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 July 15, 1997
(Date of Earliest Event Reported)
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 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 January 6, 1997 and January 27,
1997.
Competition
On July 15, 1997, Atlantic City Electric Company filed its
response to the New Jersey Board of Public Utilities (BPU) in
connection with the BPU proposal for restructuring the electric
power industry in New Jersey. Attached as exhibit 99 is the
Company's release to the financial community with respect to its
filing.
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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.
and Vice President, Treasurer and
Assistant Secretary of Atlantic
City Electric Company
Date: July 16, 1997
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Exhibit Index
Exhibit No. 99 Release to Financial Community dated July 15,
1997.
Exhibit No. 99
For additional information
Contact: Bob Marshall,
Director of Investor Relations
voice: 609-645-4655
fax: 609-645-4132
e-mail:[email protected]
July 15, 1997
Atlantic City Electric Submits Restructuring Filing
To Members of the Financial Community:
Atlantic City Electric Company, the utility subsidiary of
Atlantic Energy, Inc. (ticker symbol:ATE) today filed information
required by the New Jersey Board of Public Utilities (BPU) under
its proposal for restructuring the electric power industry in New
Jersey.
Stranded Costs
In its filing, Atlantic City Electric (the Company) provided
an estimate of stranded costs for its owned generation and for
power purchase agreements with nonutility generators (NUGs).
Those estimates, developed using an internal market price
forecast, amount to $341 million for the Company's wholly and
jointly owned generation. Utilizing the same market forecast,
the Company estimated its stranded costs associated with its 579
megawatts of NUG capacity at approximately $965 million. That
estimate is based on contract terms which run for an additional
18 to 27 years.
The Company has requested full recovery of stranded costs
associated with its owned generating assets over a eight year
period and full recovery of payments to the NUGs over the
remaining term of those agreements. Recovery of regulatory
assets and decommissioning expense, as noted in the BPU plan,
would continue to be recovered through regulated base rates, or
addressed through traditional ratemaking techniques.
Customer Choice
Under the BPU plan, customer choice commences October 1998
and full retail access occurs by July 2000. The Company plans to
begin customer choice to 10% of its customers across all customer
classes on a first come first serve basis. At that time, all
Atlantic customers will be charged the market price for
electricity, whether served by ACE or another provider.
In its filing, the Company proposed a two phase future rate
reduction for customers which, when fully implemented in 2001,
represents a 5% decrease in annual revenues, based on 1996
reported revenues. The Company has proposed a $7.2 million
reduction upon completion of its proposed merger with Delmarva
Power & Light Co., which is expected to be completed on or around
year end 1997. This amount represents one third of the synergy
savings from the merger and will be available upon BPU approval
of the Company's pending request. The additional projected
revenue reduction of approximately $40 million, beginning in
2001, is related to reductions in operating costs. This includes
amounts currently being collected and amortized for changes in
state tax law and for utility purchased power agreements, which
amortizations expire in 2000.
Securitization
The Company has proposed securitizing its transition costs
associated with its owned generation, with the proceeds applied
toward the redemption and retirement of its debt and equity
securities. Any savings associated with securitization would be
available to support further rate reductions. Legislation
required for securitization is expected to be introduced in New
Jersey in early 1998.
Mitigation
In keeping with the BPU plan, the Company has also proposed
mitigation and a resolution of the NUG contracts by funding a
buyout or buydown of the contracts through securitization of a
nonbypassable wires charge, subject to negotiation of an
acceptable value of the contracts with the NUGs. While mandated
by Federal law, and despite renegotiations with two of the four
suppliers which have produced some savings, those NUG contracts
are substantially over market. The NUG contracts, over which the
Company has no control, represent about 24% of the Company's
annual revenues. The contracts had an average cost of 10.7 cents
per kilowatthour in 1996.
The Company in its filing also addressed several cost
savings initiatives since its last base rate case in 1991,
including: voluntary severance plans which reduced its workforce
by 25%; refinancing and refundings of a significant amount of the
Company's long term debt and preferred stock which have produced
lower capital costs; the Southern New Jersey Economic Initiative,
through which the Company provided rate reductions in 1994 and
1995 totaling $38 million.
The BPU plans to transfer the stranded cost and unbundled
rate portions of the filings for all four New Jersey electric
utilities to the Office of Administrative Law for evidentiary
hearings and initial decision by April 1998. The BPU has
retained the review of each company's restructuring plans, with
the overall objective being full reviews completed by October
1998.
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A Conference Call is scheduled for 2:00 pm on Tuesday July 22 to
review the Company's filing. To participate, please call 1-888-
209-3752, Reservation # 2951342.
Call for Replay at # 1-800-633-8284 beginning 2:00 PM on July 23
for 24 hours.
The information in this press release contains forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Statements made that are not
historical facts are forward-looking and accordingly, involve
risks and uncertainties that could cause actual results or
outcomes to differ materially from those expressed in the
forward-looking statements. Although such forward-looking
statements have been based on reasonable assumptions, there is no
assurance that the expected results will be achieved. Some of
the factors that could cause actual results to differ materially
include, but are not limited to: the effects of regulatory
decisions; changes in laws and other governmental actions and
initiatives; the impact of deregulation and increased competition
in the electric utility industry; expected outcomes of legal
proceedings; generating plant performance; fuel prices and
availability.
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Elements of Stranded Costs Calculation
Adjusted
Book Value
Plant Megawatts @ 1/1/99 Market Stranded
Value* Cost
(Dollars in Millions)
Jointly Owned
Nuclear Units 380 $ 346.2 $107.7 $238.5
Jointly Owned
Fossil Units 107 $ 31.7 $ 90.9 $(59.1)
Wholly Owned
Fossil Units 1,183 $ 346.0 $184.1 $162.0
Total Owned 1,670 $ 723.9 $382.7 $341.3
NUG
Contracts 579 N/A $(965.1) $965.1
Utility
Power Purchase
Contracts 125 $( 4.4) $ 4.4
Total Stranded
Costs $1,310.8
*Assumes net cash flows (expected market revenues less operating
expenses or purchase power payments) through remaining life of
asset or contract term discounted at 9.76%.
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