FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report: August 27, 1997
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 19101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(215) 841-4000
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Item 5. Other Events
As previously reported in the Company's Current Report on Form 8-K dated August
13, 1997, on that date, the Company and various other parties filed with the
Pennsylvania Public Utility Commission (PUC) a Motion for Suspension of the
Administrative Schedule in the Company's Restructuring Proceeding. On August 14,
1997, the PUC granted the Motion.
On August 27, 1997, the Company and a group of other parties filed a Joint
Petition for Partial Settlement in the Pennsylvania Public Utility Commission
(PUC) industry restructuring proceeding. The proceeding, which began April 1,
1997, with the Company's filing of its comprehensive restructuring plan, is
pursuant to the Electricity Generation Competition and Customer Choice Act
(Competition Act). The settlement, which must be approved by the PUC, includes
the following parties: PECO Energy; Senator Vincent J. Fumo; Lance S. Haver; the
Consumers Education and Protective Association et al. (CEPA); the Office of
Trial Staff (OTS); the Office of Consumer Advocate (OCA); the Office of Small
Business Advocate (OSBA); the Philadelphia Area Industrial Energy Users Group
(PAIEUG); the American Association of Retired Persons (AARP) and the Department
of the Navy.
Key Features of the Joint Petition for Partial Settlement
- - Recovery of $5.46 billion in stranded assets and costs through a Competitive
Transition Charge (CTC) or an Intangible Transition Charge (ITC) over a period
of 10 years beginning January 1, 1999. The Company will begin to amortize these
costs (11-year amortization period) upon approval of the settlement.
- - A write-off of at least $2 billion of stranded costs (approximately $5.40 per
share) in 1997.
- - Rate reduction of 10 percent on September 1, 1998.
- - Approval to securitize up to $4 billion of authorized stranded costs.
- - Separation of generation by establishment of a separate corporate entity or
entities.
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- - Customer choice phased in for all customers in three steps: one-third of the
peak load of each customer class on January 1, 1999, one-third on January 2,
1999 and the remainder on January 2, 2000.
Stranded Cost Recovery
Below is a summary of stranded cost recovery, as requested by the Company in its
April 1, 1997 filing; as updated in its July 18, 1997 Rebuttal filing; and as
delineated in the settlement agreement.
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April 1, 1997
Restructuring July 18, 1997
Filing Rebuttal Filing Settlement
(000) (000) (000)
Generation Plant $6,688,384 $6,787,296 (1) $6,787,296
Market Value (2,862,913) (2,303,000) (2,303,000)
----------- ----------- -----------
Stranded Generation Assets 3,825,471 4,484,296 4,484,296
Regulatory Assets (3) 2,589,057 2,589,057 2,589,057
Regulatory Liabilities (5,319) (5,319) (5,319)
Nuclear Decommissioning 236,929 233,827 233,827
Fossil Decommissioning 126,605 126,605 126,605
Other Transition Costs 32,661 32,661 32,661
Disallowance 0 0 (2,000,000)(2)
----------- ----------- -----------
Total $6,805,404 $7,461,127 $5,461,127
(1) Adjusted for additional common plant.
(2) Represents $2 billion of stranded regulatory assets.
(3) Regulatory Assets
Description (000)
- ----------------------------------------------------------------------
Carrying charges on 50 percent of Limerick
common plant not included in ratebase $175,812
Carrying charges on 50 percent of common
plant of Peach Bottom, Salem and Eddystone 17,400
Unamortized loss on reacquired debt 158,311
Nuclear design basis documentation 28,852
Limerick "early window" deferred costs 86,286
Deferred fuel costs 311,468
Deferred SFAS 106 costs 100,580
Deferred SFAS 109 tax expense 1,687,069
Other 23,279
----------
Total Regulatory Assets $2,589,057
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Rate Reductions
The Company commits to guaranteed across-the-board reductions in the retail
rates that were effective December 31, 1996. The CTC is not subject to
reconciliation or true-up.
