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) May 8, 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
1-2323 THE CLEVELAND ELECTRIC ILLUMINATING COMPANY 34-0150020
(An Ohio Corporation)
c/o FirstEnergy Corp.
76 South Main Street
Akron, OH 44308
Telephone (800)736-3402
1-3583 THE TOLEDO EDISON COMPANY 34-4375005
(An Ohio Corporation)
c/o FirstEnergy Corp.
76 South Main Street
Akron, OH 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 May 8, 2003, FirstEnergy Corp. updated the investment community on
activities associated with efforts to return the Davis-Besse Nuclear Power
Station to service in a safe and reliable manner and also provided an update to
the Jersey Central Power & Light Company (JCP&L) Rate Case proceeding.
Nuclear Regulatory Commission (NRC) IMC 0350 Restart Process - May 6, 2003
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Meetings
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The NRC's IMC 0350 Panel conducted its monthly status session on the
Davis-Besse restart effort at Camp Perry, near Port Clinton, Ohio on May 6,
2003. The meeting included an update on recent NRC activities, as well as an
update by FirstEnergy Nuclear Operating Company (FENOC) officials on the
company's progress toward preparing the plant for restart.
The NRC discussed significant developments to the restart effort
since the April 15, 2003 public meeting. The developments included the
completion of the NRC's Fire Protection Inspection and the closure of the NRC's
Restart Checklist Items:
o 1a - Root Cause: Penetration Cracking and Reactor Pressure Vessel
Corrosion
o 6a through 6f - Licensing Issue Resolution
The NRC also discussed its continuing inspection efforts at the
plant, including system health reviews and design issues, safety culture/safety
conscious work environment, safety significant program effectiveness, corrective
action, and preparation for the under-vessel head inspection. With respect to
their safety culture/safety conscious work environment inspection team's
efforts, the NRC clarified that the team's purpose is to evaluate the Company's
action to improve the plant's safety culture and to ensure that the actions
provide a reasonable path to success. They indicated that the purpose is not to
impose requirements. The NRC also reported that they would be scheduling two
public meetings on this topic. The first would be for the Company to present its
assessment of safety culture and actions taken and long-term plans for
continuing improvement in this area. This meeting would be held at the NRC
Region III offices in Lisle, Illinois. The second would be a public exit meeting
at the plant when the NRC's Safety Culture/Safety Conscious Work Environment
Inspection Team completes their inspection activities.
The FENOC presentation focused on the restart test plan including
primary and secondary system readiness, Operations personnel readiness for
restart, remaining tasks necessary for preparing the plant for restart, and
further analysis of results from an employee survey conducted at the plant in
late March. FENOC officials also announced that the physical work and paper
closeout in support of the Containment Health Building Block is in final closure
phase.
Detailed presentations were provided to explain the two options under
consideration for resolving the high pressure injection (HPI) pump hydrostatic
bearing issue. The issue involves the potential for debris in water from the
containment emergency sump to block ports that provide lubrication to the
hydrostatic bearings, which could impact pump operability. The two options
presented were:
o replacement with HPI pumps that are not susceptible to this degradation
mechanism; or
o modify existing pumps to add internal self-flushing strainers to prevent
debris from entering the bearing.
The Company is currently pursuing both options in parallel, with
vendor, Framatome, leading the replacement option effort and vendor, MPR,
leading the modification option effort.
The key upcoming activities include:
o completing remaining restraints to achieving mode 4
o finalizing resolution of remaining engineering design issues
o preparing for the reactor vessel pressure test
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The NRC reported that the next scheduled 0350 Panel meeting will be
held at Camp Perry on June 3, 2003.
NRC Engineering Design Issue Resolution - May 7, 2003 Meeting
-------------------------------------------------------------
On May 7, 2003, the NRC held a public meeting in Lisle, Illinois to
discuss resolution of engineering design issues related to important safety
systems at Davis-Besse. The Company updated the NRC on completion of five key
latent issue reviews related to the reactor coolant system, auxiliary feedwater
system, component cooling water system, emergency diesel generators, and service
water system. In addition, the Company also provided an update on 10 safety
function validation projects, five of which were confirmed. Each of the
remaining design issues has a defined resolution path. Based on extensive latent
issues reviews, focused self-assessments, containment inspections, program
reviews, and safety function validation projects, the Company believes there is
reasonable assurance the systems at Davis-Besse will be able to perform their
intended safety functions upon completion of the remaining defined activities.
