FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report: July 3, 1996
PECO ENERGY COMPANY
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 1-1401 23-0970240
(State or other (SEC (IRS Employer
jurisdiction of file number) Identification
incorporation) Number)
230l Market Street, Philadelphia, Pennsylvania 19103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(215) 841-4000
<PAGE>
ITEM 5. OTHER EVENTS
The Pennsylvania Public Utility Commission (PUC) today issued a
report and recommendation that outlines its vision of a competitive
electricity market in the state. The report and recommendation, sent to
Governor Tom Ridge and the General Assembly, contains recommendations
on how to design and implement a system that features customer choice of
generation supplier.
The key items in the report include:
A TWO-STAGE TRANSITION PERIOD
First Stage: An initial five years used to test the impact of
wholesale competition, mitigate stranded investment, institute
pilot programs, enact necessary legislation and examine
regulatory filings. The first stage could be as short as three
years if the prerequisites to instituting competition are
satisfied within a shorter time frame. Likewise, the time period
could be longer if the pace of restructuring is delayed due to
unforeseen circumstances, such as litigation or lack of enabling
legislation.
Second Stage: A four-year phase-in period beginning in 2001,
with at least 10 percent of load eligible for choice by 2002; at
least 25 percent by 2003; at least 50 percent by 2004; and 100
percent by 2005.
RECOVERY OF STRANDED COSTS
The recommendation provides for the opportunity to recover up to
100 percent of verifiable, prudently incurred, net, non-
mitigatable stranded costs. The PUC will determine, during the
First Stage, the level of stranded costs that will be eligible
for cost recovery. Stranded costs and recovery mechanisms will
be considered on a case-by-case basis.
All utilities are expected to mitigate as much potential stranded
investment as possible during the First Stage transition period,
without increasing rates. Stranded costs will be recovered
through a non-bypassable competitive transition charge (CTC) that
is adjusted annually. Authorized transition costs not recovered
during the Second Stage should not be recoverable unless
otherwise authorized by the PUC.
The PUC indicates that it will provide accounting flexibility in
support of mitigation measures such as accelerated depreciation,
debt buy downs, and regulatory asset retirement.
<PAGE>
Excluded from recovery: transition costs which could have been
mitigated previously, or which are already recovered through a
net increase in the value of other assets.
OTHER RECOMMENDATIONS
- - Milestone reviews, which may include examination of mitigation
and/or quantification of stranded investment; pilot programs;
jurisdictional issues and reliability, will be conducted by the
PUC during both stages to ensure that the transition is conducted
in a careful and appropriate manner.
- - Costs for social programs will be recovered from all
customers, at the same level as is currently in rates, and
distributed from a Universal Service Fund.
- - Performance-Based Regulation should replace the existing
method of setting rates whenever shareholder interests can
coincide with ratepayer interests in least-cost service.
- - Although the PUC does not have the authority to order pilot
programs, it will encourage utilities to propose and implement
such programs during the First Stage. The PUC will issue a
tentative order inviting companies to propose pilot programs,
which are to represent no more than 5 percent of peak load.
- - Companies are encouraged to investigate participation in an
independent system operator/spot market environment.
- - The PUC acknowledges that changes will impact state taxes, and
calls on the legislature to address this issue.
IMPLEMENTATION TIMELINE
- - First Stage (transition period): 1996 - 2001.
Pilot programs in place as early as April 1997.
- - Second Stage (phase-in period): 2001 - 2005.
NEXT STEPS
- - Companies will file tentative restructuring plans with the PUC
by April 1, 1997.
<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 hereunto
duly authorized.
PECO ENERGY COMPANY
\s\ J. B. Mitchell
Vice President - Finance
and Treasurer
July 3, 1996
