UNITED STATES
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) March 16, 1999
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POTOMAC ELECTRIC POWER COMPANY
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(Exact name of registrant as specified in its charter)
District of Columbia and Virginia 1-1072 53-0127880
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
1900 Pennsylvania Avenue, N. W., Washington, D.C. 20068
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (202) 872-3526
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_______________________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
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Pepco
Form 8-K
Item 5. Other Events
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On March 15, 1999, Potomac Electric Power Company (the "Company")
filed an application with the District of Columbia Public Service
Commission ("D.C. Commission") requesting D.C. Commission approval for
the Company to sell all of its plants, facilities and equipment used in
the generation of electricity and its other rate-based assets that are
not required for the provision of electric transmission and distribution
services located in the District of Columbia, Maryland and elsewhere
(collectively, the "generation assets").
Approval by the D.C. Commission of the sale of the generation
assets is a condition to the Agreement of Stipulation and Settlement
("Maryland Agreement") concerning the Company's Maryland stranded cost
adjudication proceeding, an element of the transition to electricity
competition in Maryland. In its filing before the D.C. Commission, the
Company requests approval to sell the generation assets, irrespective of
whether the D.C. Commission orders retail electric competition in the
District of Columbia.
Divestiture of Generation Assets
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The Company currently owns more than 6,000 megawatts of generating
capacity, which is provided by six Company-owned, fossil-fueled power
plants (of which two are located in Washington, D.C., three are located
in Maryland and one is located in Virginia) and one partially-owned
(9.72%) fossil-fueled plant in Pennsylvania. The Company also has
purchased capacity totaling over 760 megawatts under long-term contracts.
In its filing, the Company seeks D.C. Commission approval to sell
its generation assets through an auction process. The generation assets
to be sold will include the Company's purchase power contracts, unless
the inclusion of such assets in the sale will result in the total value
received being significantly less or unless the Company is not legally
free to sell such assets. Any power purchase contract not included in
the sale of generation assets would become a distribution asset of the
Company.
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Pepco
Form 8-K
The Company has requested that the D.C. Commission grant expedited
consideration of its request to sell the generation assets. The Company
has committed to initiate the auction process ninety days after receiving
Commission approval for the sale. Under the Maryland Agreement, the
Company is obligated to make a good faith effort to close the sale of the
generation assets by July 1, 2000. If all required regulatory approvals
are not obtained by January 1, 2000, the Maryland Agreement will
terminate.
Proposed Freeze on Electricity Price
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As part of the application, the Company proposes that following the
closing of the sale of its generation assets and the application of the
proceeds from the sale, both the supply and delivery components of the
Company's retail prices in the District of Columbia will be frozen at
then-existing levels and the fuel adjustment clause will be eliminated
for four years. After four years from the sale of the assets, the
Company will no longer have the obligation to supply electricity at the
frozen rate. Supply prices would then be set by the competitive
marketplace and delivery prices would be determined by regulators. If
the Commission implements customer choice subsequent to the sale of the
assets, the rate freeze will still terminate four years after the asset
sale.
Application of Sale Proceeds
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If the pre-tax net proceeds allocable to the District of Columbia from
the sale of the generation assets are less than the then-current net book
value of the generation assets ("book value"), the Company proposes that the
unretired balance plus generation-related regulatory assets will be
amortized and collected from District of Columbia customers through a charge
on customers receiving distribution services from the Company such that rates
will not increase.
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Pepco
Form 8-K
If the pre-tax net proceeds from the sale of the generation assets
exceed both the book value plus the value of the regulatory assets and,
if not sold, the purchased power commitments, the portion of the
remaining proceeds that are allocable to the District of Columbia would
be distributed to the Company's District of Columbia customers in the
form of a credit on their charges for delivery service using the same
formula that is included in the Maryland Agreement.
<TABLE>
<CAPTION>
Percentage of District of Columbia
Allocation Distributed to
Excess Pre-Tax Net Proceeds District of Columbia Customers
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<S> <C>
$100 million or less 70%
Next $100 million 60%
Any amount over
$200 million 50%
</TABLE>
The period of time over which the charge or the credit would be
applied has not yet been determined.
* * *
The implementation of the sale of the generation assets is subject
to a number of conditions, including approval of the Maryland Agreement by
the Maryland Commission without any changes or conditions, as well as
acceptable legislative action by the Maryland General Assembly and
approval of the D.C. Commission. There is no assurance that any or all
of the conditions to the Maryland Agreement will be satisfied or, if satisfied,
the timeframes within which such conditions will be satisfied.
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Pepco
Form 8-K
The information in this Form 8-K contains forward looking
statements, as defined by the Private Securities Litigation Act of 1995,
with regard to matters that could have an impact on the future
operations, financial results or financial condition of the Company.
These statements, including targeted dates for the occurrence of various
events, are based on the current expectations, estimates or projections
of management and are not guarantees of future performance or future
occurrences. Actual results may differ materially from those anticipated
by the forward looking statements, depending on the occurrence or
nonoccurrence of future events or conditions that are difficult to
predict and in many cases are beyond the control of the Company, such as
the actions that will be taken by the PSC, the D.C. Commission, the
Maryland General Assembly, and other regulatory authorities, as well as
actions by the Company's prospective competitors and other interested
parties.
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.
Potomac Electric Power Company
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(Registrant)
/s/ D. R. WRAASE
By ___________________________
Dennis R. Wraase
Senior Vice President and
Chief Financial Officer
March 16, 1999
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DATE
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