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 31, 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, October 22, 1996, January 6, 1997 and January 27,
1997.
On January 30, 1997, Atlantic Energy, Inc. held a special meeting
of Atlantic Energy, Inc. shareholders at the Frank Guaracini, Jr.
Fine & Performing Arts Center in Vineland, New Jersey.
Shareholders were asked to approve the Agreement and Plan of
Merger between Atlantic Energy, Inc. ("Atlantic") and Delmarva
Power & Light Company ("Delmarva") and were also asked to approve
the Conectiv, Inc. Incentive Compensation Plan. As of the close
of business on January 30, 1997, the results of the vote of each
of the two proposals are as follows:
Proposal #1 - To consider and vote upon a proposal to approve an
Agreement and Plan of Merger, dated as of August 9, 1996 as
amended and restated as of December 26, 1996 among Atlantic,
Delmarva, a Delaware and Virginia corporation, Conectiv, Inc.
(the "Company"), a newly formed Delaware corporation and DS Sub,
Inc., a newly formed Delaware corporation and wholly owned
transitory subsidiary of Conectiv established solely to
effectuate a merger with and into Delmarva ("DS Sub") (the
"Merger Agreement"). The Merger Agreement provides for the
merger of Atlantic with and into the Company (the "Atlantic
Merger") and the merger of DS Sub with and into Delmarva (the
"Delmarva Merger") (the Atlantic and the Delmarva Merger,
together the "Mergers"), and whereby with certain limitations,
(a) each issued and outstanding share of common stock, no par
value, of Atlantic (the "Atlantic Common Stock") will be
converted into the right to receive 0.75 of one share of Common
Stock, par value $.01 per share, of the Company (the "Company
Common Stock"), and 0.125 of one share of the Class A Common
Stock, par value $.01 per share, of the Company (the "Class A
Common Stock"); (b) each issued and outstanding share of the
common stock, par value $2.25 per share, of Delmarva (the
"Delmarva Common Stock") will be converted into the right to
receive one share of Company Common Stock; and (c) the common
stockholders of Delmarva and Atlantic will become common
stockholders of the Company, as fully described in the Joint
Proxy Statement/Prospectus.
Vote For 37,843,067
Vote Against 1,539,886
Vote Abstained 265,093
Proposal #2 - To consider and vote upon a proposal to approve
the Company Incentive Compensation Plan.
Vote For 33,592,817
Vote Against 5,539,965
Vote Abstained 641,011
Salem Nuclear Generation Station
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 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.
On January 29, 1997, PS advised ACE that the Nuclear
Regulatory Commission ("NRC") held a public meeting and
identified plants placed on the "NRC Watch List", including Salem
Units 1 and 2, which were identified as Category 2 plants. In
its press release issued following the meeting, the NRC stated:
"The staff informed the Commission that the decision to
place the Salem units on the Watch List was not based
on any recent performance problems or decline; the
staff believes that Salem's efforts to achieve needed
improvements are correctly targeted and the NRC is
satisfied with the licensee's overall approach.
However, the staff noted that Salem should have been
placed on the Watch List previously because of Salem's
past safety performance. The staff also indicated that
the agency increased its attention and resources at
Salem commensurate with a Watch List plant. Finally,
the staff concluded that, notwithstanding the
improvements at Salem, it would not have been removed
from the Watch List at this time had it been previously
identified because it has yet to demonstrate a period
of safe performance at power."
The NRC has three classifications of facility monitoring. A
Category 3 facility is one which is having or has had significant
weaknesses that warrant maintaining the plant in a shutdown
condition until the licensee can demonstrate to the NRC that
adequate programs have both been established and implemented to
ensure substantial improvement; full NRC approval is required for
restart and the NRC will monitor closely. A Category 2 facility
is a plant that is authorized to operate but that the NRC will
monitor closely; although being operated in a manner that
adequately protects public health and safety, plants in this
category are having or have had weaknesses that warrant increased
NRC attention; a plant will remain in this category until the
licensee either demonstrates a period of improved performance, or
until a further deterioration of performance results in the plant
being placed in Category 3. A Category 1 facility is a plant
that has been removed from the Watch List.
More fully describing this NRC action, on January 27, 1997, the
NRC sent the following letter to PS:
United States
Nuclear Regulatory Commission
Washington, D.C.
January 27, 1997
Mr. E. James Ferland
Chief Executive Officer
Public Service Electric and Gas Company
80 Park Plaza
Newark, NJ 07101
Dear Mr. Ferland:
On January 14, 15, and 17, 1997, NRC senior managers met to
evaluate the nuclear safety performance of operating reactors,
fuel facilities, and other materials licensees. The NRC conducts
this meeting semiannually to determine if the safety performance
of various licensees exhibits sufficient weaknesses to warrant
increased NRC attention. At the January 1997 Senior Management
Meeting (SMM), the Salem and Hope Creek Generating Stations were
discussed.
