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: April 30, 1998
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
On April 29, 1998, the Company and other parties to the Company's restructuring
proceeding filed a Joint Petition for Settlement (Joint Petition) with the
Pennsylvania Public Utility Commission (PUC). 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 Joint Petition, which must be approved by the PUC, was signed by many
parties, including consumer groups, industrial users, utilities and marketers.
The Joint Petition represents a comprehensive settlement that resolves issues on
appeal before the Commonwealth Court of Pennsylvania (Commonwealth Court) and
the United States District Court for the Eastern District of Pennsylvania
(Eastern District Court) by parties to the settlement.
The following is a summary of the major elements of the settlement:
- Recovery of $5.26 billion of stranded costs over a 12-year transition
period beginning January 1, 1999 and ending December 31, 2010, with a
return of 10.75 percent.
- Rate caps will vary over the transition period. (See table.)
- Guaranteed rate reductions in the first two years of the transition
period -- a total of 8 percent in 1999 and a minimum of 6 percent in
2000.
- Beginning on January 1, 1999, the Company will unbundle rates into three
components:
- a transmission and distribution (T&D) rate of 2.98 cents per kWh.
- a competitive transition charge (CTC) designed to recover the $5.26
billion of stranded costs. Revenue collected through the CTC will be
reconciled annually based on actual sales.
- a shopping credit initially set at 4.46 cents per kWh on a system-
wide basis.
- Authorization for the Company to securitize up to $4 billion of stranded
costs. The intangible transition charges (ITC) associated with transition
bonds must terminate no later than December 31, 2010. Rates under the
settlement include the anticipated benefits of securitization. No rate
adjustment will be made upon issuance of transition bonds.
- Flexible pricing, within a specified range, for residential default
customers.
- Customer choice phased in between January 1, 1999 and January 2, 2000.
- Authorization for the Company to transfer its generation assets to a
separate entity.
- Ability of electric generation suppliers (EGS) to provide metering and
billing services to retail customers who have direct access.
- On January 1, 2001, the provider of default service for 20 percent of
residential customers will be bid competitively.
- If 35 percent and 50 percent of all customers are not shopping by 2001
and 2003, respectively, a number of customers sufficient to equal those
trigger points shall be randomly selected and assigned to licensed
suppliers by a PUC-determined process.
SCHEDULE OF RATES
<TABLE>
SCHEDULE OF SYSTEM AVERAGE RATES
(cent)/KWH
<CAPTION>
Eff. Date Trans.(a) Distr. T&D Rate CTC/ITC Shopping Generation
Cap(b) Credit Rate
Cap(c)
(1) (2) (3) (4) (5) (6)
<S> <C> <C> <C> <C> <C> <C> <C>
January 1, 1999 0.45 2.53 2.98 1.72 4.46 6.18
January 1, 2000 0.45 2.53 2.98 1.92 4.46 6.38
January 1, 2001 0.45 2.53 2.98 2.51 4.47 6.98
January 1, 2002 0.45 2.53 2.98 2.51 4.47 6.98
January 1, 2003 0.45 2.53 2.98 2.47 4.51 6.98
January 1, 2004 0.45 2.53 2.98 2.43 4.55 6.98
January 1, 2005(d) 0.45 2.53 2.98 2.40 4.58 6.98
January 1, 2006 (e) (e) N/A 2.66 4.85 7.51
January 1, 2007 (e) (e) N/A 2.66 5.35 8.01
January 1, 2008 (e) (e) N/A 2.66 5.35 8.01
January 1, 2009 (e) (e) N/A 2.66 5.35 8.01
January 1, 2010 (e) (e) N/A 2.66 5.35 8.01
<FN>
(a) Transmission prices listed are for illustration only. The PUC does not regulate
rates for transmission service.
(b) T&D Rate Cap (column 3) = sum of columns (1)+(2).
(c) Generation Rate Cap (column 6) = sum of columns (4)+(5). The cap on
generation rates will be extended, at higher levels than set forth in the
Competition Act, until December 31, 2010. In the Competition Act,
generation rates were capped until 2005.
(d) Effective until June 30, 2005.
(e) The cap on the Company's T&D rates under the Competition Act will be
extended until June 30, 2005. In the Competition Act, T&D rates were
capped until 2001.
NOTES:
- Average figures for CTC/ITC from 1999-2010 in column 4 are fixed,
subject to reconciliation for actual sales levels.
- The shopping credit figures in column 5 will be adjusted to reflect
changes due to the CTC/ITC reconciliation.
- Average transmission and distribution service rates will not exceed the figures in column 3.
