(As filed with the Securities and Exchange Commission on December 23, 2002)
File No. 70-9793
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POS AMC
Amendment No. 6
(Post-Effective Amendment No. 3)
to
FORM U-l
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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FirstEnergy Corp.
OHIO EDISON COMPANY
THE TOLEDO EDISON COMPANY
FIRSTENERGY FACILITIES SERVICES GROUP, LLC
76 South Main Street
Akron, Ohio 44308
(Names of companies filing this statement and addresses of principal
executive offices)
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FirstEnergy corp.
(Name of top registered holding company parent of applicants)
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Leila L. Vespoli, Douglas E. Davidson, Esq.
Senior Vice President and General Counsel Thelen Reid & Priest LLP
Counsel 40 West 57th Street
FirstEnergy Corp. New York, New York 10019
76 South Main Street
Akron, Ohio 44308
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(Names and addresses of agents for service)
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS.
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By Order dated October 29, 2001 in this proceeding (Holding Co. Act
Release No. 27459) (the "Merger Order"), as supplemented by a supplemental order
dated November 8, 2001 (Holding Company Act Release No. 27483), the Commission
authorized the merger between FirstEnergy Corp. ("FirstEnergy"), an Ohio
corporation, and GPU, Inc. ("GPU"), a Pennsylvania corporation. The merger (the
"Merger") became effective on November 7, 2001, with FirstEnergy as the
surviving entity, and FirstEnergy registered under the Act as a holding company
on the same day. As a result of the merger, FirstEnergy directly or indirectly
owns all of the outstanding common stock of ten electric utility subsidiaries,
Ohio Edison Company ("Ohio Edison"), The Cleveland Electric Illuminating Company
("Cleveland Electric"), The Toledo Edison Company ("Toledo Edison"), American
Transmission Systems, Incorporated ("ATSI"), Jersey Central Power & Light
Company ("JCP&L"), Pennsylvania Electric Company ("Penelec"), Metropolitan
Edison Company ("Met-Ed"), Pennsylvania Power Company ("Penn Power"), York Haven
Power Company, and Waverly Electric Power & Light Company, which together
provide service to approximately 4,300,000 retail and wholesale electric
customers in a 37,200 square-mile area in Ohio, New Jersey and Pennsylvania; and
one gas utility subsidiary, Northeast Ohio Natural Gas Corp. ("NONGC"), which
provides gas distribution and transportation service to approximately 5,000
customers in central and northeast Ohio (these subsidiaries are collectively
referred to as the "Utility Subsidiaries"). FirstEnergy's electric and gas
utility subsidiaries are referred to herein collectively as the "Utility
Subsidiaries." Ohio Edison, Cleveland Electric, Toledo Edison, Penn Power, ATSI
and NONGC are referred to herein collectively as the "FE Pre-Merger Utility
Subsidiaries."1
The Merger Order also authorized certain FirstEnergy associate
companies to provide services to the FE Pre-Merger Utility Subsidiaries at
prices not restricted to cost. Specifically, FirstEnergy Facilities Services
Group, LLC ("FE Facilities") was authorized to provide maintenance and repair
services to FirstEnergy, Ohio Edison and Toledo Edison. These arrangements, as
well as extensions, additions and replacements of these arrangements in the
ordinary course of business (the "At Market Service Arrangements") have been
authorized to remain in place for a period ending not later than December 31,
2002. The Merger Order authorized the exemption or waiver for these At Market
Services under Section 13 of the Act from the cost standards of Rules 90 and 91
thereunder, as applicable.
FE Facilities now requests that the Commission issue a supplemental
order extending the interim exemption granted under the Merger Order from
December 31, 2002 until June 30, 2003. FE Facilities requests this extension
because it needs additional time to implement internal cost accounting systems.
