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 February 23, 1996
Registrant;State of
Commission Incorporation IRS Employer
File No. Address and Telephone No. Identification No.
1-9760 Atlantic Energy, Inc. 22-2871471
(New Jersey)
6801 Black Horse Pike
Egg Harbor Township, NJ 08234
(609) 645-4500
1-3559 Atlantic City Electric Company 21-0398280
(New Jersey)
6801 Black Horse Pike
Egg Harbor Township, NJ 08234
(609) 645-4100
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Item 5. Other Events.
The following information updates certain matters previously
reported to the Securities and Exchange Commission under Part I,
Item 1 - Business of the Annual Report on Form 10-K for 1994,
Part II of the Quarterly Reports on Form 10-Q for the quarters
ended June 30, 1995 and September 30, 1995 and Item 5 of the
Current Reports on Form 8-K dated June 15, 1995, July 21, 1995,
October 19, 1995 and December 14, 1995 of Atlantic Energy, Inc.
and Atlantic City Electric Company (ACE).
Salem Station
ACE is a 7.41% owner of Units 1 and 2 of the Salem Nuclear
Generating Station which are operated by Public Service Electric
and Gas Company (PS). The Salem units represent 164,000
kilowatts of ACE's total installed capacity of 2,351,700
kilowatts. At January 31, 1996, ACE's net investment in the
Salem Station was approximately $141.8 million, or 6% of ACE's
total assets.
As previously reported, ACE was advised by PS that Salem
Units 1 and 2 have been out of service since May 16, 1995 and
June 7, 1995, respectively. Since that time, PS has been engaged
in a thorough assessment of each unit to identify and complete
the work necessary to achieve safe, sustained, reliable and
economic operation. PS has stated that it will keep each unit
off line until it is satisfied that the unit is ready to return
to service and to operate reliably over the long term and the
Nuclear Regulatory Commission (NRC) has agreed that the unit is
sufficiently prepared to restart. On June 9, 1995, the NRC
issued a Confirmatory Action Letter documenting these commitments
of PS.
ACE was advised that on December 11, 1995, PS presented its
restart plan for both units to the NRC at a public meeting. On
February 13, 1996, the NRC staff issued a letter to PS indicating
that it had concluded that PS' overall restart plan, if
implemented effectively, should adequately address the numerous
Salem issues to support a safe plant restart, and describing
further actions the NRC will undertake to confirm that PS'
actions have resulted in the necessary performance improvements
to support safe plant restart.
PS has advised ACE that as a part of its comprehensive
review, an extensive examination is being performed on the steam
generators, which are large heat exchangers used to produce steam
to drive the turbines. Within the industry, certain pressurized
water nuclear units other than Salem have experienced cracking in
a sufficient number of the steam generator tubes to require
various modifications to these tubes and replacement of the steam
generators in some cases. Until the current outage, regular
periodic inspections of the steam generators for each Salem unit
have resulted in repairs of a small number of tubes well within
NRC limits. As a result of the experience of other utilities
with cracking in steam generator tubes, in April 1995 the NRC
issued a generic letter to all utilities with pressurized water
reactors. This generic letter requested utilities with
pressurized water reactors to conduct steam generator
examinations with inspection devices capable of detecting
evidence of degradation. Subsequently, PS conducted steam
generator inspections of the Salem units using the best
technology available, including a new, more sensitive, remote
controlled eddy current testing device.
ACE has been advised that with respect to Salem Unit 1, the
most recent inspection of the steam generators is not complete,
but partial results from eddy current inspections in February
1996 using this new technology show indications of degradation in
a significant number of tubes. The inspections are continuing
and PS has decided to remove several tubes for laboratory
examination to confirm the results of the inspections. Removal
of the tubes should be completed in March and definitive results
of the state of the Salem Unit 1 tubes from the subsequent
laboratory examinations should be known in April. However, based
on the results of inspections to date, PS has concluded that the
Salem Unit 1 outage, which was expected to be completed in the
second quarter of 1996, will be required to be extended for a
substantial additional period to evaluate the state of the steam
generators and to subsequently determine an appropriate course of
action. PS has advised ACE that degradation of steam generators
in pressurized water reactors has become of increasing concern
for the nuclear industry. Nationally and internationally,
utilities have undertaken actions to repair or replace steam
generators. In the extreme, degradation of steam generators has
contributed to the retirement of several American nuclear power
reactors. ACE has been advised that after the Salem Unit 1 tubes
are fully examined, PS will be able to evaluate its course of
action in light of NRC and other industry requirements.
