by the company in 1994 (see TMI-2 Future Costs). Amounts
deposited in external trusts, including the interest earned on these funds,
are classified as Nuclear Decommissioning Trusts on the balance sheet.
The Financial Accounting Standards Board (FASB) is currently reviewing
the utility industry's accounting practices for nuclear decommissioning costs.
If the FASB's tentative conclusions are adopted, TMI-1 retirement costs may
have to be recorded as a liability, rather than as accumulated depreciation,
with an offsetting asset recorded for amounts collectible through rates. Any
amounts that cannot be collected through rates may have to be charged to
expense. The FASB is expected to release an Exposure Draft on decommissioning
accounting practices by the fourth quarter of 1995.
TMI-1:
The Pennsylvania Public Utility Commission (PaPUC) previously granted
the Company revenues for decommissioning costs of TMI-1 based on its share of
the NRC funding target and nonradiological cost of removal as estimated in the
site-specific study. Collections from customers for retirement expenditures
are deposited in external trusts. Provision for the future expenditure of
these funds has been made in accumulated depreciation, amounting to
$26 million at June 30, 1995. TMI-1 retirement costs are charged to
depreciation expense over the expected service life of the nuclear plant.
Management believes that any TMI-1 retirement costs, in excess of those
currently recognized for ratemaking purposes, should be recoverable under the
current ratemaking process.
TMI-2 Future Costs:
The Company and its affiliates have recorded a liability for the
radiological decommissioning of TMI-2, reflecting the NRC funding target (in
1995 dollars). 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 for incremental
costs specifically attributable to monitored storage. In addition, the
-10-
<PAGE>
Company and its affiliates have recorded a liability for the nonradiological
cost of removal consistent with the TMI-1 site-specific study and have spent
$3 million as of June 30, 1995, of which the Company's share is $1.5 million.
Estimated TMI-2 Future Costs as of June 30, 1995 and December 31, 1994 for the
Company are as follows:
June 30, 1995 December 31, 1994
(Millions) (Millions)
Radiological Decommissioning $128 $125
Nonradiological Cost of Removal 36 36
Incremental Monitored Storage 9 9
Total $173 $170
The above amounts are reflected as Three Mile Island Unit 2 Future Costs
on the balance sheet. At June 30, 1995, $44 million was in trust funds for
TMI-2 and included in Nuclear Decommissioning Trusts on the balance sheet.
In 1993, a PaPUC rate order for the Company allowed for the future
recovery of certain TMI-2 retirement costs. The Pennsylvania Office of
Consumer Advocate requested the Commonwealth Court to set aside the PaPUC's
1993 rate order and in 1994, the Commonwealth Court reversed the PaPUC order.
In December 1994, the Pennsylvania Supreme Court granted the Company's request
to review that decision. Oral argument was held on April 27, 1995, and the
matter is pending. As a consequence of the Commonwealth Court decision, the
Company recorded pre-tax charges totaling $127.6 million during 1994. These
charges appear in the Other Income and Deductions section of the 1994
Consolidated Statement of Income and are composed of $82.6 million for
radiological decommissioning costs, $35 million for the nonradiological cost
of removal and $10 million for incremental monitored storage costs. The
Company will await resolution of the appeal pending before the Pennsylvania
Supreme Court before making any nonrecoverable funding contributions to
external trusts for its share of these costs. The Company is similarly
required to charge to expense its share of future increases in the estimate of
the costs of retiring TMI-2 if the Pennsylvania Supreme Court does not reverse
the Commonwealth Court's decision. Earnings on trust fund deposits are
recorded as income. Prior to the Commonwealth Court's decision, the Company
contributed $40 million to external trusts relating to its share of the
accident-related portion of the decommissioning liability. This contribution
was not recovered from customers and has been expensed.
As a result of TMI-2's entering long-term monitored storage in late
1993, the Company and its affiliates are incurring incremental annual storage
costs of approximately $1 million, of which the Company's share is
$.5 million. The Company and its affiliates estimate that the remaining
annual storage costs will total $19 million, of which the Company's share is
$9 million, through 2014, the expected retirement date of TMI-1.
