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 January 6, 1997
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
<PAGE>
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 the year ended December 31, 1995 for Atlantic
Energy, Inc. and Atlantic City Electric Company, as amended and
supplemented by Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996, and
Current Reports on Form 8-K dated May 29, 1996, June 26, 1996,
July 25, 1996 and October 22, 1996.
Atlantic City Electric Company ("ACE") is an owner of 7.41%
of Salem Nuclear Generating Station Units 1 and 2 ("Salem"),
which are operated by Public Service Electric & Gas Co. ("PS").
As previously reported, Salem Units 1 and 2 (the "Salem Units")
have been out of service since May 16, 1995 and June 7, 1995,
respectively. The Salem units represent 164,000 kilowatts of
ACE's total installed capacity of 2,351,700 kilowatts.
ACE has entered into a Stipulation Agreement ("Agreement")
with PS in its capacity as operator of Salem for the purpose of
limiting ACE's exposure to operation and maintenance ("O&M")
expenses for Salem to be incurred during calendar year 1997. PS
has budgeted $293.9 million for 1997 Salem O&M expense, of which
ACE's 7.41% share approximates $21.8 million.
Pursuant to the terms of the Agreement, ACE will pay to PS
$10.0 million of O&M expense as a fixed charge to be payable in
twelve equal installments commencing February 1, 1997. The
ability of PS to receive payment from ACE of any additional
contribution for 1997 Salem O&M expense, up to ACE's 7.41% share
of $293.9 million, is performance-based and directly related to
the return of the Salem Units to full service on July 1, 1997 and
January 1, 1997, respectively (the "Return to Service Dates"),
and the operation of the Salem Units, after such Return to
Service Dates, at a capacity factor of 80% or greater. During
the past 10 years, the average annual capacity factor for Salem
Unit 1 has been 68.1% and for Salem Unit 2, has been 61.1%. In
the last year of operation prior to the current Salem shutdown
(1994) the operating capacity factor for Salem Unit 1 was 59.3%
and for Salem Unit 2 was 57.8%.
For example, under the Agreement, if Salem Unit 1 returns to
full service on July 1, 1997 and operates at an 80% capacity
factor for the remainder of 1997 and Salem Unit 2 returns to service on
January 1, 1997 and operates at an 80% capacity factor for the
remainder of 1997, PS will receive from ACE an additional $11.8
million, or $21.8 million in total, representing ACE's 7.41%
share of the budgeted 1997 Salem O&M of $293.9 million.
Conversely, if neither of the Salem Units returns to service
during calendar year 1997, ACE would not pay to PS any additional
1997 O&M expense in excess of the $10.0 million fixed charge. If
PS returns both Salem Units to full service on the Return to
Service Dates and operates in excess of 80% capacity factor
during 1997; or, if PS returns both Salem Units to full service
in advance of the Return to Service Dates and operates at or in
excess of 80% capacity factor, PS has the opportunity to receive,
$21.8 million, representing ACE's 7.41% of the 1997 Salem O&M
expense, plus an additional amount, which would not be expected
to exceed $2.5 million, based upon current Return to Service
Dates. To the extent ACE derives a savings against 1997 O&M
expenditures, those savings will offset replacement power costs
incurred due to the unavailability of the Salem Units.
In the event PS exceeds the 1997 Salem O&M budget of $293.9
million, ACE will not be responsible for its 7.41% share of such
excess O&M costs unless (i) the excess O&M is directly
attributable to requirements imposed by the Nuclear Regulatory
Commission or other governmental agencies having jurisdiction
over the Salem Units, (ii) notice from the Commission or agency
is received by PS after the effective date of the Agreement
(12/31/96) and (iii) the notice in generically applied to all
similar nuclear plants. Certain other extraordinary events
giving rise to additional O&M expenses have also been excluded
from the Agreement. Otherwise, ACE shall have no responsibility
for such excess O&M costs incurred at Salem during 1997.
In exchange for this Agreement, ACE has agreed to dismiss
the litigation currently pending in the New Jersey Superior
Court, Atlantic County, in Docket No. ATL-L-773-96 captioned
Atlantic City Electric Company v. Public Service Electric & Gas
Company.
This Agreement applies only to calendar year 1997 and does
not apply to any damages incurred by ACE which may continue
beyond or be incurred after December 31, 1997; and does not apply
to any capital expenditures during 1997 or thereafter which, in
each instance, will continue to be governed by the terms and
conditions of the Salem Owners Agreement and the rights and
obligations of ACE and PS at law or in equity.
ACE believes that the certainty around responsibility for
1997 Salem O&M expenses and the resolution of the litigation is
in the best interest of ACE and its customers.
On December 31, 1996, the New Jersey Board of Public
Utilities ("BPU") issued an Order approving a stipulation of
settlement among ACE, the New Jersey Division of the Ratepayer
Advocate, and the Staff of the BPU relating to the BPU
investigation into the continuing outage of Salem Units 1 and 2.
On December 19, 1996, the BPU entered an Order approving two
additional stipulations of settlement among ACE, the New Jersey
Division of the Ratepayer Advocate and the Staff of the BPU
relating to (i) the generic proceeding regarding recovery of
capacity costs associated with electric utility power purchases
and (ii) a 1994 Salem outage. As a result of the BPU Orders
approving these stipulations, ACE will provide credits to
customers during January and February 1997, totaling $13.0
million. ACE has recorded these charges against third quarter
1996 income.
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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 of Atlantic Energy, Inc.
Senior Vice President, Secretary and
General Counsel of Atlantic City
Electric Company
Date: January 6, 1997