JCP&L Rate Case Proceeding
--------------------------
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.
Reflecting its final update in the case, JCP&L is requesting a $122
million rate increase, a 6.1% average increase in customers' rates. This request
reflects asset securitization of the forecasted July 31, 2003 deferred balance
of $688 million. If JCP&L were not allowed to securitize the deferred balance,
it has requested deferred balance recovery over a four-year period with a return
on the unamortized balance. This alternative would raise the overall rate
request to $246 million, a 12.4% average increase in customers' rates.
The final updated rate request, including securitization of the
deferred balances, is detailed below by rate tariff component:
Jersey Central Power & Light Company
Revenue and % Rate Change
($ Millions)
Securitization of
Deferred Balance
----------------
Revenue % Change
------- --------
Delivery Charge $(41) (2.1)
Credit Elimination 111 5.6
MTC/TBC 68 3.4
SBC (16) (0.8)
---- ----
Total $122 6.1%
==== ====
The rate increase of $111 million for the credit elimination will not
have any impact on reported earnings. The changes in the MTC/TBC and the SBC
tariff components will not have any significant impact on earnings as these cost
recovery clauses generally use deferred accounting. Additional information about
the above rate tariff components is available in the August 1, 2002 investor
letter.
Initial Briefs were filed in the case yesterday. The JCP&L and the
Ratepayer Advocate Briefs focused on the positions each party had taken in their
testimony during the hearing phase of the
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proceeding. The New Jersey Board of Public Utilities (BPU) regulatory staff
(Staff) participated in the hearings but did not file testimony. The Staff's
Brief was their first public position in the proceeding.
JCP&L strongly disagrees with many of the positions taken by the
Staff in their Brief. JCP&L believes that its filed position in the rate case is
reasonable and supported by the evidence in the record. Nonetheless, should the
BPU ultimately accept the Staff's positions in a final order in the case, JCP&L
estimates that the revenue and earnings impact of the Staff's position for the
delivery charge component of the case is as follows:
JCP&L Base Rate Case
Staff's Briefing Position On Delivery Charge
--------------------------------------------
($ Millions)
Filed Position by JCP&L $ (41)
Staff Revenue Adjustments:
Expense Items (106)
Return on Equity (ROE) ( 45)
Capital Structure (21)
Rate Base ( 5)
-----
Total $(218)
=====
Estimated Annual Earnings Impact $(119)
The Staff used an allowed return on equity of 9.75% and an overall
rate of return of 8.5%. This reflected an allowed common equity ratio for
ratemaking purposes of 46%.
In the prudence review of the JCP&L deferred balances, the Staff
recommended that $153 million of the deferred balance be excluded from recovery
from customers. If reflected in a final BPU order, deferred balance disallowance
would result in a one-time charge against earnings.
The Staff Brief had other recommendations impacting other components
of JCP&L's tariff rates but these items do not have any significant impact on
earnings as they relate to recovery clauses that generally use deferred
accounting.
JCP&L made its formal securitization filing with the BPU earlier this
year. The use of securitization for recovery of the deferred balance will be
decided in that proceeding.
JCP&L strongly disagrees with many of the positions taken by the
Staff in their Brief and will detail those in its Reply Brief, which is due on
May 21, 2003. The Administrative Law Judge is scheduled to issue her recommended
decision by the end of June and the BPU should decide the case in July. New
rates are to become effective on August 1, 2003.
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.
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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.
May 9, 2003
FIRSTENERGY CORP.
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Registrant
THE CLEVELAND ELECTRIC
----------------------
ILLUMINATING COMPANY
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Registrant
THE TOLEDO EDISON COMPANY
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Registrant
JERSEY CENTRAL POWER & LIGHT COMPANY
------------------------------------
Registrant
Harvey L. Wagner
-----------------------------------
Harvey L. Wagner
Vice President, Controller
and Chief Accounting Officer
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