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
-11-
<PAGE>
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 totals $2.7 billion. In
accordance with NRC regulations, these insurance policies generally require
that proceeds first be used for stabilization of 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
$8.9 billion. Coverage for the first $200 million of such liability is
provided by private insurance. The remaining coverage, or secondary financial
protection, is provided by retrospective premiums payable by all nuclear
reactor owners. Under secondary financial 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 (TMI-2 being excluded
under an exemption received from the NRC in 1994), subject to an annual
maximum payment of $10 million per incident per reactor. In addition to the
retrospective premiums payable under Price-Anderson, the GPU System is also
subject to retrospective premium assessments of up to $69 million, of which
the Company's share is $19 million, in any one year under insurance policies
applicable to nuclear operations and facilities.
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 beginning at $2.6 million per week for the first
year, decreasing by 20 percent for years two and three.
COMPETITION AND THE CHANGING REGULATORY ENVIRONMENT
Nonutility Generation Agreements:
Pursuant to the requirements of the federal Public Utility Regulatory
Policies Act (PURPA) and state regulatory directives, the Company has entered
into power purchase agreements with nonutility generators for the purchase of
energy and capacity for periods up to 26 years. The majority of these
agreements contain certain contract limitations and subject the nonutility
generators to penalties for nonperformance. While a few of these facilities
are dispatchable, most are must-run and generally obligate the Company to
purchase, at the contract price, the net output up to the contract limits. As
of June 30, 1995, facilities covered by these agreements having 246 MW of
capacity were in service and 89 MW were scheduled to commence operation later
in 1995. Estimated payments to nonutility generators from 1995 through 1999,
assuming all facilities which have existing agreements, or which have obtained
orders granting them agreements enter service, are $114 million, $170 million,
$278 million, $414 million and $419 million, respectively. These agreements,
in the aggregate, will provide approximately 812 MW of capacity and energy to
the Company, at varying prices.
-12-
<PAGE>
The emerging competitive generation market has created uncertainty
regarding the forecasting of the GPU System's energy supply needs which has
caused the Company and its affiliates to change their supply strategy to seek
shorter-term agreements offering more flexibility. Due to the current
availability of excess capacity in the marketplace, the cost of near- to
intermediate-term (i.e., one to eight years) energy supply from existing
generation facilities is currently and expected to continue to be
competitively priced at least for the near- to intermediate-term. The
projected cost of energy from new generation supply sources has also decreased
due to improvements in power plant technologies and reduced forecasted fuel
prices. As a result of these developments, the rates under virtually all of
the Company's and its affiliates' nonutility generation agreements are
substantially in excess of current and projected prices from alternative
sources.
The Company and its affiliates are seeking to reduce the above market
costs of these nonutility generation agreements by (1) attempting to convert
must-run agreements to dispatchable agreements; (2) attempting to renegotiate
prices of the agreements; (3) offering contract buy-outs while seeking to
recover the costs through their energy clauses and (4) initiating proceedings
before federal and state administrative agencies, and in the courts. In
addition, the Company and its affiliates intend to avoid, to the maximum
extent practicable, entering into any new nonutility generation agreements
that are not needed or not consistent with current market pricing and are
supporting legislative efforts to repeal PURPA. These efforts may result in
claims against the GPU System for substantial damages. There can, however, be
no assurance as to what extent the Company's and its affiliates' efforts will
be successful in whole or in part.
While the Company and its affiliates thus far have been granted recovery
of their nonutility generation costs from customers by the PaPUC and New
Jersey Board of Public Utilities (NJBPU), there can be no assurance that the
Company and its affiliates will continue to be able to recover these costs
throughout the term of the related agreements. The GPU System currently
estimates that in 1998, when substantially all of these nonutility generation
projects are scheduled to be in service, above market payments (benchmarked
against the expected cost of electricity produced by a new gas-fired combined
cycle facility) will range from $300 million to $450 million annually, of
which the Company's share will range from $90 million to $140 million
annually.
Regulatory Assets and Liabilities:
As a result of the Energy Policy Act of 1992 (Energy Act) and actions of
regulatory commissions, the electric utility industry is moving toward a
combination of competition and a modified regulatory environment. In
accordance with Statement of Financial Accounting Standards No. 71 (FAS 71),
"Accounting for the Effects of Certain Types of Regulation," 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:
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;
-13-
<PAGE>
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 any
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.
