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) October 22, 1996
Registrant;
Commission State of 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 under Part I, Item 1 - Business of the Annual Report on
Form 10-K for 1995, under Part I - Note 3 and Part II, Item 5 -
Other Information of the Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996, under Part I - Note 2 and
Management's Discussion and Analysis of Financial Conditions and
Results of Operations of the Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, and under Item 5 - Other Events
in the Current Reports on Form 8-K dated May 29, 1996, June 26,
1996 and July 25, 1996 of Atlantic Energy, Inc. and Atlantic City
Electric Company (ACE).
On October 22, 1996, ACE, the New Jersey Division of the
Ratepayer Advocate (Ratepayer Advocate) and the Staff of the New
Jersey Board of Public Utilities (BPU Staff)(collectively the
parties) signed three contemporaneous stipulations of settlement
concerning the New Jersey Board of Public Utilities' (BPU)
investigation into the continuing outage of the Salem Nuclear
Generating Station, the generic proceeding regarding recovery of
capacity costs associated with electric utility power purchases
from cogenerators and other power purchasers and a 1994 Salem
Nuclear Generating Station outage.
Salem Nuclear Generating Station (Salem Station)
On October 22, 1996, ACE, the Ratepayer Advocate and the
Staff of the BPU submitted a settlement to the BPU for its
consideration as a full and complete resolution of all issues
raised by the BPU's Orders dated March 14, 1996, June 26, 1996
and August 29, 1996 concerning the outage at Salem Units 1 and 2,
which commenced on May 16 and June 7, 1995, respectively. The
terms of the settlement are as follows:
i) ACE will provide credits to customers totaling $12
million during the months of January and February, 1997 based
upon customer usage between January 1, 1996 through October 31,
1996. Such amounts, net of previously accrued costs, will be
charged against 1996 income.
ii) For purposes of the stipulation, the parties agree that
the scheduled return-to-service date for Salem Unit 1 is June 30,
1997 and the scheduled return-to-service date for Salem Unit 2 is
December 31, 1996. ACE's replacement power costs for the current
outage for each unit, up to the scheduled return-to-service
dates, will be recoverable in rates in ACE's next annual
Levelized Energy Clause (LEC) proceeding. In stipulating the
1996/1997 provisional LEC rates, these replacement power costs
were estimated at $27.8 million and will continue to be deferred
until ACE's next LEC proceeding. Replacement power costs
incurred after the scheduled return-to-service dates as a result
of the failure of either unit to meet its respective scheduled
return-to-service date, will not be recoverable in rates. Such
replacement power costs are approximately $700 thousand per month
per unit.
iii) The $12 million credit and ACE's agreement to bear
subsequent replacement power costs described above resolve all
issues regarding the current outages at Salem Units 1 and 2
through the scheduled return-to-service dates and obviate the
need for any further action with regard to used and useful
issues. All parties have reserved the right to take any position
with respect to used and useful issues should either unit
experience an extended outage subsequent to their actual return
to service from the current outages.
iv) If the currently pending litigation between ACE and
station operator, Public Service Electric & Gas Company (PS)
results in a recovery of damages related to the outage through
the scheduled return-to-service dates, the first $8 million of
ACE's net recovery (the gross amount of recovery less all
litigation expenses) shall not be subject to any claim on behalf
of ACE's customers. Any claim in excess of $8 million may be
addressed in subsequent proceedings. Any recovery of damages
related to the outage subsequent to the return dates shall not be
subject to a claim on behalf of ACE's customers because
replacement power costs after the return dates will not be borne
by ACE's customers.
v) The performance of Salem Units 1 and 2 shall not be
included in the calculation of any penalty under the BPU's
nuclear performance standards for the period each unit was taken
out of service to each unit's respective scheduled return-to-
service date. The parties have also agreed, that for the years
1995 and 1996, there will be no penalty or reward under the BPU
nuclear performance standard. Furthermore, to the extent
replacement power costs are not recoverable pursuant to the
agreement, the performance of the unit causing such costs to be
incurred will not be included in the calculation of any penalty
under the nuclear performance standards since the risk of nuclear
operation and performance will reside with ACE. ACE reported a
nuclear performance penalty of $845 thousand, net-of-tax, in 1995
and has accrued $1.9 million, net-of-tax, through September 30,
1996. Such amounts would be offset against the 1996 settlement
amount discussed above.
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Other Matters
On September 16, 1994, the BPU issued an Order supporting
the investigation of the double recovery of capacity costs from
nonutility generation projects. The Ratepayer Advocate alleged
that ACE, along with other New Jersey electric utility companies,
were recovering cogeneration capacity costs concurrently in base
rates and LEC rates. The Ratepayer Advocate's testimony claimed
that ACE's overrecovery of capacity costs for the four-year
period June 1991 through May 1995 was $38.3 million. ACE
presented testimony disputing the Ratepayer Advocate's claimed
overrecovery.
ACE and other New Jersey electric utilities have entered
into separate stipulations of settlement with respect to this
matter. ACE's stipulation of settlement specifies that ACE will
provide credits through customer bills totaling $1.0 million
during the months of January and February, 1997 based on
customers usage between January 1, 1996 and October 31, 1996.
All issues raised by the Board's Order of September 16, 1994 with
regard to alleged overrecovery of non-utility capacity costs,
shall be deemed closed and resolved.
On March 29, 1996, ACE filed with the BPU a petition
requesting a $49.7 million increase in annual LEC revenues
effective June 1, 1996. Under a stipulation dated July 12, 1996,
ACE implemented provisional rates resulting in an increase of
annual LEC revenues of $27.6 million effective July 17, 1996
while agreeing to defer an amount equal to replacement power
costs associated with a 1994 Salem Station outage. In
consideration of each of the other settlements reached, all
issues with regard to the 1994 Salem outage are closed and
resolved. The amount deferred, $1.74 million, shall be fully
recoverable through ACE's next LEC proceeding.
The incremental effect of these settlements will reduce 1996
net income by $5.7 million or $.11 per share of Atlantic Energy
common stock and will be charged against 3rd quarter 1996
financial results
Each of the stipulations shall become effective upon
issuance of the Board's written order, which would follow after
public hearings on the matter.
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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/ L. M. Walters
L. M. Walters
Treasurer of Atlantic Energy, Inc.
Vice President, Treasurer and Assistant Secretary of
Atlantic City Electric Company
Date: October 23, 1996
