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) June 27, 2003
Commission Registrant; State of Incorporation; I.R.S. Employer
File Number Address; and Telephone Number Identification No.
----------- ----------------------------------- ------------------
333-21011 FIRSTENERGY CORP. 34-1843785
(An Ohio Corporation)
76 South Main Street
Akron, Ohio 44308
Telephone (800)736-3402
1-3141 JERSEY CENTRAL POWER & LIGHT COMPANY 21-0485010
(A New Jersey Corporation)
c/o FirstEnergy Corp.
76 South Main Street
Akron, OH 44308
Telephone (800)736-3402
Item 9. Regulation FD Disclosure
On June 27, 2003, FirstEnergy Corp.'s subsidiary, Jersey Central Power
& Light (JCP&L), signed a settlement agreement (Settlement) with all of the
parties in its base rate case proceeding except for the Board of Public
Utilities (BPU) Regulatory Staff and the Division of the Ratepayer Advocate.
JCP&L is currently in a base rate proceeding, which was required as a
part of its restructuring order consistent with the electric restructuring
legislation enacted in New Jersey on February 9, 1999. The discovery, hearing
and briefing phases of the proceeding are completed and the parties are awaiting
the initial recommended decision in the case by the Administrative Law Judge
(ALJ). JCP&L expects the BPU to rule on our base rate case in July so that new
rates can become effective on August 1, 2003 - the end of the four-year
transition period.
In its initial filing in August 2002, JCP&L requested a $153 million
rate increase, a 7.8% average increase in customers' rates. In its final update
in the case, JCP&L is requesting a $122 million rate increase, a 6.1% average
increase in customers' rates. The Settlement would increase rates by $81
million, a 4.1% average increase in customers' rates as detailed below by rate
tariff component:
Jersey Central Power & Light Company
Revenue and % Rate Change
------------------------------------
($ Millions)
Updated
Revenue Settlement
------------------------
Request Revenue % Change
------- ------- --------
Delivery Charge $(41) $(80) (4.0)%
Credit Elimination 111 111 5.6
MTC/TBC 68 67 3.4
SBC (16) (17) (0.9)
---- ---- ----
Total $122 $ 81 4.1%
==== ==== ===
( ) indicates reduction
Some of the key elements of the Settlement are:
o JCP&L's rate base is established at $2,017 million.
o JCP&L's capital structure utilized for the purposes of setting the
rate of return is 41.05% debt, 4.95% preferred stock/securities, and
54% common equity.
o The overall rate of return to be applied to the rate base is 9.14%, which
reflects an allowed return on common equity of 10.6%.
o The Parties agree that JCP&L's entire deferred balance (estimated to be
$618 million at July 31, 2003) has been reasonably and prudently incurred
and that JCP&L should be permitted to recover the full amount.
Under its 1999 restructuring order, JCP&L is entitled to full and
timely recovery of the costs associated with the provision of basic generation
service (BGS) as well as the costs associated with utility power purchase
agreements (PPAs) and non-utility generator PPAs. To the extent that these
energy-related costs exceed the recovery afforded by the rates JCP&L is
authorized to charge during the four-year transition period, JCP&L is authorized
to defer these costs, including interest on the unrecovered balance, for future
recovery.
JCP&L has requested that the deferred balance be recovered through an
asset securitization and made the required securitization filing with the BPU
earlier this year. JCP&L expects the BPU to rule on the securitization filing
later this year. Pending the BPU decision on securitization, the Settlement
implements an interim 10-year amortization schedule, which is reflected in the
$67 million increase in the MTC/TBC tariff component. This increase includes a
debt-rate return on the after-tax deferred balance. If the BPU approves
securitization of the deferred balance, the $67 million would be directed
towards servicing the securitization bonds' principal and interest payments, and
the related income taxes. Any difference between the $67 million and the actual
securitization bond and income tax charges, whether positive or negative, would
be deferred. In the event that the BPU does not approve a securitization of the
deferred balance, or if securitization cannot be accomplished for any other
reason, the return component would increase to JCP&L's pre-tax rate of return of
13.1% if the deferred balance amortization period were to exceed four years.
JCP&L's filed position for a $41 million reduction in the delivery
charge would reduce annual after-tax earnings by approximately $39 million. The
Settlement's reduction of $80 million in the delivery charge would reduce annual
after-tax earnings by approximately $62 million. The rate increase of $111
million for the credit elimination will not have any comparative impact on
reported earnings. The changes in the MTC/TBC and SBC tariff components will not
have any significant impact on earnings as these cost recovery clauses generally
use deferred accounting.
Under the Settlement's interim deferred balance recovery through a
10-year amortization schedule, the Settlement would have an annual positive cash
impact to JCP&L of approximately $50 million. If the BPU were to allow JCP&L to
securitize the estimated $618 million deferred balance, JCP&L would have a
one-time positive cash impact of approximately $365 million from the net
securitization proceeds.
This base rate proceeding only involves the regulated portion of
customer charges. The generation portion of most customer bills will increase by
an average of 7.4% on August 1, 2003, as their generation rates are adjusted to
reflect the outcome of the fixed price BGS auction conducted by the BPU earlier
this year. However, even after taking into account this increase along with the
Stipulation increase, no JCP&L rate class subject to the fixed price BGS auction
results will pay higher rates than were in effect in July 1999, immediately
prior to electric restructuring in New Jersey.
In addition to JCP&L, other parties to the Settlement are the
Independent Energy Producers of New Jersey, Gerdau Ameristeel, New Jersey
Transit, New Jersey Commercial Users and the United States Department of
Defense. Although the BPU Regulatory Staff and the Division of the Ratepayer
Advocate did not enter into the Settlement, the above list reflects all other
parties in JCP&L's base rate proceeding.
JCP&L was pleased to have come to a settlement agreement, which it
believes offers a fair and reasonable compromise for all of the parties. The
Settlement moderates the increase in customer charges, while providing JCP&L
with a reasonable basis to earn its allowed returns and to maintain timely and
cost-effective access to the capital markets.
The Settlement has been filed with the ALJ who can recommend the
Settlement to the BPU for approval or make some other recommendation. Her
recommended decision in the case is due shortly. The Stipulation requires
approval by the BPU before it could become effective.
This Form 8-K includes forward-looking statements based on information
currently available to management. Such statements are subject to certain risks
and uncertainties. These statements typically contain, but are not limited to,
the terms "anticipate", "potential", "expect", "believe", "estimate" and similar
words. Actual results may differ materially due to the speed and nature of
increased competition and deregulation in the electric utility industry,
economic or weather conditions affecting future sales and margins, changes in
markets for energy services, changing energy and commodity market prices,
legislative and regulatory changes (including revised environmental
requirements), the availability and cost of capital, ability to accomplish or
realize anticipated benefits from strategic initiatives and other similar
factors.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, each Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
June 27, 2003
FIRSTENERGY CORP.
-----------------
Registrant
JERSEY CENTRAL POWER & LIGHT COMPANY
------------------------------------
Registrant
Harvey L. Wagner
--------------------------------
Harvey L. Wagner
Vice President, Controller
and Chief Accounting Officer