In accordance with the provisions of FAS 71, the Company has deferred
certain costs pursuant to actions of the PaPUC and the Federal Energy
Regulatory Commission (FERC) and is recovering or expects to recover such
costs in electric rates charged to customers. Regulatory assets are reflected
in the Deferred Debits and Other Assets section of the Consolidated Balance
Sheet, and regulatory liabilities are reflected in the Deferred Credits and
Other Liabilities section of the Consolidated Balance Sheet. Regulatory
assets and liabilities, as reflected in the June 30, 1995 Consolidated Balance
Sheet, were as follows:
(In thousands)
Assets Liabilities
Income taxes recoverable/refundable
through future rates $ 211,959 $ 27,663
TMI-2 deferred costs 5,314 -
TMI-2 tax refund - 2,423
Unamortized property losses 2,634 -
Unamortized loss on reacquired debt 7,305 -
DOE enrichment facility decommissioning 10,772 -
Other postretirement benefits 22,598 -
Other 1,890 1,770
Total $ 262,472 $ 31,856
-14-
<PAGE>
Income taxes recoverable/refundable through future rates: Represents amounts
deferred due to the implementation of FAS 109, "Accounting for Income Taxes,"
in 1993.
TMI-2 deferred costs: Represents costs that are being recovered through
wholesale rates for the remaining investment in the plant and fuel core.
TMI-2 tax refund: Represents the tax refund related to the tax abandonment of
TMI-2. This balance is being amortized by the Company concurrent with its
return to customers through a base rate credit.
Unamortized property losses: The NRC has mandated that the design of nuclear
reactors be documented. As a result, the Company's share of the costs
incurred in documenting TMI-1 plant design, in addition to costs incurred in a
study used to assess the vulnerability of nuclear reactors to severe
accidents, are recorded in this account. The study costs are amortized over
the life of the plant.
Unamortized loss on reacquired debt: Represents premiums and expenses incurred
in the redemption of long-term debt. In accordance with FERC regulations,
reacquired debt costs are amortized over the remaining original life of the
retired debt.
DOE enrichment facility decommissioning: These costs, representing payments
to the DOE over a 15-year period beginning in 1994, are currently being
collected through the Company's energy adjustment clause.
Other postretirement benefits: Includes costs associated with the adoption of
FAS 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." Recovery of these costs is subject to regulatory approval.
Amounts related to the decommissioning of TMI-1, which are not included
in Regulatory Assets on the balance sheet, are separately disclosed in NUCLEAR
PLANT RETIREMENT COSTS.
The Company continues to be subject to cost-based ratemaking regulation.
The Company is unable to estimate to what extent FAS 71 may no longer be
applicable to its utility assets in the future.
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, decommission or clean up waste disposal and other sites currently
or formerly used by it, including formerly owned manufactured gas plants, mine
refuse piles and generating facilities, 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.
To comply with the federal Clean Air Act Amendments (Clean Air Act) of
1990, the Company expects to spend up to $145 million for air pollution
control equipment by the year 2000. In developing its least-cost plan to
-15-
<PAGE>
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. In 1994, the
Ozone Transport Commission (OTC), consisting of representatives of 12
northeast states (including Pennsylvania and New Jersey) and the District of
Columbia, proposed reductions in nitrogen oxide (NOx) emissions it believes
necessary to meet ambient air quality standards for ozone and the statutory
deadlines set by the Clean Air Act. The Company expects that the U.S.
Environmental Protection Agency (EPA) will approve the proposal, and that as a
result, the Company will spend an estimated $10 million, beginning in 1997, to
meet the reductions set by the OTC. The OTC requires additional NOx
reductions to meet the Clean Air Act's 2005 National Ambient Air Quality
Standards for ozone. However, the specific requirements that will have to be
met at that time have not been finalized. The Company and its affiliates are
unable to determine what additional costs, if any, will be incurred.
The Company has been notified by the EPA and state environmental
authorities 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 4 hazardous and/or toxic waste sites. In
addition, the Company has been requested to voluntarily participate in the
remediation or 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 Company has also been named in lawsuits requesting damages for
hazardous and/or toxic substances allegedly released into the environment.
The ultimate cost 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 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.
OTHER COMMITMENTS AND CONTINGENCIES
The Company's construction programs, for which substantial commitments
have been incurred and which extend over several years, contemplate
expenditures of $115 million during 1995. As a consequence of reliability,
licensing, environmental and other requirements, additions to utility plant
may be required relatively late in their expected service lives. If such
additions are made, current depreciation allowance methodology may not make
adequate provision for the recovery of such investments during their remaining
lives. Management intends to seek recovery of such costs through the
ratemaking process, but recognizes that recovery is not assured.
