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: July 18, 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
<PAGE>
Item 5. Other Events
As previously reported in the Company's Current Report on Form 8-K dated April
1, 1997, the Company filed its comprehensive restructuring plan with the
Pennsylvania Public Utility Commission (PUC) under the Pennsylvania Electricity
Generation Customer Choice and Competition Act (Competition Act).
The Company today filed with the PUC rebuttal testimony in its restructuring
proceeding.
The testimony filed today responds to previously filed proposals by various
intervening parties and discusses the impact on the Company's future financial
condition and results of operations of some of these proposals. The Company
urges the PUC to reject these extreme positions in favor of a more measured
approach which fairly balances the interests of all constituencies, as
contemplated by the Competition Act.
Thirteen parties have submitted testimony covering a broad spectrum of issues.
Some have confined their comments to relatively narrow areas of concern; others
have commented on virtually every aspect of the Company's filing. Three parties
have set forth comprehensive proposals: Office of Trial Staff (OTS); Office of
Consumer Advocate (OCA); and the Philadelphia Area Industrial Energy Users Group
(PAIEUG).
The Company's rebuttal witnesses address the following major subject areas:
Quantification/Recovery of Stranded Costs
Allocation of Costs and Rate Unbundling
Universal Service
Consumer Education
Economic Impact on Community
Quantification/Recovery of Stranded Costs
Several parties have proposed, either expressly or implicitly, that the PUC
reduce the Company recoverable costs through various forms of "sharing." These
proposals fall into the following broad categories:
Reduced stranded generation costs resulting from the use of a higher
market price projection than that proposed by the Company.
Recommendations that shareholders be required to absorb a percentage of
stranded generating costs. Recommendations that shareholders be forced
to forgo a return on their investment.
Denial of recovery of all or a portion of future decommissioning costs.
While the testimony addresses each issue separately, it also provides a summary
of the impact on the Company's financial condition of the OTS, OCA, PAIEUG
proposals as compared to the Company's proposal.
<PAGE>
Recommendations for stranded cost recovery are summarized below:
The Company $6.8 billion
OTS $4.9 billion; 70/30 customer/shareholder
sharing of stranded plant
OCA $4.3 billion; no return on stranded plant
PAIEUG $3.7 billion; no return on stranded plant
If any of the intervenor proposals is adopted, the impact on the Company's
financial condition would be significant.
The OCA and PAIEUG proposals would cause a write-off of at least $798
million, or more than $2.00 per share, in regulatory assets in the
1997-98 time frame.
Cash flow and other critical financial measures would be negatively
affected. Cash flow would not be expected to meet scheduled maturity
needs, dividend, and capital expenditures during virtually the entire
transition period.
The Company expects that it would not maintain an S&P investment-grade
rating of its mortgage bonds during virtually the entire transition
period.
The proposals would significantly jeopardize the ability of the Company
to maintain its current dividend.
The Company cannot currently predict what decision the PUC will ultimately reach
in the Company's restructuring proceeding or what impact that decision will
ultimately have on the Company's future financial condition, results of
operation or common stock dividend.
A final decision in the restructuring proceeding is not expected until January
1998. The schedule:
August 1 Opposing Party Surrebuttal
August 4-22 Evidentiary Hearings
November 4 ALJ Recommended Decision
December 18 Polling by Commissioners
January 8, 1998 Commission Order
Estimated Financial Impact of Restructuring Proposals
The following estimates were prepared by the Company solely for the purpose of
demonstrating in the Company's rebuttal testimony the relative impact of the
Company's proposal and the intervenors' proposals on the Company's financial
condition. The estimates are not intended to be and should not be used as a
forecast or projection of the Company's future financial condition or results of
operation. The Company currently does not provide analysts with projections of
future earnings and does not anticipate changing this policy in the foreseeable
future.
<PAGE>
<TABLE>
Earnings Per Share ($/sh)
<CAPTION>
1999 2000 2001 2002 2003 2004 2005
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PECO(1) 1.32 1.45 1.62 1.64 1.65 1.59 1.55
OTS 0.07 0.42 1.03 1.22 1.41 1.56 1.69
OCA (0.17) 0.13 0.67 0.83 0.98 1.09 1.18
PAIEUG (0.16) 0.14 0.67 0.81 0.95 1.07 1.15
<FN>
(1) Assumes $6.8 billion stranded cost recovery; $1.1 billion
securitization; seven-year Competitive Transition Charge (CTC) recovery
period. Extension of the CTC recovery period and/or additional
securitization would result in higher earnings per share. The
opportunity for both is provided for in the Competition Act.
</FN>
</TABLE>
<TABLE>
Net Cash Flow (2) (Mil $)
<CAPTION>
1999 2000 2001 2002 2003 2004 2005
<S> <C> <C> <C> <C> <C> <C> <C>
PECO (183) 280 2 (172) (124) 330 236
OTS (558) (29) (216) (361) (276) 220 160
OCA (667) (137) (331) (479) (400) 89 24
PAIEUG (669) (170) (365) (517) (440) 51 (17)
<FN>
(2) Defined as cash from operations less scheduled maturities, capital
expenditures and common dividends.
</FN>
</TABLE>
<TABLE>
Net Cash Flow Per Share ($/sh)
<CAPTION>
1999 2000 2001 2002 2003 2004 2005
<S> <C> <C> <C> <C> <C> <C> <C>
PECO (0.92) 1.41 0.01 (0.86) (0.62) 1.66 1.19
OTS (2.80) (0.15) (1.09) (1.81) (1.39) 1.11 0.80
OCA (3.10) (0.64) (1.54) (2.23) (1.86) 0.41 0.11
PAIEUG (3.25) (0.79) (1.70) (2.40) (2.05) 0.24 (0.08)
<FN>
Shares (3)
(3) The Company and OTS - 199 million shares outstanding for the
entire transition period (1999-2005);
OCA and PAIEUG - 215 million shares outstanding for the entire
transition period (1999-2005).
</FN>
</TABLE>
* * * *
<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 18, 1997