FirstEnergy and its subsidiaries are currently establishing a cost accounting
structure and supporting computer systems for FirstEnergy Service Company
("Service Company"), which will function as the service company for the
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1 FirstEnergy also directly or indirectly holds investments in numerous
non-utility subsidiaries that are engaged in a variety of energy-related,
exempt, or otherwise functionally related non-utility businesses. Reference is
made to Appendix A to the Merger Order for a description of these non-utility
subsidiaries.
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FirstEnergy system. FirstEnergy expects that the Service Company cost accounting
arrangement and the supporting computer system will be fully functional by April
1, 2003. FE Facilities anticipates that cost accounting systems for the current
At Market Service Arrangements will be established by June 30, 2003, and thus
make this extension request to provide for additional time.
In addition, FE Facilities may seek a permanent exemption from Section
13(b) of the Act and the at cost rules thereunder for the At Market Service
Arrangements. FirstEnergy has been following the proceedings in the pending
Exelon Corp. ("Exelon") docket, file number 70-9645, in which certain
non-utility subsidiaries of Exelon are seeking a permanent Section 13(b)
exemption based on facts and circumstances similar to those of the At Market
Service Arrangements. If the Commission grants a permanent exemption to those
subsidiaries of Exelon, FE Facilities may seek to rely on that precedent in
seeking a permanent exemption for the At Market Service Arrangements in this
docket.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
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FirstEnergy estimates that the additional fees, commissions and
expenses incurred or to be incurred in connection with the proposed transaction
will not exceed $2,500.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
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Applicants believe that Section 13(b) of the Act and Rules 87, 90 and
91 thereunder may be applicable to the authorizations requester herein.
The authorization requested herein is also subject to the requirements
of Rule 54. Rule 54 provides that in determining whether to approve an
application by a registered holding company which does not relate to any exempt
wholesale generator ("EWG") or "foreign utility company" ("FUCO"), the
Commission shall not consider the effect of the capitalization or earnings of
any subsidiary which is an EWG or a FUCO upon the registered holding company if
paragraphs (a), (b) and (c) of Rule 53 are satisfied.
FirstEnergy currently meets all of the conditions of Rule 53(a),
except for clause (1). In the Merger Order, the Commission, among other things,
authorized FirstEnergy to invest in EWGs and FUCOs so that FirstEnergy's
"aggregate investment," as defined in Rule 53(a)(1), in EWGs and FUCOs does not
exceed $5 billion, which $5 billion amount is greater than the amount which
would be permitted by clause (1) of Rule 53(a) which, based on FirstEnergy's
consolidated retained earning of $1.85 billion as of September 30, 2002, would
be $926 million. The Merger Order also specifies that this $5 billion amount may
include amounts invested in EWGs and FUCOs by FirstEnergy and GPU at the time of
the Merger Order ("Current Investments") and amounts relating to possible
transfers to EWGs of certain generating facilities owned by certain of
FirstEnergy's operating utilities ("GenCo Investments"). FirstEnergy has made
the commitment that through June 30, 2003, its aggregate investment in EWGs and
FUCOs other than the Current Investments and GenCo Investments ("Other
Investments") will not exceed $1.5 billion. The Commission has reserved
jurisdiction over investments that exceed such amount.
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As of September 30, 2002, and on the same basis as set forth in the
Merger Order, FirstEnergy's aggregate investment in EWGs and FUCOs was
approximately $1.27 billion,2 an amount significantly below the $5 billion
amount authorized in the Merger Order. Additionally, as of September 30, 2002,
consolidated retained earnings were $1.85 billion. By way of comparison,
FirstEnergy's consolidated retained earnings as of December 31, 2001 were $1.52
billion.