The Company has entered into long-term contracts with nonaffiliated
mining companies for the purchase of coal for certain generating stations in
which it has ownership interests. The contracts, which expire between 1995
and the end of the expected service lives of the generating stations, require
the purchase of either fixed or minimum amounts of the stations' coal
requirements. The price of the coal under the contracts is based on
-16-
<PAGE>
adjustments of indexed cost components. The Company's share of the cost of
coal purchased under these agreements is expected to aggregate $24 million for
1995.
During the normal course of the operation of its businesses, 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 employees
alleging unlawful employment practices. It is not expected that the outcome
of these types of matters would have a material effect on the Company's
financial position or results of operations.
-17-
<PAGE>
Metropolitan Edison Company and Subsidiary Companies
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
1994 Annual Report on Form 10-K.
RESULTS OF OPERATIONS
Earnings available for common stock for the second quarter of 1995 were
$12.4 million, compared to a net loss of $76.0 million for the same period
ended 1994. The increase in second quarter earnings was due to the
recognition in 1994 of one-time charges totaling $92.9 million after-tax.
These one-time charges consisted of a write-off of certain Three Mile Island
Unit 2 (TMI-2) retirement costs ($72.8 million) resulting from a Pennsylvania
court order, and costs related to voluntary enhanced retirement programs
($20.1 million). Lower operation and maintenance (O&M) expense also
contributed to the earnings increase. However, this increase was more than
offset by lower sales from cooler spring weather this year compared to last
year.
For the six months ended June 30, 1995 earnings available for common
stock were $28.5 million, compared to a net loss of $39.1 million for the same
period last year. The same factors affecting the quarterly results also
affected the results for the six month period. In addition, the six month
June 1995 earnings comparison was negatively affected by lower sales due to
warmer 1995 winter weather. Also affecting the six months earnings comparison
was nonrecurring interest income (net of nonrecurring interest expense) in
1994 of $13 million after-tax resulting from refunds of previously paid
federal income taxes related to the tax retirement of TMI-2.
OPERATING REVENUES:
Total revenues for the second quarter of 1995 decreased 3.2% to
$190.3 million, as compared to the second quarter of 1994. For the six months
ended June 30, 1995, revenues decreased 3.4% to $396.1 million, as compared to
the same period last year. The components of the changes are as follows:
(In Millions)
Three Months Six Months
Ended Ended
June 30, 1995 June 30, 1995
Kilowatt-hour (KWH) revenues
(excluding energy portion) $ (8.9) $(16.1)
Energy revenues 6.7 8.4
Other revenues (4.1) (6.0)
Decrease in revenues $ (6.3) $(13.7)
-18-
<PAGE>
Kilowatt-hour revenues
The decrease in KWH revenues in the three and six month periods was due
primarily to lower residential sales from a warmer winter and cooler spring
this year as compared to the previous year. New customer additions in the
residential and commercial sectors partially offset these decreases.
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 for the three month period increased primarily from
higher energy cost rates, partially offset by lower sales. Energy revenues
for the six month period increased primarily from higher energy cost rates and
higher sales to other utilities, partially offset by lower sales to customers.
Other revenues
Generally, changes in other revenues do not affect earnings 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 since these cost
increases are substantially recovered through the Company's energy clause.
However, lower reserve capacity expense for the three months ended June 1995
contributed to earnings.
Fuel and Deferral of energy costs, net
Generally, changes in fuel expense and deferral of energy costs do not
affect earnings as they are offset by corresponding changes in energy
revenues.
Other operation and maintenance
The decrease in other O&M expense for the three and six months ended June
1995 was primarily attributable to a one-time $35.2 million pre-tax charge in
1994 related to the voluntary enhanced retirement programs. Also contributing
to the O&M reduction was payroll and benefits savings from the retirement
programs and lower first quarter winter storm repair costs.
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.
-19-
<PAGE>
OTHER INCOME AND DEDUCTIONS:
Other income/(expense), net
The increase in other income for the three and six months ended June 1995
was primarily attributable to a 1994 write-off of $127.6 million pre-tax for
certain TMI-2 retirement costs resulting from a Pennsylvania court order. The
increase was partially offset by lower first quarter interest income of
$29.8 million pre-tax resulting from 1994 refunds of previously paid federal
income taxes related to the tax retirement of TMI-2. The tax retirement of
TMI-2 resulted in a refund for the tax years after TMI-2 was retired.