In our letter of January 29, 1996, James M. Taylor, the former
NRC Executive Director for Operation, advised you that at the
January 17-18, 1996 SMM, NRC senior managers concluded that
recent trends in performance at Hope Creek raised sufficient
concerns that we believed it would be appropriate to meet with
you to discuss these concerns. In that letter we also stated
that resolution of our performance concerns at Salem remained to
be demonstrated through sustained and reliable operations.
At the January 1997, SMM the discussion regarding Hope Creek
considered the additional insights gained from our monitoring of
plant performance since the January 1996 SMM. Based on these
discussions it was concluded that the corrective actions you are
taking have been effective in addressing our concerns regarding
adverse trends in performance at Hope Creek. A summary of NRC
discussions related to Hope Creek follows:
Steps taken by management to address both human performance
and equipment issues over the past year have resulted in an
overall improvement in plant operations.
Management has consistently exhibited a conservative
approach to decision making. Progress has been made in
communicating higher standards and lowering significantly
the threshold for identification of problems. Numerous
staffing changes and an extensive training and
requalification initiative have led to improved control of
plant activities by operators. This is significant since
the negative trend discussed in the January 1996 SMM was
most notably evidenced by several significant events where
operators failed to properly control plant evolutions.
Overall personnel error rates have declined significantly.
The station is well along in addressing previously
identified problems with technical specification and
surveillance procedure discrepancies. Overall material
condition of the plant is good as illustrated by improved
plant operating performance. This improvement stemmed, to a
large degree, from work accomplished during an extended
outage completed in early 1996. Maintenance and engineering
backlogs are well understood and prioritized but they
constitute a continuing challenge to the station.
Continuing attention is also needed to improve operator
staffing levels which were reduced somewhat during the
station's operator requalification initiative.
The senior managers also discussed the Salem facility. As
described in more detail in the following paragraphs, Salem was
designated as a Category 2 plant, not due to any performance
problems or decline during this evaluation period, but due to a
change in senior management judgement as described in the fourth
paragraph below. A summary of NRC discussions related to Salem
follows:
Both Units 1 and 2 were shut down to address significant
equipment and human performance problems in mid-1995. An
NRC Confirmatory Action Letter issued at the time
established actions required before restart of the Units.
A strong management team has been assembled by PSE&G; it has
been in place for most of the outage. A much lower problem
reporting threshold has been established and management has
been aggressive in addressing root causes. Significant
staffing changes have been made. Operations and maintenance
staffs have completed extensive training and requalification
programs to both reinforce fundamental skills and establish
higher safety standards. Steps have been taken to
strengthen station self assessment, corrective action and
work control processes. As a result, the number and
significance of personnel errors have declined. Operators
have demonstrated improved ownership of the plant and
conservative decision making.
The outage scope has been extensive. Numerous plant
components have been refurbished or replaced with the more
reliable equipment in both safety-related and balance-of-
plant systems. Operator work-arounds are being addressed.
A comprehensive, pre-startup test program is underway to
assure repair work has been effective. Engineering
organizations are providing stronger support on equipment
and design issues as evidenced by completion of a recent
licensing basis conformance review.
The senior managers thoroughly discussed current activities
at Salem and the basis for past SMM decisions. The
conclusion was that the scope and depth of the problems that
existed at Salem prior to the dual unit shutdown warranted
categorizing it as a Category 2 facility indicating need for
increased NRC attention. Past decisions regarding Salem's
status were influenced by current licensee management's
recognition of problems and efforts being made to address
them. As a practical matter, given the extent of these
problems and the scope of activities, the agency increased
its attention to Salem and applied resources commensurate
with a plant in a Category 2, status. As a consequence,
senior managers reviewed Salem performance using the
Category 2 plant removal matrix. The managers concluded,
notwithstanding the significant steps being taken and
results achieved to date, Salem would not be removed from
Category 2 status if it had previously been categorized as
such. A key consideration in the removal matrix is
assessment of plant and integrated station performance at
power which has yet to occur.
In summary, the decision was made to recognize that Salem
should have been placed on the watch list previously and
that it would not have been removed at this point. As such,
Salem is being classified as a Category 2 facility at this
time. This classification is not intended to suggest that
licensee actions underway at Salem to achieve needed
improvements are incorrectly targeted. NRC is satisfied
with the overall approach and will be monitoring closely the
progress to achieve the planned improvements.
An NRC Commission meeting, open to the public, has been scheduled
to be held in the Commissioners' Conference Room in Rockville,
Maryland, on January 29, 1997, at 10:00 a.m. to review the
results of the latest meeting of NRC senior managers. Mr. Hubert
Miller, the Region I Regional Administrator, has discussed the
bases for our conclusions with regard to Hope Creek and Salem
with members of your staff.
If you have any questions, regarding this matter, do not hesitate
to call me.
Sincerely,
HUGH L. THOMPSON, JR.
Hugh L. Thompson, Jr.
Acting Executive Director
for Operations
Docket Nos.: 50-272
50-311
50-354
cc: See next page
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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 31, 1997