<TABLE>
<CAPTION>
Schedule of Average Rates
(cents)/kWh
Effective Date Transmission Distribution CTC/ITC Cumulative Energy & Total Generation
Rate Capacity Bill Rate Rate
Decrease(a) Cap Cap(b) Cap(c)
(1) (2) (3) (3') (4) (5) (6)
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
September 1, 1998 N/A N/A N/A N/A N/A 8.95 N/A
January 1, 1999 0.47 2.64 3.04 10% 2.80 8.95 5.84
January 1, 2000 0.47 2.64 3.04 10% 2.80 8.95 5.84
January 1, 2001 0.47 2.64 3.14 9% 3.20 9.45 6.34
January 1, 2002 0.47 2.64 3.14 9% 3.50 9.75 6.64
January 1, 2003 0.47 2.64 3.14 9% 3.70 9.95 6.84
January 1, 2004 (d) (d) 2.87 12% 3.97 N/A 6.84
January 1, 2005 (d) (d) 2.77 13% 4.07 N/A 6.84
January 1, 2006 (d) (d) 2.57 15% 4.77 N/A 7.34
January 1, 2007 (d) (d) 2.47 16% 5.37 N/A 7.84
January 1, 2008 (d) (d) 2.27 18% 5.57 N/A 7.84
(end 12-31-08) -- -- -- 40% -- -- --
</TABLE>
(a) The figures listed in this column present, on average for each year,
the percentage decreases relative to the Company's total bundled rates
for service on December 31, 1996, reflected in the CTC or ITC.
(b) Total Bill Rate Cap (column 5) = sum of columns (1)+(2)+(3)+(4)
(c) Generation Rate Cap (column 6) = sum of columns (3)+(4). The cap on
generation rates will be extended, at higher levels than under the
Competition Act, until December 31, 2008.
(d) The cap on the Company's transmission and distribution rates under the
Competition Act will be extended until January 1, 2004.
Notes:
- - Average figures for CTC/ITC from 1999-2008 in column 3 are fixed.
- - Transmission and Distribution average rates will not exceed the sum of the
figures in columns 1 and 2.
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- - Prices for energy and capacity for the Company's generation customers will
not, on average, exceed the figures in column 4.
- - Total rates for the Company's generation customers will not, on average,
exceed the figures in column 5.
- - The generation portion of bills for the Company's generation customers will
not, on average, exceed the figures in column 6.
- - If any legal impediment precludes the Company from securitizing its stranded
costs, the average rate caps will be increased by 0.3 cents/kWh and the
September 1, 1998 rate reduction will be 7.0 percent. Such legal impediments do
not include approvals, if any, required by the Securities and Exchange
Commission or the Internal Revenue Service.
Securitization
As part of the settlement, the PUC will issue an irrevocable Qualified Rate
Order (QRO) approving the securitization - at the Company's discretion - of up
to $4 billion of recoverable stranded costs. No timing of issuance has yet been
determined.
Other Features
- - Effective January 1, 1999, the Company will unbundle its rates into
distribution charges, transmission charges, ITC and/or CTC, and the market price
for energy and capacity.
- - Subject to receipt of necessary regulatory approvals, the Company will
transfer ownership and operation of its generating facilities to a separate
corporate entity. The generating facilities will be valued for transfer purposes
at a market value of $2.303 billion. If such authorizations are not obtained,
the Company will separate its generating functions into a separate business
unit.
- - The generation rate cap provisions of the Competition Act and the settlement
apply to those customers who remain generation customers of the distribution
utility.
<PAGE>
Customers who choose to purchase power from alternative suppliers and later
return to purchase power from the Company (the local distribution company) will
have the option to receive the Company's generation on a monthly market rate
basis (without benefit of the generation rate cap) or on a minimum 12-month
contract basis (with benefit of the generation rate cap).
- - Until December 31, 2008, the Company will purchase energy and capacity from
the Company's generation subsidiary or from other sources for those retail
customers who do not choose other suppliers. These customers will be charged
market energy prices determined by the Company. These rates and the Company's
purchases will not be subject to prudence review, but will be subject to the
rate cap.
- - To ensure adequate funding levels for nuclear decommissioning, the Company
will establish an adjustment clause to capture future increases and decreases in
the costs of decommissioning its share of the Limerick, Peach Bottom and Salem
plants. The Company's generation entity will contribute $36.7 million annually
to external trust funds. These amounts are in addition to the $234 million to be
collected through the CTC/ITC.
PUC Approval Required
Subject to PUC approval, this is a comprehensive settlement of all stranded
investment, asset securitization, customer education, universal service,
ratemaking and rate unbundling issues in the Company's restructuring proceeding.
Issues not addressed in the settlement, such as metering, billing, etc., will be
considered in the various working groups already formed, litigation among the
parties, further settlement discussions, or other forums as determined by the
PUC.
The petitioners have asked the PUC to suspend the restructuring proceeding. The
administrative law judges must issue a recommendation to the PUC, which must
then issue an order approving or not approving the settlement.
There is not yet an official timetable for consideration of the settlement.
* * * *
<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
August 27, 1997