INTEREST CHARGES AND DIVIDENDS ON PREFERRED SECURITIES:
Other interest
Other interest expense for the six months ended June 1995 decreased due
primarily to the recognition in the first quarter of 1994 of interest expense
related to the tax retirement of TMI-2. The tax retirement of TMI-2 resulted
in a $7.0 million pre-tax charge to interest expense on additional amounts
owed for tax years in which depreciation deductions with respect to TMI-2 had
been taken.
Dividends on company-obligated mandatorily redeemable preferred securities
In 1994, the Company issued $100 million of monthly income preferred
securities through a special-purpose finance subsidiary. Dividends on these
securities are payable monthly.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL NEEDS:
The Company's capital needs for the six months ended June 30, 1995
consisted of cash construction expenditures of $63 million. Construction
expenditures for the year are forecasted to be $115 million. Expenditures for
maturing debt are expected to be $41 million for 1995. Management estimates
that approximately one-half of the capital needs in 1995 will be satisfied
through internally generated funds.
FINANCING:
During the second quarter of 1995, the Company issued $30 million
principal amount of first mortgage bonds (FMBs), the proceeds of which were
used to reduce outstanding short-term debt.
Also in the second quarter, GPU sold one million shares of common stock
through an underwritten public offering. The net proceeds of $29.6 million
were used to make cash capital contributions to the Company and its
affiliates, of which the Company's share was $10 million.
In July 1995, the Company redeemed at maturity $12 million principal
amount of 4 5/8% FMBs. The Company also issued $28.5 million principal amount
of 6.10% FMBs as collateral for a like amount of pollution control revenue
refunding bonds issued by the Northampton County Industrial Development
Authority. The proceeds from the sale of the authority bonds will be used to
-20-
<PAGE>
redeem the Authority's 10 1/2% pollution control bonds maturing September 1,
1995, issued to finance construction of pollution control facilities at the
Company's Portland station.
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 1995. Under existing authorizations, the Company may issue senior
securities in the amount of $190 million, of which $100 million may consist of
preferred stock. The Company, through its special-purpose finance subsidiary,
has remaining regulatory authority to issue an additional $25 million of
monthly income preferred securities. The Company also has regulatory
authority to incur short-term debt, a portion of which may be through the
issuance of commercial paper.
The Company's bond indentures and articles of incorporation include
provisions that limit the amount of long-term debt, preferred stock and short-
term debt the Company may issue. The Company's interest and preferred
dividend coverage ratios are currently in excess of indenture and charter
restrictions. The ability to issue securities in the future will depend on
coverages at that time. The ability of the Company to issue, through its
special-purpose subsidiary, monthly income preferred securities, is not
affected by such coverage restrictions.
COMPETITIVE ENVIRONMENT:
In March 1995, prior to the Federal Energy Regulatory Commission's (FERC)
issuance of the Notice of Proposed Rulemaking on open access non-
discriminatory transmission services, the Company and its affiliates filed
with the FERC proposed open access transmission tariffs. Such proposed
tariffs provided for both firm and interruptible service on a point-to-point
basis. Network service, where requested, would be negotiated on a case by
case basis. In July 1995, the Company and its affiliates submitted to the
FERC further support and justification for their tariffs in response to a FERC
Staff request. The Company and its affiliates do not know whether or to what
extent the FERC will require modifications to any of the proposed terms and
conditions of these transmission tariffs.
In June 1995, the Securities and Exchange Commission (SEC) approved an
SEC Staff report containing a series of legislative and administrative
recommendations to reform the Public Utility Holding Company Act of 1935
(Holding Company Act). The SEC Staff recommended that the SEC support repeal
of the Holding Company Act with a minimum one year transition period, and a
transfer of audit, reporting and certain other responsibilities to the FERC
while giving state commissions access to holding company books and records.
In the interim, the Staff recommended that the SEC adopt a series of
administrative reforms that would streamline such things as the issuance of
securities for routine financings and permit a wide range of energy related
diversification activities. The Staff also recommended that the SEC more
flexibly interpret the Holding Company Act's integrated system requirements by
allowing utility acquisitions and specifically, combination electric and gas
systems, where the affected state commissions concur.
In response to the Staff report, the SEC has adopted certain changes
which will streamline routine financings, and has proposed a number of others.