In any event, even taking into account the capitalization of and
earnings from EWGs and FUCOs in which FirstEnergy currently has an interest,
there would be no basis for the Commission to withhold approval of the
transactions proposed herein. With respect to capitalization, since the date of
the Merger Order, there has been no material adverse impact on FirstEnergy's
consolidated capitalization resulting from FirstEnergy's investments in EWGs and
FUCOs. As of September 30, 2002, FirstEnergy's consolidated capitalization
consisted of 34.8% common equity, 1.7% cumulative preferred stock, 1.8%
subsidiary - obligated mandatorily redeemable preferred securities, 56.1%
long-term debt and 5.6% notes payable. As of December 31, 2001, those ratios
were as follows: 32.2% common equity, .7% cumulative preferred stock, 1.2%
subsidiary-obligated maditorily redeemable preferred securities, 60.1% long term
debt and 3.8% notes payable. Additionally, the proposed transactions will not
have any material impact on FirstEnergy's capitalization. Further, since the
date of the Merger Order, and, after taking into account the effects of the
Merger, there has been no material change in FirstEnergy's level of earnings
from EWGs and FUCOs.
FirstEnergy's operating subsidiaries are financially sound companies
as indicated by their investment grade ratings from the nationally recognized
rating agencies for their senior unsecured debt. The following chart includes a
breakdown of the senior, unsecured credit ratings for FirstEnergy's operating
utility subsidiaries.
Subsidiary Standard & Poors3 Moody's4 Fitch5
Ohio Edison BBB- Baa2 ---
Cleveland Electric BBB- Baa3 ---
Toledo Edison BBB- Baa3 BB
Penn Power BBB- Baa2 ---
JCP&L BBB --- ---
Met-Ed BBB --- ---
Penelec BBB A2 BBB+
FirstEnergy satisfies all of the other conditions of paragraphs (a)
and (b) of Rule 53. With respect to Rule 53(a)(2), FirstEnergy maintains books
and records in conformity with, and otherwise adheres to, the requirements
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2 This $1.27 billion amount represents Current Investments only. As of
September 30, 2002, FirstEnergy had no Genco Investments.
3 Standard & Poor's Rating Services
4 Moody's Investors Service, Inc.
5 Fitch, Inc.
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thereof. With respect to Rule 53(a)(3), no more than 2% of the employees of
FirstEnergy's domestic public utility companies render services, at any one
time, directly or indirectly, to EWGs or FUCOs in which FirstEnergy directly or
indirectly holds an interest. With respect to Rule 53(a)(4), FirstEnergy will
continue to provide a copy of each application and certificate relating to EWGs
and FUCOs and relevant portions of its Form U5S to each regulator referred to
therein, and will otherwise comply with the requirements thereof concerning the
furnishing of information. With respect to Rule 53(b), none of the circumstances
enumerated in subparagraphs (1), (2) and (3) thereunder have occurred. Finally,
Rule 53(c) by its terms is inapplicable since the proposed transaction does not
involve the issue or sale of a security to finance the acquisition of an EWG or
FUCO.
ITEM 4. REGULATORY APPROVALS.
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No state commission has jurisdiction with respect to any aspect of the
requested authorization, and no Federal commission, other than your Commission,
has jurisdiction with any aspect thereof.
ITEM 5. PROCEDURE.
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FirstEnergy requests that the Commission issue a supplemental order
approving the proposed transaction at the earliest practicable date, but in any
event not later than December 31, 2002. It is further requested that: (i) there
not be a recommended decision by an Administrative Law Judge or other
responsible officer of the Commission, (ii) the Division of Investment
Management be permitted to assist in the preparation of the Commission's
decision and (iii) there be no waiting period between the issuance of the
Commission's order and the date on which it is to become effective.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
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(a) Exhibits:
(None)
(b) Financial Statements:
Omitted as not relevant to the proposed transaction.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
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(a) The authorization proposed herein does not involve a major Federal
action significantly affecting the quality of the human environment.
(b) No federal agency has prepared or is preparing an environmental
impact statement with respect to the authorization proposed herein.
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SIGNATURES
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Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, as amended, the undersigned companies have duly caused this statement
to be signed on their behalves by the undersigned thereunto duly authorized.
FirstEnergy Corp.
Ohio Edison Company
The Toledo Edison Company
FirstEnergy Facilities Services Group, LLC
By: /s/ Harvey L. Wagner
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Harvey L. Wagner
Vice President and Controller
Date: December 23, 2002
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