- The generation portion of bills for customers who remain with regulated Company-generation supply will
not, on average, exceed figures in column 6.
- Calculation of Year 1 average rates:
9.96 (cent)/kWh (existing rate cap) - 8 percent reduction = 9.16 (cent)/kWh
9.16 (cent)/kWh = 2.98 (column 3) + 1.72 (column 4) + 4.46 (column 5)
</FN>
</TABLE>
CTC AMORTIZATION
<TABLE>
ANNUAL STRANDED COST
AMORTIZATION AND RETURN(a)
<CAPTION>
Annual Revenue Excluding GRT
Year Sales CTC Total Return @ 10.75% Amortization
mWh (cent)/kWh ($000) ($000) ($000)
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 33,569,358 1.72 $551,988 $566,134 $ (14,146)
2000 33,837,913 1.92 621,102 564,222 56,879
2001 34,108,616 2.51 818,457 547,777 270,680
2002 34,381,485 2.51 825,004 516,869 308,135
2003 34,656,537 2.47 818,352 482,401 335,951
2004 34,933,789 2.43 811,540 444,798 366,742
2005 35,213,260 2.40 807,933 403,555 404,378
2006 35,494,966 2.66 902,623 353,070 549,553
2007 35,778,925 2.66 909,844 290,627 619,217
2008 36,065,157 2.66 917,123 220,312 696,811
2009 36,353,678 2.66 924,459 141,229 783,231
2010 36,644,507 2.66 931,855 52,381 879,474
<FN>
(a) Subject to reconciliation of actual sales and collections. Under the
settlement, sales are estimated to increase 0.8 percent per year.
</FN>
</TABLE>
OTHER FEATURES
- - The T&D rate cap of 2.98 cents per kWh includes .01 cents for a sustainable
energy and economic development fund during the rate cap period.
- - The Company is permitted to transfer ownership and operation of its
generating facilities to a separate corporate entity. The generating
facilities will be valued at book value at the time of the transfer.
- - Twenty percent of residential customers will be assigned to a provider of
last resort (PLR), other than the Company, on January 1, 2001. The PLR will
be selected on the basis of a PUC-approved energy and capacity market price
bidding process. Company-affiliated suppliers will be prohibited from bidding
for this block of customers.
- - As of January 1, 2001, the Company (as PLR) will price its service to
residential customers within a specified range. A single rate will be
established for each rate schedule.
- - A Qualified Rate Order authorizing securitization of up to $4 billion
is included.
BACKGROUND
December 3, 1996
Governor Ridge signed into law the Competition Act, which fundamentally
restructures retail electric service in Pennsylvania.
January 22, 1997
The Company filed a request for authorization to securitize $3.6 billion in
stranded costs.
April 1, 1997
The Company submitted a comprehensive Restructuring Plan, which included a
request for approval of the imposition of unbundled rates and the recovery of
$6.8 billion in stranded costs.
July 18, 1997
The Company submitted Rebuttal Testimony, which reflected an increase in
stranded costs to $7.5 billion.
August 27, 1997
The Company and nine other parties, including representatives of all major
consumer interests, filed a Joint Petition for Partial Settlement.
October 7, 1997
Enron Energy Services Power, Inc. filed a petition requesting approval of an
alternative restructuring plan.
December 11, 1997
PUC voted 3-2 to adopt a motion which rejected the Partial Settlement and the
Enron Plan, and substantially modified the Company's proposed restructuring
plan.
December 23, 1997
PUC issued its Restructuring Order which, among other things, determined that
the Company's recoverable stranded costs were $5.024 billion and that
unbundling of the Company's rates resulted in a customer shopping credit of
4.46 cents per kWh.
January 7, 1998
The Company and five other parties filed petitions requesting rehearing,
reconsideration and clarification of the Restructuring Order.
January 16, 1998
PUC issued an order denying many of the changes requested by the parties,
reducing authorized stranded costs to $4.9 billion and directing the Company
to make a compliance filing.
January 20, 1998
The Company submitted its compliance filing.
February 1998
PUC rejected the Company's compliance filing and modified the Company's
revised compliance filing.
The Company filed appeals to Commonwealth Court and a complaint in
U.S. District Court. Appeals were also filed by the Consumer
Education and Protection Association, Indianapolis Power & Light Co.,
Conectiv Energy, the Office of Consumer Advocate, Enron Power
Marketing, Inc. and NEV, East, LLC.
March 5, 1998 Settlement negotiations began.
<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. Barry Mitchell
-----------------------
Vice President, Finance
and Treasurer
April 30, 1998