GPU and other registered holding companies, believe, however, that repeal of
-21-
<PAGE>
the Holding Company Act is necessary to remove a significant impediment to
competition.
THE SUPPLY PLAN:
Managing Nonutility Generation
The Company is seeking to reduce the above market costs of nonutility
generation (NUG) agreements, including (1) attempting to convert must-run
agreements to dispatchable agreements; (2) attempting to renegotiate prices of
the agreements; (3) offering contract buy-outs while seeking to recover the
costs through its energy clause and (4) initiating proceedings before federal
and state administrative agencies, and in the courts. In addition, the
Company intends to avoid, to the maximum extent practicable, entering into any
new nonutility generation agreements that are not needed or not consistent
with current market pricing and are supporting legislative efforts to repeal
the Public Utility Regulatory Policies Act of 1978 (PURPA). These efforts may
result in claims against the Company for substantial damages. There can,
however, be no assurance as to what extent the Company's efforts will be
successful in whole or in part. The following is a discussion of some major
nonutility generation activities involving the Company.
In April 1995, the Company agreed to buy-out the power purchase agreement
for a 13 MW unconstructed nonutility generating facility. The Company
estimates that the buy-out of the uneconomic power purchase contract will save
its customers $16 million over 25 years. In June 1995, the PaPUC authorized
recovery from customers of the $1.65 million buy-out price over a two year
period, starting with the Company's April 1, 1996 energy cost rate.
In May 1995, the Company filed a petition for enforcement and declaratory
order with the FERC requesting that the FERC overturn two contracts with
nonutility generators, aggregating 327 MW of capacity, and to act against the
PaPUC's implementation of PURPA. Specifically, the Company contended that the
PaPUC's procedures resulting in orders to enter into contracts with qualifying
facilities at prices based on the costs of a "coal proxy" plant violate PURPA
and the FERC's implementing regulations. In June 1995, the FERC denied the
petition. The Company has filed a petition for rehearing with the FERC.
In 1994, a nonutility generator requested that the PaPUC order the
Company to enter into long-term agreements to buy capacity and energy. The
Company sought to dismiss the request based on a May 1994 PaPUC order, which
granted the Company and an affiliate permission to obtain additional
nonutility purchases through competitive bidding until new PaPUC regulations
have been adopted. In September 1994, the Pennsylvania Commonwealth Court
granted the PaPUC's application to revise its May 1994 order for the purpose
of reevaluating the nonutility generator's right to sell power to the Company.
The PaPUC subsequently ordered that hearings be held in this matter. In March
1995, the Company moved to dismiss the nonutility generator's petition. The
nonutility generator has filed a cross-motion for summary judgment. The
matter is pending before the PaPUC.
As part of an effort to reduce above-market payments under nonutility
generation agreements, the Company and its affiliates are seeking to implement
a program under which the natural gas fuel and transportation for the
Company's and its affiliates' gas-fired facilities, as well as up to
-22-
<PAGE>
approximately 1,100 MW of nonutility generation capacity, would be pooled and
managed by a nonaffiliated fuel manager. The Company and its affiliates
believe the plan has the potential to provide substantial savings for their
customers. The Company and its affiliates are conducting negotiations with a
nonaffiliated company to serve as fuel manager.
The Company has contracts and anticipated commitments with nonutility
generation suppliers under which a total of 246 MW of capacity are currently
in service and an additional 566 MW are currently scheduled or anticipated to
be in service by 1999.
-23-
<PAGE>
PART II
ITEM 1 - LEGAL PROCEEDINGS
Information concerning the current status of certain legal
proceedings instituted against the Company and its affiliates and
GPU 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 Consolidated 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 9, 1995, the
following were elected directors of the Company for the ensuing
year:
R. C. Arnold
J. F. Furst
J. G. Graham
F. D. Hafer
J. R. Leva
G. R. Repko
R. S. Zechman
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.
(27) Financial Data Schedule.
(b) Reports on Form 8-K:
None.
-24-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this quarterly report to be signed on its behalf by
the undersigned thereunto duly authorized.