PS has advised ACE that the examination of the Salem Unit 2
steam generators was completed in January 1996 using the same
testing device as used in Salem Unit 1. The results of the Salem
2 inspection are being reviewed again to confirm their results in
light of the experience with Salem Unit 1. Although this review
has not yet been completed, results to date appear to confirm
that the condition of the Salem Unit 2 steam generators is well
within current repair limits at the present time. ACE has been
advised by PS that it will also remove tubes from the Salem Unit
2 steam generators for laboratory analysis to further confirm the
results of this testing.
As previously reported, Salem Unit 1 had been scheduled to
return to service in the second quarter of 1996 and Salem Unit 2
in the third quarter of 1996. ACE has been advised that as a
result of the extent of the recently discovered degradation in
the Salem Unit 1 steam generators, PS is focusing its efforts on
the return of Salem Unit 2 to service in the third quarter. The
conduct of the additional steam generator inspections and testing
on Salem Unit 2 is not expected to adversely affect the timing of
its restart. However, the timing of the restart is subject to
completion of the requirements of the restart plan to the
satisfaction of PS and the NRC as well as to the normal
uncertainties associated with such a substantial review and
improvement of the systems of a large nuclear unit, so that no
assurance can be given that the projected return date will be
met.
ACE's share of additional operating and maintenance expenses
associated with Salem restart activities in 1995 was $2.6
million. In 1996 operations and maintenance expenses are
estimated to be $5.8 million and capital expenditures to amount
to $1.9 million. ACE's share of total operating and maintenance
expenses for both Salem units for the year was $24.5 million and
capital costs were $10.6 million. For 1996, ACE does not
presently expect its share of operating and maintenance expenses
or capital costs for Salem Station to exceed 1995 amounts;
however this could change as a result of the steam generator
inspection results referred to above.
The outage of a Salem unit causes ACE to incur replacement
power costs of approximately $700 thousand per month per unit.
Such amounts vary, however, depending on the availability of
other generation, the cost of purchased energy and other factors,
including modifications to maintenance schedules of other units.
Based on the information provided by PS regarding the delay in
the return of Salem Unit 1, the return of Salem Unit 2 in the
third quarter of 1996 and expected operation of the other nuclear
units in which ACE has an ownership interest, ACE presently
estimates that its aggregate nuclear capacity factor for 1996
will be approximately 50%. Such capacity factor would result in
an estimated penalty of $3.3 million under the New Jersey Board
of Public Utilities nuclear performance standard.
ACE continues to evaluate the legal, regulatory and
administrative implications of these events. At this time, it is
not possible to predict what actions may be taken in any
regulatory administrative or civil proceedings by ACE or others,
the outcome of any such proceedings, if commenced, or the
ultimate amount of responsibility of ACE for costs and penalties
arising from such proceedings.
Hope Creek Station
ACE owns 5% of the Hope Creek nuclear unit, which is also
operated by PS. As previously reported, the Hope Creek unit
commenced a refueling and maintenance outage on November 11,
1995. As also previously reported, PS had advised ACE that the
NRC, by letter dated December 1, 1995, informed PS that a Plant
Performance Review performed by the NRC for the period April 23,
1995 to October 21, 1995 indicated a continued decline in plant
performance, and that PS had determined to extend the refueling
outage until February 1996 to include the implementation of
corrective actions to eliminate operational deficiencies noted by
the NRC and detected by PS through self assessment. PS has also
advised ACE that in the NRC December 1, 1995 letter the NRC
requested a management meeting prior to restart to allow PS to
present its self assessment of the progress made during the
outage and of the readiness of the unit for restart. ACE has
also been advised that on February 12, 1996 the NRC commenced a
Readiness Assessment Team Inspection for Hope Creek, which
scheduled to be completed on March 1, 1996, and that the Hope
Creek unit is expected to return to service in early March 1996.
It is not possible to predict the outcome of the NRC inspection
or what other actions which may be taken by the NRC with respect
to Hope Creek.
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SIGNATURE
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.
Atlantic Energy, Inc.
Atlantic City Electric Company
(Registrant)
By: /s/ J. E. Franklin II
J. E. Franklin II
Vice President, Secretary and General Counsel
Atlantic Energy, Inc.
Senior Vice President, Secretary and General Counsel
Atlantic City Electric Company
Date: February 23, 1996
