SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of
earliest event reported): May 26, 1994
PENNSYLVANIA ELECTRIC COMPANY
(Exact name of registrant as specified in charter)
Pennsylvania 1-3522 25-0718085
(State or other (Commission (IRS employer
jurisdiction of file number) identification no.)
incorporation)
1001 Broad Street, Johnstown, Pennsylvania 15907
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (814) 533-8111
<PAGE>
Item 5. OTHER EVENTS.
As previously reported, in March 1993 the Pennsylvania
Public Utility Commission ("PaPUC") issued a generic policy
statement permitting the deferral of incremental expense
associated with the adoption by Pennsylvania utilities of
Statement of Financial Accounting Standards No. 106 ("FAS 106"),
"Employer's Accounting for Postretirement Benefits Other Than
Pensions."
Consistent with the PaPUC policy statement, in July
1993 Pennsylvania Electric Company ("Penelec") filed a petition
with the PaPUC seeking approval to defer approximately $10
million annually of FAS 106 incremental expense until such
expense has been recognized in Penelec's base rates. The PaPUC
approved Penelec's petition by declaratory order in October 1993.
The Company's affiliate, Metropolitan Edison Company ("Met-Ed"),
had earlier received PaPUC authorization as part of a 1993 order
issued in Met-Ed's retail base rate case to defer incremental FAS
106 expense in which the PaPUC stated that "provided that the
Company can satisfy its burden of proving adequate cost controls
in a future rate case within five years of the inception of FAS
106, the prudently incurred costs booked to the regulatory asset
account can be included in rates". The rate order did not,
however, provide for current collection of revenues associated
with such costs.
As also previously reported, in a proceeding involving
an unaffiliated Pennsylvania utility, Pennsylvania Power & Light
Company ("PP&L"), the Pennsylvania Office of Consumer Advocate
("Advocate") appealed a PaPUC declaratory order issued outside a
1
<PAGE>
full base rate proceeding permitting that utility to defer its
incremental FAS 106 expense pending its next base rate order. On
May 26, 1994, the Pennsylvania Commonwealth Court upheld the
Advocate's appeal and reversed the PaPUC's declaratory order.
The Commonwealth Court held that FAS 106 expense incurred by PP&L
after January 1, 1993 (the effective date for the FAS 106
accounting change) but prior to its next base rate case could not
be deferred for future recovery as part of a later base rate case
order, and that to assure such future recovery constituted
unlawful retroactive ratemaking.
The ultimate outcome of any appeal by a party to that
case, should one be made, of the Commonwealth Court decision can
not be predicted.
Unless the Commonwealth Court decision is overturned,
Penelec would have to write-off any FAS 106 expense amounts
deferred on its books. It is estimated that approximately $14.5
million (before income taxes) representing the Pennsylvania
jurisdictional amount of incremental expense resulting from FAS
106 will have been deferred by Penelec during 1993 and through
June 30, 1994. Moreover, after any write-off, Penelec would
charge to income annual incremental expense resulting from FAS
106 which currently approximate $9.6 million (before income
taxes).
As noted above, Met-Ed was authorized in a 1993 retail
base rate order of the PaPUC to defer for future recovery annual
incremental (including the annual transition obligation) FAS 106
expense which amount to approximately $8.4 million (before income
taxes) and which will have amounted to approximately $12 million
2
<PAGE>
through June 30, 1994. As previously reported, the Advocate has
appealed certain aspects of the PaPUC's 1993 rate order for Met-
Ed, including the deferral for future recovery of incremental FAS
106 expense. However, the Advocate did not pursue the FAS 106
issue in its brief or in oral argument.
The Advocate also has appealed a PaPUC base rate order
granting an unaffiliated Pennsylvania water utility recovery in
current rates of its transition obligation resulting from the
utility's adoption of FAS 106 on January 1, 1993. On June 7,
1994, the Commonwealth Court affirmed the PaPUC's order and
dismissed the appeal, finding that the PaPUC's allowance of
recovery of FAS 106 transition obligation costs did not
constitute unlawful retroactive ratemaking.
There can be no assurance of the ultimate outcome of
these proceedings.
3
<PAGE>
SIGNATURE
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.
PENNSYLVANIA ELECTRIC COMPANY
By:_______________________________
Don W. Myers
Vice President and Treasurer
Date: June 10, 1994
<PAGE>