METROPOLITAN EDISON COMPANY
August 8, 1995 By: /s/ F. D. Hafer
F. D. Hafer, President
August 8, 1995 By: /s/ D. L. O'Brien
D. L. O'Brien, Comptroller
(Principal Accounting Officer)
-25-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000065350
<NAME> METROPOLITAN EDISON COMPANY
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,596,312
<OTHER-PROPERTY-AND-INVEST> 88,514
<TOTAL-CURRENT-ASSETS> 187,929
<TOTAL-DEFERRED-CHARGES> 425,932
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,298,687
<COMMON> 66,273
<CAPITAL-SURPLUS-PAID-IN> 355,200
<RETAINED-EARNINGS> 172,088
<TOTAL-COMMON-STOCKHOLDERS-EQ> 593,561
100,000 <F1>
23,598
<LONG-TERM-DEBT-NET> 603,284
<SHORT-TERM-NOTES> 8,100
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 7,873
<LONG-TERM-DEBT-CURRENT-PORT> 27,018
0
<CAPITAL-LEASE-OBLIGATIONS> 1,455
<LEASES-CURRENT> 42,090
<OTHER-ITEMS-CAPITAL-AND-LIAB> 891,708
<TOT-CAPITALIZATION-AND-LIAB> 2,298,687
<GROSS-OPERATING-REVENUE> 396,091
<INCOME-TAX-EXPENSE> 17,697
<OTHER-OPERATING-EXPENSES> 318,904
<TOTAL-OPERATING-EXPENSES> 336,601
<OPERATING-INCOME-LOSS> 59,490
<OTHER-INCOME-NET> (1,624)
<INCOME-BEFORE-INTEREST-EXPEN> 57,866
<TOTAL-INTEREST-EXPENSE> 28,865 <F2>
<NET-INCOME> 29,001
472
<EARNINGS-AVAILABLE-FOR-COMM> 28,529
<COMMON-STOCK-DIVIDENDS> 50,000 <F3>
<TOTAL-INTEREST-ON-BONDS> 44,393
<CASH-FLOW-OPERATIONS> 36,582
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> REPRESENTS COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED
<F1> SECURITIES.
<F2> INCLUDES DIVIDENDS ON COMPANY-OBLIGATED MANDATORILY REDEEMABLE
<F2> PREFERRED SECURITIES OF $4,500.
<F3> REPRESENTS COMMON STOCK DIVIDENDS PAID TO PARENT CORPORATION.
</FN>
<PAGE>
</TABLE>
<TABLE>
Exhibit 12
METROPOLITAN EDISON COMPANY AND SUBSIDIARY 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, June 30,
1995 1994
<S> <C> <C>
OPERATING REVENUES $396 091 $409 833
OPERATING EXPENSES (excluding
taxes based on income) 318 904 349 212
Interest portion of rentals (A) 2 547 2 534
Net expense 316 357 346 678
OTHER INCOME:
Allowance for funds used
during construction 1 601 1 232
Other income, net (4 112) (98 875)
Total other income (2 511) (97 643)
EARNINGS AVAILABLE FOR FIXED CHARGES $ 77 223 $(34 488)
FIXED CHARGES:
Interest on funded indebtedness $ 22 534 $ 21 411
Other interest (B) 7 073 9 773
Interest portion of rentals (A) 2 547 2 534
Total fixed charges $ 32 154 $ 33 718
RATIO OF EARNINGS TO FIXED CHARGES 2.40 (1.02)(D)
Preferred stock dividend requirement $ 472 $ 1 816
Ratio of income before provision for
income taxes to net income (C) 155.4% 182.8%
Preferred stock dividend requirement
on a pre-tax basis 733 3 319
Fixed Charges, as above 32 154 33 718
Total fixed charges and preferred
stock dividends $ 32 887 $ 37 037
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS 2.35 (.93)(D)
<FN>
NOTES:
(A) The Company included the equivalent of the interest portion of all rentals
charged to income as fixed charges for this statement and excluded such
components from Operating Expenses.
(B) Includes dividends on company-obligated mandatorily redeemable preferred
securities of $4,500 for 1995.
(C) Represents income before provision of income taxes of $45,069 and $(68,206)
for 1995 and 1994, respectively, divided by income of $29,001 and $(37,307).
(D) Pre-tax earnings for the six-months ended June 30, 1994 were inadequate to
cover both fixed charges and combined fixed charges and preferred stock
dividends. The deficiency in pre-tax earnings for the ratio of earnings to
fixed charges and the ratio of earnings to combined fixed charges and
preferred stock dividends is $68,206 and $71,525, respectively, which
represents additional pre-tax earnings needed to reach a one-to-one ratio.
</FN>
</TABLE>
<PAGE>
